The Palm Scribe

Palm Oil Fund Agency Deemed Ineffective in Helping Smallholders

Regulations on the management of financial assistance in the Indonesian palm oil sector need to be reviewed because it is not efficient and tended to rather make it difficult for smallholders who should be the main subject in the country’s palm oil economy, a research by a regulation and policy consultancy showed.


Puguh Windrawan, a researcher with HICON Law and Policy Strategic Consultation, in his presentation of the result of the research on Tuesday (17/7) said that palm oil smallholders currently were facing three main problems – access to subsidized fertilizer, an inefficient palm oil plantation replanting funding scheme and the institutional model of the Palm Oil Fund Management Agency (BPDPKS).

“The regulations on the management of palm oil assistance fund must be reviewed,” Windrawan said. Such review was needed to make the regulations friendlier to palm oil smallholders whose role is becoming increasingly important in the country’s palm oil industry.

Smallholders account for more than 40 percent of the total surface of palm oil plantations in Indonesia, which officials have put at some 14.3 million hectares.

The problems faced by smallholders became even worst because of the prevalent problem of land legality faced by the majority of the smallholders, Windrawan added.

“Smallholders have difficulties in obtaining land titles and this requires funds that are not negligible,” Windrawan said addressing a Focus Group Discussion taking the themeEmpowering Farmers and Engaging Stakeholders in Palm Oil Issues.

 He said that the issue of land legality among smallholders was “why (assistance) funding are not being distributed well.”

Windrawan, therefore, urged that BPDPKS eases its legal procedures, accords more attention to smallholders and step up its direct engagement with farmers and other stakeholders in the field.

In the Term of Reference of the discussion, Hicon said that the establishment of an institution to manage palm oil funds such as the BPDPKS in practice only gave rise to new problems in the management of the fund.

“The matter of the portion of fund distribution that is not proportional showed that palm oil farmers are not being placed as the main subject in the palm oil economy,” the document said.

Mula Putra, who represented the Director-General for Plantation at the discussion, admitted that land tenure legality among smallholders was a major problem.

“The registration of palm oil smallholders is indeed the main focus that so far still needs to be improved,” he told the same discussion.

Mansuetus Darto, who heads the Union of Palm Oil Farmers (SPKS) said that besides of the land legality issue, smallholders also mostly had neither the skills nor the experience in organizing their operation as well as funds. On the other hand, institutions such as he BPDPKS only wanted to deal with groups or organized farmers.

“Just hand it over to the private sector so that the procedure does not become too complicated because we see that they do not trust farmers who indeed rarely have an institutionalized system to manage palm oil funds,” Darto said.

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