The Palm Scribe

Major Corrections Needed if Palm Oil Is to Become a Pillar of Indonesian Economy: NGO

Madani Berkelanjutan, a non-governmental organization, said that if palm oil is to become a main pillar of the Indonesian economy as the government is repeatedly saying, there was a need for major corrections in the management of the sector, not only to safeguard the environment, but also to spread the benefits more equitably.

illustration of palm oil fruit data
Palm Oil Fruit Photo: Yemisi Ogbe

“There must be major corrections if palm oil is to be beneficial in the truest context,” Mohammad Teguh Surya, Executive Director of Madani Berkelanjutan told a discussion on palm oil here on Wednesday (11/3).

He said that it would be impossible to now replace palm oil with another commodity. It would need time and would be costly. What can be done is that Palm oil should be better managed so that its benefits can be distributed well and evenly.

“If for example, palm oil is trusted as as a source for future economic growth, that will replace oil and gas, then there should be a serious correction on its management,” he said.

Teguh said that a one-year study conducted by Madani, the results of which was announced at the same occasion, showed that there were much improvements to be made in the management of the palm oil sector.

“I could be that palm oil has so far been beneficial, but only to business units, entrepreneurs and land owners,” Teguh said, adding that this was only one of the aspects to be remediated when putting order in to the management of the palm oil sector.

Detailing the findings of the Madani Berkelanjutan study, the group’s Palm Oil Program Officer Trias Fetra Ramadhan said that from the ten provinces with the highest growth in oil palm plantation development, only three had rural communities with a high level of welfare — Riau, East Kalimantan and Jambi.

“But this high level of welfare in villages in these three provinces is not only due to palm oil,” Trias said, adding that in Riau and East Kalimantan the biggest contributors to welfare were rubber and coconut while for Jambi they were rubber and cinnamon.

He said that the percentage of villages with oil palm plantations were 42 percent of Riau’s 1,875 village, in East Kalimantan was at 27.2 percent of 841 villages and in Jambi 22.8 percent of 1,399 villages.

He also said that official data showed that the top five provinces with the highest oil palm expansion rate, only two — Central Kalimantan and North Sumatra which had commensurate regional economic growth.

“Efforts to make communities prosper in a region can be done with a focus of equalizing a number of commodities so that palm oil and other plantation commodities can become contributors and substitute sources of economy in the region in the face of the fluctuating markets,” Trias said.

Teguh said that a number of findings from the Madani study showed that in Indonesia, the rapid expansion rate of oil palm plantation was not correlated to productivity, and that although a large part of the palm oil plantation industry was in the hands of small farmers, their productivity was low and therefore their contribution weak.

Also read: NGO Joins Calls for Cooperation In Palm Oil Sector

“These are real problems, there is clearly an imbalance, Teguh said.

Although very profitable and said to be beneficial to the economy, the palm oil sector was not dominated by the state but rather by the private sector. The question then arose, to whom are all the laws, regulations and policies directed at in the palm oil sector? These arrangements at the end, would only help develop the palm sector not for the benefit of the state and by that, the people, but only for a handful of parties in the private sector.

No less important an issue that needed to be addressed urgently, Teguh said, was the absence of accurate data, especially on smallholders and concessions.

In another research conducted by Madani in collaboration with, found that about 97 percent of smallholders were autodidacts and had received no guidance whatsoever, and 54 percent used non-certified seedlings. Therefore, productivity remained low at less than one ton per hectare per month.

The research also showed that 73 percent of the farmers sold their fresh fruit bunch production to middlemen not directly to the mills. Seventy-nine percent of farmers also did possess land certificate or titles and 71 percent of the smallholders were not part of farmer organizations. Access to certification as well as assistance and funding requires farmers to be organized in groups.

In the context of such an important business, “How can smallholders proceed on their own?” questioned Teguh.

“Why must there be serious correction? It is so that palm oil can become beneficial in the truest context,” Teguh added.

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