GAPKI: Sustainability In All Supply Chains Ensures Stability

JAKARTA – The sustainability principles should be continually implemented all across the palm oil supply chains, from the big oil palm players up to the smallholders.

The Indonesian Palm Oil Association (GAPKI) Chairman Joko Supriyono said during a virtual discussion recently in Jakarta that the sustainability is a market driven requirement, which cannot be ignored. That is the reason why the sustainability has to be implemented all across the supply chains.

“The smallholders should be continually pushed to apply the sustainability principles. To realize it, their highest priority should be to increase productivity. If their productivity is low, they will not be able to survive. Now, there is no problem as the price of fresh fruit bunches (FFB) is good. When the price gets lower but the smallholders’ productivity is high they can still have a margin,” Joko told the webinar, which was organized by the Association of Oil Palm Smallholders under the Nucleus Estate and Smallholder Scheme (Aspekpir), in cooperation  with GAPKI.

He said that the palm oil commerce becomes problematic as smallholders have no direct access to the palm oil mills and they have to deal with many brokers. As a result, the smallholders only managed to get prices lower than those set by the government. For example, the government set the ceiling price for the smallholders at Rp1,500 per kg, but they only got Rp1,200 per kg.

The smallholders under the nucleus estate and smallholders scheme (PIR) become the model as they partner with the oil palm companies. That way they can get direct access to the mills and they are paid at the price set by the government. “That’s why the smallholders should find companies as their partners and strengthen their institutions. The partnership is a must for both oil palm companies and smallholders,” Joko asserted.

The nucleus and plasma partnership had ended in 1990s. Now, the oil palm partnerships are open for any schemes,  from the simple one to the most complex one. The simple one can be just avalist or consulting partner. The complex ones require companies to manage the smallholdings while the smallholders have to pay fees.

Aspekpir Chairman Setiyono said that in the past the partnership model is like the relationship of fostering father and fostering children. Like the fostering children, the smallholders just follow the companies as they do not have the know-how of plantation operation. The companies as the nucleus estates developed the plantations from A to Z, while the smallholders just follow.

The smallholders only involved in cultivation, and sell their products in the form of fresh fruit bunches (FFB). “The price of FFB is determined by the prices of CPO and PKO. The government used to be serious in managing the PIR by involving many institutions,” he noted.

Now, he said, the partners in any scheme of partnerships are equal. As a result, all issues, from seeds to replanting and to maintenance, have to be discussed first before implementation.

Smallholders should advance beyond only producing FFB, and become CPO producers by having shares in the oil palm mills. “By owning mills, then Europe can no longer easily attack the palm oil companies as smallholders also have shares in the industries,” he said.

On the sidelines of the webinar, GAPKI and Aspekpir signed a memorandum of understanding (MoU) on development of partnership and acceleration of the oil palm PIR development. Based on the MoU, GAPKI urged all of its member companies to establish partnerships with the smallholders grouped in Aspekpir.

M Nurdin, director general of transmigration area development at the ministry of villages, disadvantaged regions and transmigration, said that total investments for development of plantations, infrastructure and facilities in new transmigration areas reached Rp18.62 trillion.

According to him, there are 44 companies that had established partnerships with smallholders, of which some 42 involve in oil palm plantations. Based on each company’s business plan, as of October 2020 realization of the nucleus estates target of 138,803.14 hectares had reached 78,715.87 hectares, realization of the plasma plantation target of 150,399.55 ha reached some 47,291.43 ha; and realization of employment reached 21,433 workers from the target set at 49,571 workers. (*)