A worker collecting palm oil fruit inside a palm oil factory. (Reuters Photo/Samsul Said)

Indonesia to Issue a Moratorium on New Palm Oil Concessions


APRIL 15, 2016

Jakarta. Palm oil producers are confounded by President Joko Widodo's pledge to impose a moratorium on oil palm plantations in an effort to preserve the country's degrading rain forests.

Land clearing for the plantations has been the main culprit for annual forest fires and haze which affects millions across the Southeast Asia region and has become a dominant factor for shrinking of the world's third largest tropical rain forests.

Joko on Thursday (14/04) said the country need to stop giving concession on for plantation and mines in forested area.

"The future of nature depends on how Indonesia preserves its environment," Joko said.

Still, being the world largest producer of the edible oil, Indonesia's economy depends on the commodity for growth and providing jobs for millions farmers and workers in the industry.

"Right now we cannot comment on president's statement," said Tofan Mahdi, the spokesman at Indonesia Palm Oil Association (Gapki) on Thursday.

He said the association is intensifying discussions with the president and the Ministry of Environment and Forestry in order to clarify details of the plan.

Tofan pointed out that palm oil exports reached $19 billion last year, larger that the country's oil and gas exports of $12 billion. The industry also provides 6 million jobs and supports development in remote areas, he said.

"After all, President Joko has stated that palm oil is a strategic sector that needs to be maintained," Tofan said.

The plan, if materialized adds pressure on the industry which is already suffering from a declining commodity price. Indonesia stopped granting permits for oil palm plantation on peat lands in May 2011, a policy that caused the country to miss an estimated $10 billion in potential income from the sector, Gapki said.

Still, producers have room to increase their productivity by replanting old palm oil trees and adopt modern farming technique, particularly in small-holding plantation, Coordinating Minister for Economy Darmin Nasution said.

Smallholders account for about 40 percent of Indonesia's 32 million palm oil output last year.