An oil palm plantation in Cianjur, West Java, in 2018. (Antara Photo/Raisan Al Farisi)

Indonesia Continues to Lean on Palm Oil

AUGUST 27, 2019

Jakarta. Indonesia will continue to lean on palm oil economically for decades to come despite European opposition, as stakeholders look for a strategic policy that will help the industry grow sustainably, environmentally and financially. 

"You'd be hard pressed to find another sector in Indonesia that can replace the impact of palm oil on the economy," said Tofan Mahdi, the Indonesian Palm Oil Association's (Gapki) communications head, during a seminar in Padang on Aug.14.

Tofan said this year has been tough on the industry because the price of palm oil is on the decline, but government regulations like the mandatory B30, to be implemented next year, is creating a positive sentiment in the market. 

"For the last few days the price of palm oil is recovering – a breath of fresh air for everyone," Tofan said. 

In 2017, palm oil export reached its highest ever value at Rp 320 trillion ($22 billion).

"Seeing the trend for 2019, it looks like foreign earnings from palm oil this year will not reach the same heights it did two years prior," Tofan said. 

But Tofan also said he remains optimistic for palm oil despite increasing pressure from foreign entities such as the European Union. 

Nevertheless, according to him the recent RED II policy and the 18 percent tariff on Indonesian palm oil have hit the local industry hard. 

"It feels like there's no other commodity as versatile as palm oil, we're currently importing everything else, palm oil is the only thing we're exporting. This is a trade war, we cannot let negative campaigns shut down this industry," Tofan said. 

"If we do, Indonesia might one day be the one importing palm oil, ... that's what other countries want," he said. 

Speaking on behalf of Gapki, he said the association is thankful for the government's mandatory biodiesel B20 and B30 programs which will be implemented next year. 

Fajar Wahyudi, the biodiesel division head of the Indonesian Palm Oil Fund Management Board, shared the same sentiment. He is optimistic the program will reach its goals, of using conventional diesel mixed with 20 to 30 percent palm oil-derived biodiesel, within three years.

"The use of palm oil for biodiesel will have a significant impact. It will increase jobs in the industry, increase the demand for CPO [crude palm oil], stabilize the price of CPO and improve the livelihood of oil palm farmers," Fajar said.