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Policy coherence is needed to boost the palm oil industry
The next government needs to aim for integrated, coherent policies to regulate the palm oil industry, especially in view of the mainstay commodity's declining production trend and the country's development and energy transition goals.
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Waterway: Bamboo raft operators row their customer past a palm oil plantation on a flooded road connecting Jambi and Suak Kandis in Pulau Tigo district, Muaro Jambi regency, Jambi, on Feb. 25, 2024. (Antara/Wahdi Septiawan)
P
rabowo Subianto, the most likely winner of the Feb. 14 presidential election, has outlined his renewable energy development plan, which includes increasing the mandatory biofuel content in diesel blends to 50 percent biodiesel (B50) from currently 35 percent (B35) and introducing 10 percent bioethanol (E10) by 2029.
His renewable energy target seems realistic, since Indonesia is the world’s largest palm oil producer with an annual output of over 50 million tonnes, and it is steadily expanding its oil palm plantations.
Coordinating Maritime Affairs and Investment Minister Luhut Binsar Panjaitan even expressed confidence that Indonesia will be able to sustainably produce 100 million tonnes of palm oil per year by 2045.
The country has implemented a mandatory program since 2008 to use biodiesel containing crude palm oil (CPO) and has marketed B35, a biofuel containing 35 percent palm oil.
Palm oil is currently the country’s largest source of biofuel, but insofar as the commodity is concerned, the outlook is not so encouraging. CPO production has been declining for four straight years, even though Indonesia has over 16.8 million hectares of oil palm estates.
The latest official data show that 1.5 million ha (9 percent) of all plantations comprise young (immature) trees and 14.5 million ha or 91 percent are mature (producing) estates. However, 46 percent of producing trees are very old, and their productivity is now on a downward trend.
CPO production growth in 2005-2010 averaged slightly higher than 10 percent per annum, mainly due to the high pace of plantation expansion, but annual output growth declined to 7.4 percent in 2010-2020, fell further to 3.2 percent in 2015-2020 and then either remained stagnant or became negative in 2020-2023. More worrisome yet is that Indonesian palm oil productivity has been virtually stagnant.
