JAKARTA – The palm oil industry is considered to hold a strategic position in supporting the sustainability of Indonesia’s economic transformation toward the “Golden Indonesia 2045” vision. However, amidst limitations on land expansion, increasing productivity has become an increasingly urgent challenge to ensure the availability of the national palm oil supply.
Bandung Sahari, Head of the Communications Division at the Indonesian Palm Oil Association (GAPKI), stated that the palm oil industry’s contribution to the national economy stems not only from palm oil itself but also from a wide range of derivative products utilized across the food, industrial, and energy sectors.
Indonesia also plays a crucial role in the global palm oil supply. Of the total global production of palm oil—which reaches approximately 85 million metric tons (MT)—Indonesia contributes around 49 million MT, or roughly 58%.
This substantial contribution means that the state of Indonesia’s palm oil industry influences the global balance of vegetable oil supplies. Bandung noted that approximately 22% of the global vegetable oil supply originates from Indonesia.
“This places Indonesia in a significant position regarding the global balance of energy supply and demand. To meet future demand, a focus on both sustainability and productivity is essential,” said Bandung in an official statement received by InfoSAWIT on Thursday (08/10/2026).
Supply Deficit Could Reach 27 Million MT
Supply issues are becoming increasingly critical alongside population growth and rising demand for palm oil. Bandung estimates that without significant growth in production, Indonesia could face a supply deficit of up to 27 million metric tons in meeting both domestic and export needs.
This situation presents a challenge, as the scope for plantation expansion is increasingly limited. Since the implementation of the moratorium on oil palm plantation expansion, the growth of plantation land area has slowed.
According to Bandung, if the planted area does not expand significantly, increasing productivity becomes the primary means of ensuring adequate supply. He noted that domestic crude palm oil (CPO) production needs to reach approximately 5 metric tons per hectare annually to meet the ever-growing demand.
Consequently, the future of the palm oil industry can no longer rely solely on expanding land area. The productivity of existing plantations has become the deciding factor.
Sustainability vs. Cost
On the other hand, increasing productivity must go hand in hand with the sustainability agenda. According to Bandung, as one of the developing countries with the largest economies, Indonesia needs to ensure that the growth of the palm oil sector does not overlook environmental considerations.
This challenge is further complicated by the fact that implementing sustainable practices can drive up production costs.
“Efforts to reduce the emissions footprint certainly require the adoption of more sustainable practices. However, this almost invariably entails the consequence of higher costs. Higher costs can erode competitiveness,” he said.
For plantation companies, rising costs pose a challenge to maintaining competitiveness, while for palm oil smallholders, these additional expenses can become an even heavier burden.
Amidst global market demands that increasingly prioritize environmental, social, and governance (ESG) factors, the palm oil industry must strike a balance between productivity, competitiveness, and sustainability.
Technology and Human Resource Quality Serve as Foundation
Bandung believes that boosting productivity must also be supported by the development of agricultural technology, the quality of human resources, and the strengthening of farmers’ capacities.
Controlling land-use conversion is a crucial step in preserving productive areas. Agricultural and plantation lands need protection to prevent them from being eroded by conversion to non-agricultural uses.
At the same time, there is a need to strengthen centers for education and agricultural technology innovation. Adopting appropriate technology is seen as a way to improve operational efficiency while enabling plantations to achieve higher productivity without the need to open up new land.
“Policy integration from upstream to downstream, as well as connectivity between the agricultural, industrial, and service sectors, is also essential to generate maximum added value for the national economy,” said Bandung.
Enhancing the quality of farmers and human resources in the agricultural sector is also considered vital. This effort must be accompanied by the strengthening of institutions and farmer entrepreneurship, ensuring that farmers do not merely act as raw material producers but are capable of playing a more significant role in the industrial value chain.
Don’t Focus Solely on Down-streaming
The significant attention paid to oil palm down-streaming in recent years must be balanced by a strengthening of the upstream sector. Ultimately, the growth of the downstream industry relies on the availability of raw materials.
Bandung emphasized that investment in the downstream sector must go hand in hand with efforts to maintain the national supply of Crude Palm Oil (CPO).
“In recent years, much of our attention and investment has been directed toward the downstream sector. However, there is one fundamental aspect we must not overlook: supply,” he asserted.
According to him, innovation and investment in the downstream sector will not yield optimal results without the support of adequate availability of raw materials.
“No matter how impressive downstream innovations may be, they lose their significance if we lack the raw material supplies needed to sustain that growth. How prepared are we to face a potential future deficit in palm oil supplies?” he asked.
Therefore, infrastructure investment supporting the agricultural sector is also essential to enhance production and distribution efficiency. Strengthening connectivity among the agricultural, industrial, and service sectors is expected to generate greater added value for the national economy.
Sustainable palm oil for the future
The national palm oil industry continues to advance various sustainability initiatives, including commitments to zero deforestation, peatland protection, and respect for human rights.
These commitments are seen not only as environmental measures but also as a means to strengthen the industry’s business resilience in the face of evolving global market demands.
Ultimately, the challenge facing Indonesia’s palm oil industry extends beyond merely increasing production. The greater challenge lies in maintaining supply availability through enhanced productivity without compromising sustainability principles.
Given the increasingly limited scope for land expansion, industry strategies must focus on boosting productivity, strengthening human capital, fostering technological innovation, building smallholder capacity, and integrating policies across the entire supply chain—from upstream to downstream.
These measures are crucial for ensuring the industry can continue to meet both domestic and global needs while generating added value for the national economy on the path toward “Golden Indonesia 2045.” (*)
