Business

Govt calls for road map
for palm oil industry

The government has called on stakeholders in the country’s growing palm oil sector to set up a road map to ensure that oil palm plantations will not only help economic growth but promote environmental sustainability.

Speaking during an international conference on palm oil in Nusa Dua, Bali, Friday, Trade Minister Mari Elka Pangestu said that such a business road map was important to determine the right direction to take for the country’s oil palm sector.

“All stakeholders have a responsibility to find a balance between economic growth and social progress with aspects related to environmental sustainability. Growth could stall if we don’t have a comprehensive approach,” the minister said in a speech at the sixth Indonesian Palm Oil Conference.

She said there had been tremendous growth in the contribution of the palm oil sector to the country’s GDP within the last five years. Exports of crude palm oil (CPO) and its related products have shown remarkable growth over the past five years. The exports, which totaled only US$4 billion in 2004, had increased to almost $15 billion at present, with an average growth of 36 percent per annum. Production also doubled during the five-year period, with an average growth of 10 percent a year.

Mari acknowledged the need to promote environmental sustainability on the country’s oil palm plantations, which have often been criticized for their negative impacts on the environment. But she said that such a sustainability scheme should not impose an undue burden on the supply chain of production, starting from farming all the way to trading, especially for smallholders that account for about 40 percent of palm oil production in Indonesia.

“I encourage all of us to sit down and work out a road map together. It has to be done collectively so that the results are good for all parties.”

Global dependence on palm oil will continue to rise over the next decade, as predicted by Thomas Mielke of Oil World. “About 76 to 77 million tons of palm oil would be required in 2020, with an annual average growth of 3 million tons. Indonesia will have an annual growth rate of 1.9 million tons,” Mielke said in his presentation at the conference.

He said palm oil prices would remain high next year and would reach a peak between January and April, as the current price already reached 3,500 ringgit ($1,112).

“January and April will still be very tight, fuelling prices by 200 ringgit to 300 from the current level. There will be sizably better production prospects from May 2011 onward.”

Mielke predicted that Indonesia would be able to produce 40.5 million tons of palm oil in 2020, almost double the 2010 production of 21.8 million tons. Malaysia is expected to produce 22.8 million tons in 2020 from 17.52 million tons this year.

Global output is predicted to be up by three to 3.1 million tons in 2011, with Indonesia’s output to increase by 2.1 million and Malaysia’s by 0.7 million tons, he added.

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