The Secretary-General of the Indonesian Association of Coconut Processing Industry (HIPKI) Donatus Gede Sabon is warning of the dangers and vulnerability of an economy that is heavily relying on a single commodity, in this case, palm oil.
Sabon said that the development of palm oil in Indonesia in the past several decades has shifted aside, the role of a number of people’s commodities in the national economic structure.
“Such an important domination of palm oil is not without risks, especially because of the high value of the investment, foreign exchange contribution and also workforce absorption,” Sabon said in his presentation at the Workshop on Moving Towards the Improvement of Management in the Palm Oil Industry here on Monday (13/8).
Abednego Tarigan, a senior expert with the Office of the Presidential Staff (KSP) had earlier said at the same occasion that there had been an “extraordinary” growth in the Gross Domestic Product from palm oil and that the contribution of this commodity in the national GDP had now already overtaken that from the oil and gas sector.
“So, it has become the largest contributor,” said Tarigan, adding that the growth of the GDP contribution of the plantation sector that includes palm oil has reached 5.7 percent and 8.9 percent respectively in the past two years.
Based on data from the Central Bureau of Statistics (BPS), palm oil product as a plantation commodity contributed Rp 429 trillion to the national Gross Domestic Product (GDP) in 2016 and the figure rose to Rp 461.31 trillion in 2017. In both those years, the contribution of the oil and gas sector remained below Rp 400 trillion.
Sabon said that rejection against palm oil and its derivative products is increasingly mounting and this could harm the resilience of the national economy.
“If a ban really takes place, the Indonesian economy can really face a problem,” he said, referring to the growing resistance against palm oil in the main markets or the commodities and the looming possibility of these market banning palm oil and its derivative products.
Even more so, since the domestic absorption of palm oil is not yet able to offset any drastic drop in demand for the commodities overseas as the national biodiesel program is not yet fully ready.
Sabon deplored the state’s partiality towards palm oil, as shown through its support in policy instrument, and added that this, “made other plantation commodities as if brushed aside from the national economic map.”
He said there was a need to strengthen the country’s economy for the long term and this would need economic-political allocations that are also directed towards other commodities which also have potentials. He cited coffee, cocoa, coconut, rubber, and others.
“The government must have the political will to do this job,” Sabon added.
He also said that a moratorium on new palm oil plantation permit could be used for a momentum to build “alternative forces,” in the economy.
“Our economic strength has a vulnerability if the economy solely depended on palm oil,” he said.
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