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The government's half-baked policy to empower oil palm smallholders

The agriculture minister's recent announcement on a new NES policy might look good on paper, but falls short of the regulatory review and reform needed to address the complexities of the oil palm industry and ensure smallholders' prosperity.

Edi Suhardi and Agam Fatchurrohman (The Jakarta Post)
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Wed, February 5, 2025

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The government's half-baked policy to empower oil palm smallholders A worker unloads fresh fruit bunches (FFB) from a pickup truck after bringing them from a plantation to sell at a market in Sepaku, East Kalimantan, on July 10, 2024. (AFP/Yasuyoshi Chiba)

A

nother surprising move was made by Agrarian and Spatial Planning Minister/National Land Agency (BPN) head Nusron Wahid, when he announced on Jan. 30 a new policy that, at first glance, seemed a bold populist idea to enhance equity and distribute wealth through the expansion of smallholder oil palm farms.

The minister told a meeting with the House of Representatives that oil palm plantation companies applying to renew their right to cultivate (HGU) permits would be required to create partnerships with oil palm smallholders to make up at least 30 percent of their total concession area, significantly larger than the 20 percent stipulated in the 2014 Plantations Law and reinforced in Law No. 6/2023 on job creation.

This requirement is actually an extension of the plantation firm-smallholder partnership scheme known as nucleus estate and smallholder (NES), which has been implemented since the 1970s.

Conceptually, NES is a smallholder-friendly policy and management cooperation whereby plantation companies provide smallholders with access to bank financing, technology (quality seedlings), oil palm fruit processing and crude palm oil marketing.

On paper, the NES concept is good for plantation development because smallholders that join the program can plant or replant their small estates (usually 2 hectares) with technical guidance and financing assistance from plantation companies. Put another way, companies serve as an agent of development for oil palm smallholders.

We still believe that harmonious, mutually beneficial cooperation between big plantation companies and smallholders surrounding their concessions is the most effective way of expanding tree crop plantations without widening land inequality.

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While smallholders dominate most of the eight tree crop commodities cultivated in Indonesia, the oil palm sector has a relatively balanced ownership between smallholders and companies in terms of acreage: smallholders own 40 percent of plantations totaling around 16.8 million hectares, while plantation companies owned the remaining 60 percent.

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  • Palmerat Barat No. 142-143
  • Central Jakarta
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