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Integrated palm oil industry practices: Lessons from Sei Mangkei SEZ
The Sei Mangkei SEZ is a model of a palm oil industry that produces fewer carbon emissions than Indonesia's existing industry players.
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PT Unilever Oleochemical Indonesia's (UOI) factory sits surrounded by palm oil plants in the Sei Mangkei Special Economic Zone (SEZ), North Sumatra. UOI is owned by PT Unilever Indonesia. (Unilever Oleochemical Indonesia/Unilever Oleochemical Indonesia)
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efore 2012, only a few people had heard of Sei Mangkei village in North Sumatra. After then-president Susilo Bambang Yudhoyono issued Government Regulation No. 29/2012 on the Special Economic Zone (SEZ) policy, Sei Mangkei rose to fame globally.
Since 2015, eight global companies, Unilever Oleochemical, Alternative Protein (United Kingdom), Aice (Singapore), Alliance Consumer Product, Sheel Oils (India), All Cosmos Biotek, Simedarby (Malaysia) and Evyap (Turkey) have set up factories in the Sei Mangkei SEZ.
The SEZ policy aims to create export-oriented regions through integration and industrialization. These regions have more relaxed economic rules, which attract investors and create jobs. By June 2024, 20 Indonesian SEZs had attracted 368 industrial players, with a total investment of US$12.5 billion, creating 132,000 jobs.
Some SEZs export a lot, like Galang Batang, Kendal, Palu and Sei Mangkei. Sei Mangkei SEZ is the oldest of its kind, with a total export value of $2.01 billion, with downstream palm oil commodities being the majority of exported products.
The Sei Mangkei SEZ, covering an area of 2,002.77 hectares, lies near the Malacca Strait and is connected to the port by rail, making it attractive to investors. The railway accelerates the movement of goods, which helps industrial players save money.
Over its nine years of operation, Sei Mangkei SEZ has demonstrated that Indonesia has the potential to establish a geographically integrated production and manufacturing system for downstream palm oil products, ensuring traceability.
My research with Fumie Takanashi (2023-2024) found three impacts of the SEZ policy on the palm oil value chain in Sei Mangkei.
