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FACT FILE – Indonesia world leader in palm oil production

CIFOR (Center for International Forestry Research) - Tue, 9 Jul 2013 02:26 GMT
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The growing demand for edible oils domestically and internationally has created conditions in which Indonesia has become the global leader in terms of cumulative area of oil palm plantations and Crude Palm Oil production. Photo courtesy of CIFOR/Yayan Indriatmoko
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High demand for edible palm oil in India, China and at home have made Indonesia the top global producer of crude palm oil (CPO), according to statistics compiled by scientists at the Center for International Forestry Research (CIFOR).

Here are some key facts about Indonesia’s palm oil:

INDONESIA AS OIL PALM PRODUCER

  • In recent years, the oil palm plantation and palm oil processing sectors have become a key part of Indonesia’s economy.
  • The growing demand for edible oils domestically and internationally created conditions in which Indonesia has become the global leader in terms of the cumulative area of oil palm plantations and Crude Palm Oil (CPO) production.
  • In 2011, oil palm plantations covered 7.8 million hectares in Indonesia, out of which 6.1 million ha were productive plantations under harvest.
  • In 2010, these plantations produced 22 million tonnes of CPO, while in 2011 the yield was 23.5 million tonnes.
  • By 2020, Indonesia plans to double the current production of CPO to 40 million tonnes annually and expand its oil palm plantation portfolio by additional 4 million hectares.
  • High demand for edible oils from emerging economies in Asia such as India and China and high levels of domestic consumption are the main driving forces behind this growth.
  • Approximately half of Indonesia CPO production is exported in unprocessed form. Most of the remainder is processed into cooking oil and about half of this is exported as well, according to the World Bank. The rest is consumed locally.
  • About 75 percent of plantation estates and CPO production are located in Sumatra and Kalimantan, areas in Indonesia with a long history of oil palm cultivation, both in the form of large-scale estates as well as smallholder operations (Almost half of the overall plantation area is managed by smallholders and it is believed that smallholder operations have contributed significantly to the expansion of oil palm estates in recent years).

 

ECONOMICS AND THE OIL PALM SECTOR

  • Weak law enforcement in the forestry and plantations sector is problematic. Despite anti-fire regulations, there has been little, or no prosecution in the law courts over detected violations. If plantation companies are found to be responsible for the current haze episode, they must be held accountable.
  • The oil palm sector, particularly CPO production, is an important source of government revenues. The main source of these revenues is the export tax; this ranges from 0 percent (if the export reference price is less than $500 per tonne) to 25 percent (when the domestic reference price exceeds $1,300 per tonne), according to the World Bank.
  • In 2008, CPO generated $12.4 billion in foreign exchange from exports; in the same year, the government earned at least $1 billion in export tax.
  • The oil palm sector in Indonesia is estimated to employ up to 0.4 persons per hectare, this means that nearly 8 million hectares of oil palm plantation estates established by 2011, provide direct employment to about 3.2 million people.
  • The job-generating potential is viewed as important for poverty alleviation in Indonesia, where about 30 million people (or 15 percent of the population) live under the poverty line.
  • The expansion of oil palm plantation estates is also seen as important for infrastructure development in rural Indonesia.
  • This is particularly true in the case in the hinterlands of the outer islands where public infrastructure (roads, electricity, telecommunications) is limited and its development expensive if borne by the government alone.

 

ENVIRONMENT AND OIL PALM ESTATES

  • Potential benefits come at the expense of Indonesia’s natural forests. At least half of the 8 million hectares of currently productive plantations have been developed through prior deforestation.
  • It is also clear the current smog crisis is at least in part caused by the clearing of land for plantation estates.
  • Land acquisition for oil palm estates frequently results in conflicts between customary land owners and plantation developers over the terms of land deals and levels of compensation.
  • These problems have led to difficulties for the Indonesian oil palm companies in marketing CPO in eco-sensitive markets such as the European Union.
  • The Indonesian government is responding to this by implementing the Indonesian ISPO scheme, which becomes mandatory for all oil palm companies in the country by end of 2014.

 

 

REFERENCES

Antara News. 2012 RI`s CPO production in 2012 projected at 25 million tons. 4 January.

