Indonesia needs to rejuvenate palm oil plantations

Andi Abdussalam Antara 4 Feb 17;

Jakarta (ANTARA News) - With some 11.6 million hectares of plantations, Indonesia needs to rejuvenate its palm oil trees to maintain its position as the worlds largest crude palm oil (CPO) producer.

The country needs to rejuvenate its palm oil plantations to increase its CPO production, as in the midterm, the Industry Ministry has accorded priority to increasing investment in the palm oil processing industry that needs raw material.

Hence, anticipatory efforts must be undertaken to meet the need for raw material for the production of about 40 million tons of CPO by 2020.

However, as the plantations are old, there has been a downward trend in CPO production. Bayu Krisnamurthi, president director of the Palm Oil Plantation Fund Managing Board (BPDP), had stated last month that CPO exports fell two percent by volume in 2015, while production dropped by about seven percent.

"At the end of 2015, palm oil fruit production fell due to the El Nino-induced drought in 2015. Exports fell two percent by volume, as production dropped by seven percent," Krisnamurthi, who has recently stepped down from the post of BPDP president director, noted.

In 2015, Indonesias CPO production had reached 32.5 million tons, with exports reaching 26.4 million tons. The export value went down from US$21.1 billion in 2014 to $18.6 billion in 2015.

Indonesias exports of CPO and its derivatives fell by five percent to 25.1 million tons in 2016, from 26.4 million tons in 2015. However, its production also dropped by three percent to 34.5 million tons in 2016, from 35.5 million tons in the previous year.

Hence, the government is committed to rejuvenating the countrys palm oil plantations.

"Our concern is how to accelerate the palm oil replanting program. This is an urgent priority for the new management of BPDP to realize soon," Chief Economic Minister Sofjan Djalil informed several relevant ministers who met on Wednesday (Feb 1) to discuss the election of the new management of BPDP.

BPDP is in charge of managing palm oil plantation funds for the development of the countrys palm oil plantations based on policies outlined by the Finance Ministry.

In the meantime, the Industry Ministry is committed to developing the countrys palm oil processing industry as part of the implementation of the national downstream palm oil development policy in the agriculture sector.

According to Industry Minister Airlangga Hartarto, who issued a directive to participants of a national palm oil meeting recently, palm oil is expected to contribute to the national economy through increasing the commoditys added value, export performance, worker absorption, peoples prosperity, and contribution to state revenues.

"The upstream and downstream palm oil industry is one of the important and strategic economic sectors," Minister Hartarto remarked on Thursday (Feb 2).
Based on the Indonesian Plantation Statistics in 2016, palm oil plantations played a significant role in providing jobs for workers. A total of 5.7 million people work in this sector, comprising 2.2 million small-scale farmers.

Currently, Indonesia is estimated to have 11.6 million hectares of palm oil plantations. Of this total, some eight percent are managed by state companies, 49 percent by private CPO industries, and 43 percent belong to small farmers. The livelihood of about 16-20 million people depends on upstream and downstream palm oil businesses across Indonesia.

In the long run, the Industry Ministry is encouraging the palm oil processing industry to utilize the latest technology, so that it will produce various downstream products, such as super edible oils, golden nutrition, bioplastics, biosurfactants, and green fuels.

Minister Hartarto pointed out that in order to boost the development of the palm oil downstream industry, the government has, since 2012, applied a fiscal policy instrument thorough the imposition of a progressive export tax and a plantation fund-raising policy since 2015.

With the implementation of these policies, the export ratio of upstream products since 2013 has shifted from 70 percent to 30 percent, while on the other hand, the export ratio of downstream palm oil products has increased from 30 percent to 70 percent.

Based on data at the Indonesian Palm Oil Company Association, the palm oil industry contributed $18.1 billion in foreign exchange earnings to the state.
Indonesias CPO market is expected to continue to grow in the main export destinations of India, China, Pakistan, and countries in the Middle East, among others.

Palm oil plantations could serve as a regional and international economic power in the agricultural sector through various innovations and breakthroughs by the government and private sector.

In 2013, the global CPO imports had reached $42.7 billion. Of this amount, Indonesia had contributed some $17.3 billion, or about 43.68 percent of the global demand, while Malaysia had supplied $14.9 billion, or about 36.4 percent.(*)