The Palm Scribe

Indonesian Palm Oil Industry Needs a Specific National Authority

Considering the importance of palm oil for the Indonesian economy and also its significant role in fighting against poverty, the country should consider having a specific institution to manage the sector at the national scale, a number of practitioners and observers said.

“According to me, I agree that there should be a separate institution to deal with palm oil,” said Marselinus Andry, who heads the advocacy department of the Union of Palm Oil Farmers (SPKS). Andry said that such institution should be composed of individuals who really understood the palm oil industry and has to also be supported by a cross-ministerial authority.

At present, the palm oil industry is regulated by a number of ministries and institutions. The Ministry of Agriculture deals with the crop and cultivation while the Ministry of Industry deals with the Crude Palm Oil (CPO) and its derivative products. The Ministry of Foreign Affairs, working with the Ministry of Trade deals with the promotion and trade of palm oil overseas as well as its advocacy. The Ministry of Finance deals with related subsidies and tax, while the Manpower Ministry deals with labor. The Ministry of Environment and Forestry Affairs deals with the environmental aspect, and the Ministry of Cooperatives and SMEs deals with palm oil cooperatives.

Besides the long list of ministries, regulations are also issued by regional administrations at provincial and district levels, as well as by a number of other bodies, such as the Palm Oil Fund Management Agency.

Andry from SPKS said the need for this national authority was even more important when considering the moratorium on new palm oil concession issued by the president in September 2018. “In this moratorium, those who have so far dealt with palm oil is now ordered to evaluate it,” he said, pointing to the various concerned ministers named in the presidential decree on the moratorium.

Agus P. Sari, Chief Executive Officer of PT Bentang Alam Indonesia (Landscape Indonesia) drew a parallel between the role of palm oil and that of oil and gas which had for decades been the primary contributor of foreign exchange for Indonesia.

“I am trying to draw a parallel analogy with oil and gas….For Oil and gas, there is a separate director general at the Energy and Mineral Resources Ministry, with a budget quite big and an institutional ecosystem that is quite complete,” he told the Palm Scribe. Meanwhile, palm oil which in recent years has become the main foreign exchange reserve earner, has no such facilities.

“Palm oil is ‘only” given authority at the level of a director within the Ministry of Agriculture, under the Directorate General of Plantations, with a budget which is far from adequate,” Sari said.

However, Sari could not yet say whether there was a need for a separate institution at the ministerial level, thus put directly under the president, to deal with the palm oil sector. He only said that perhaps the most realistic solution would be to appoint a director general for palm oil at the Ministry of Agriculture and provided with a stronger ecosystem outside of the ministry. He cited the equivalent of Special Work Unit for the Implementation of Activities in Downstream Oil and Gas (SKK MIgas).

“There may be a benefit in forming a palm oil coordination body, but de facto is, this has been done by the Coordinating Ministry for the Economy,” he added.

Meanwhile, the Chairman of the Indonesian Association of Palm Oil Producers (GAPKI) Joko Sulistiono believed that the orientation of the development of the national palm oil industry needs to be managed because just coming out with regulations was not enough, even more so when those regulations come from a variety of ministries and institutions.

“A conductor is needed, to unite the aims and harmonize the rhythms, so that it can become a concert that is nice to watch and listen to,” Sulistiono said in an article on the orientation of the development of the Indonesian palm oil industry, uploaded on the official GAPKI website last month. He said that sectoral ego was still very much present, including in the palm oil sector.

“Maybe there is a need for some sort of body that especially manages policies, produces a road map, details the programs and evaluate achievements so that these regulations can become enablers,” he said.

In 2018, Indonesia exported 34.71 million tons of CPO and derivative products worth $20.54 billion. Although it represented an eight percent rise in volume, because of weak CPO prices, it represented an 11 percent drop in value.

Senior Indonesian ministers have said that the palm oil sector absorbed 17.5 million jobs, directly and indirectly, and assured the welfare for more than 2.3 million smallholders.

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