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Indonesian palm oil at critical juncture: To thrive or dive?
The government still tends to scapegoat companies for not supporting its price stabilization measures, while the main blame should be put on its utterly poor institutional capacity to implement the erratic measures.
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A worker loads palm oil fruits on a boat for transportation along the Kampar River on Aug. 13, 2022, to the processing plants in Kampar, Riau. (AFP/Wahyudi)
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vershadowed by tougher antimarket policies to stabilize the price of cooking oil at the government-fixed level and a weakening palm oil market, the Indonesian Palm oil Association (Gapki) will convene its national conference, held once every five years, in Bali on March 8-10.
As the representative of the upstream palm oil industry, Gapki will discuss the prospects, key issues and strategies for multistakeholder efforts to rise to the emerging challenges faced by the industry. A timely and correct response by the organization in engaging the government and other key stakeholders to address any threats will ensure palm oil can thrive sustainably.
On the contrary, failure to act or inaction against growing internal and external issues will lead to a bleak future for the palm oil industry as has happened to other failed commodities, such as coconut and rubber, which enjoyed a robust market and growth in the 1960s-1970s but went bust in the 1980s.
Despite the policy uncertainty over the past two years and escalating negative campaign by the European Union and many green NGOs, the palm oil industry has proven its resilience.
The burgeoning development of oil palm plantations to an estimated total area of more than 16.5 million hectares in 2022 and an annual production of over 50 million tonnes of oil has made the industry the second largest foreign exchange earner after coal. About two-thirds of the total output are exported in crude palm oil and its derivatives.
Yet more important to the economy is that about 40 percent of the total plantation area is owned by about 3 million smallholders, a factor that makes its role significantly important in combating poverty in rural areas.
Among the ongoing challenges facing the industry for the next decade is its persistent negative international perception, notably in the Europe Union, as one of the main drivers of deforestation, which has prompted many advanced countries to campaign against the commodity through protective trade measures. The most outstanding of the laws perceived to be protectionist trade policies in the name of mitigating climate change is the EU deforestation legislation.