Bahroeny, J.J. 2009 Palm oil as an economic pillar of Indonesia. Jakarta Post, 2, December.

Boucher, D., Elias, P., Lininger, K., May-Tobin, C., Roquemore, S. and Saxon, E. 2011The root of the problem: what’s driving tropical deforestation today? Union of Concerned Scientists (UCS), Cambridge, USA.

Bruntse-Dahl, R. 2011 Malaysia and Indonesia bolster defense of palm oil industry to West. The Guardian, 20 May.

Casson, A., Tacconi, L. and Deddy, K. 2007 Strategies to reduce carbon emissions from the oil palm sector in Indonesia. CIFOR Working Paper 62. CIFOR, Bogor, Indonesia.

Colchester, M. 2010 Land acquisition, human rights violations and indigenous peoples on the palm oil frontier. Forest Peoples Programme, London.

Colchester, M. and Chao, S. 2011 Oil palm expansion in South East Asia: trends and implications for local communities and indigenous peoples. Forest Peoples Programme, London.

Fitzherbert, E.B., Struebig, M.J., Morel, A., Danielsen, F., Brühl, C.A., Donald, P.F. and Phalan, B. 2008 How will oil palm expansion affect biodiversity? Trends in Ecology and Evolution 23(10): 538–545.

Gibbs, H.K., Ruesch, A.S., Achard, F., Clayton, M.K., Holmgren, P., Ramankutty, N. and Foley, J.A. 2010 Tropical forests were the primary sources of new agricultural land in the 1980s and 1990sIn: Proceedings of the National Academy of Sciences of the United States of America, 16732–16737.

International Finance Corporation (IFC) 2011 The World Bank Group framework and IFC strategy for engagement in the palm oil sector. IFC and the World Bank, Washington, DC.

Jelsma, I., Giller, K. and Fairhurst, T. 2009 Smallholder oil palm production systems in Indonesia: lessons from the NESP Ophir project. Report by the Plant Sciences Group, Wageningen. Wageningen University, The Netherlands.

Marti, S. 2008 Losing ground: the human rights impacts of oil palm plantation expansion in Indonesia. Friend of the Earth, Life Mosaic and Sawit Watch, London.

McCarthy, J.F., Gillespie, P. and Zen, Z. 2011 Swimming upstream: local Indonesian production networks. World Development 40(3): 555–569.

Miettinen, J., Shi, C. and Liew, S.C. 2011 Deforestation rates in insular Southeast Asia between 2000 and 2010. Global Change Biology 17: 2261–2270.

Pahan, I. 2010 Kelapa Sawit : Manajemen Agribisnis dari Hulu hingga Hilir. Penebar Swadaya, Jakarta, Indonesia.

Pardamean, M. 2011 Sukses Membuka Kebun dan Pabrik Kelapa Sawit. Penebar Swadaya, Jakarta, Indonesia.

Potter, L. 2008 Dayak resistance to oil palm plantation in West Kalimantan, Indonesia. Paper to the 17th biennial conference of the Asian Studies Association of Australia, Melbourne, 1-3 July.

Sheil, D., Casson, A., Meijaard, E., van Nordwijk, M., Gaskell, J., Sunderland-Groves, J., Wertz, K. and Kanninen, M. 2009 The impacts and opportunities of oil palm in Southeast Asia: what do we know and what do we need to know? CIFOR Occasional Paper 51. CIFOR, Bogor, Indonesia.

Slette, J.P. and Wiyono, I.E. 2011 Oilseeds and products update 2011 USDA Foreign Agriculture Service, Jakarta, Indonesia.

World Bank 2010 Environmental, economic and social impacts of oil palm in Indonesia: a synthesis of opportunities and challenges. World Bank, Jakarta, Indonesia.

World Growth 2011 The economic benefit of palm oil to Indonesia. World Growth, Arlington, USA.

 

For more information on the issues discussed in this article, please contact Krystof Obidzinski at k.obidzinski@cgiar.org

This research was carried out as part of the CGIAR Research Program on Forests, Trees and Agroforestry.

 

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