JAKARTA – Indonesia’s palm oil industries are predicted to face various challenges in 2025, ranging from global pressures like the import tariff imposed by USA President Donald Trump to the structural problems inside the country. The Indonesian Palm Oil Association (GAPKI) sees such conditions as potential factors to weaken the competitiveness of Indonesian palm oil products at the global market.
GAPKI Executive Director Mukti Sardjono said that prominent among the challenges is the high import tariff applied by USA President Donald Trump against palm oil products of Indonesia. Currently, the USA import tariff is set at 32%, much higher than that imposed on Malaysian palm oil products at 24%.
“As a result, we see now the export burden of Indonesian palm oil products at US$221.12 per ton, while export burden of Malaysia is only at US$140 per ton. Just based on this export burden alone, we can see that our competitiveness is weaker,” Mukti said during a discussion of Bisnis Indonesia Forum in Central Jakarta on Tuesday (24/6/2025).
CPO price weakens amid global uncertainty
GAPKI said that in March 2025, the price of crude palm oil (CPO) started to decline and stood below the prices of other vegetable oils, such as rapeseed oil and sunflower oil. The condition marked the adjustment of global market to the prices of vegetable oils.
But the weakening prices did not stand alone. External factors, such as geopolitical conflicts between Russia – Ukraine, India-Pakistan, and Iran – Israel in the Middle East, had triggered the price increase of energy at the global market. As a result, it had raised the production cost of palm oil in Indonesia.
Mukti also highlighted the risk of declining export demand from main destination countries if they are impacted by global economic crisis caused by the geopolitical conflicts. “Considering such condition, then the year of 2025 will become the year of full of challenges for Indonesia’s palm oil industries,” he said.
Mukti Sardjono said that besides the global challenges, the palm oil industries of Indonesia are also facing various national problems, which are particularly concerned with the stagnant growth of production and even tends to decline. But on the other hand, domestic demand of palm oil for foods, energy (such as biodiesel), and the oleochemical industry continues to increase.
However, the most crucial issue is the issue of regulation and business climate that is not yet conducive. Mukti said that there are 37 government institutions involving in regulating the palm oil industries, often causing overlapping and inconsistent policies.
“Legal uncertainty and complicated bureaucracy have made it difficult for business actors to operate their palm oil businesses efficiently and effectively,” he said.
Another problem is related to the locations of oil palm plantation areas, which are considered encroaching the forest areas or borderlines. “If it is not resolved immediately, there will be a major risk to the continuity of production and employment in palm oil industries,” said Mukti.
“If there is no certainty and clarity regarding the governance of oil palm plantations, especially on forest issue, there could be mass layoffs and significant decrease in production volume of palm oil,” he concluded. (*)
