Palm Oil Becomes Economic Savior Amid Uncertainty

Press Release
Indonesian Palm Oil Association (IPOA)

Palm oil becomes economic savior amid uncertainty

JAKARTA – The palm oil industry has become the economic savior amid the uncertainty caused by the outbreak of Covid-19 pandemic. To keep ensuring the positive contribution, the palm oil industry players will keep the strict implementation of health protocol in their respective plantations and companies, so that the plantations can continue normal operations.

“In this occasion, allow me to express our deepest sympathy to those who were impacted by Covid 19 pandemic which has taken so many lives and jobs. We do hope vaccines that are being developed can work and function effectively and the pandemic can be overcome soon. But on the other side, we’re grateful that amid this difficult year, the palm oil industry keeps contributing positively to the national economy,” the Indonesian Palm Oil Association (GAPKI) Chairman  Joko Supriyono said in his welcoming remarks in the IPOC (Indonesian Palm Oil Conference)  2020 New Normal organized virtually on Wednesday.

Joko Supriyono said that the Covid-19 pandemic had also affected the exports of palm oil as a number of countries of export destinations implemented lockdown that restricted economic activities. But in spite of declining export performance, the export of palm oil until the third quarter 2020 managed to contribute foreign exchange at US$15 billion.

“When the export weakening, the local demand for palm oil increased as raw materials for biodiesel and oleochemical to produce soaps, hand sanitizers, and other products,” said Joko.

Joko pointed out that in the fourth quarter, the exports of palm oil products have been improving. The increase of export and domestic demand has kept the prices at very good level.

“The palm oil industry will be always supporting the government’s mandatory program of biodiesel to support the growth of palm oil industry and the national self-sufficiency in energy,” Joko said.

Meanwhile, Economic Coordinating Minister Airlangga Hartarto said in his keynote speech in the IPOC 2020 New Normal that the palm oil industry has contributed significantly to the national economy amid the outbreak of Covid-19 pandemic. “Through stimulus and the implementation of economic recovery program in 2021, our national economy is expected to grow by 4.5% – 5.2%. But it is based on the assumption that the Covid-19 pandemic will be put under control after the vaccine will be distributed by early 2021,” he said.

Airlangga Hartarto said that the sectors of agriculture, forestry, and fishery have become the largest contributor to the national GDP. Despite being affected by the economic slowdown, the agriculture sector has a higher resilience than other sectors in facing the Covid-19 pandemic.

To support the economic recovery, Airlangga Hartarto pointed out three government policies to support the palm oil industry.

First, the omnibus law (UU) No.11/2020 on job creation through the increase of investments and easiness of doing businesses. That way the people’s rights of getting jobs can be realized and the government can improve the public welfare by keeping in line with the environmental protection.

Second, the presidential instruction No.8/2018 on moratorium and evaluation of oil palm plantation licenses. It is expected to support the implementation of sustainable development through the increase of productivity of oil palm plantations (intensification). It is supported by the presidential instruction No.6/2019 on action plan of sustainable palm oil 2019-2024, which will stand as roadmap for the government and all stakeholders.

Third, the certification system of Indonesian Sustainable Palm Oil (ISPO) with principles and standards that set a balance of developments socially, economically and environmentally.

To strengthen the efforts of accelerating the reduction of greenhouse gas emissions, the government has been continually improving the ISPO by  considering 7 principles: 1) system of licensing and managing plantations; 2) implementation of good practices of  cultivation and palm oil processing; 3) environmental management and supervision; 4) responsibility to the workers; 5) social and community responsibility; 6) empowerment of people’s economy; 7) sustainable business increase.

“The ISPO certification is mandatory for oil palm companies. But for the smallholders, the government will try to empower them by providing access to financing of the ISPO certifications that will be mandatory for smallholders in the next five years. Besides, the government will also provide financing for replanting program which has been initiated by President Joko Widodo for plantations in North Sumatera, Riau, and South Sumatera,” said Airlangga Hartarto.

He said that the replanting program has become one of the strategic programs in reviving the national economy that will be pursued through a cooperation of the government with the business players and other all stakeholders.

“We hope that all sides will understand the government’s efforts in supporting the palm oil industry sustainably. Let us join forces in realizing this goal by considering the environmental and social factors without weakening the financing to reach this goal,” said Airlangga Hartarto.

He predicted that the demand for palm oil will fully recover in 2021,  in line with the recovery of economy. The palm oil price is also expected to be continually stable with the support of the mandatory program of biodiesel.(*)

Jakarta, 2 December 2020
Indonesian Palm Oil Association (IPOA)

For further information, please contact:

Tofan Mahdi
Head of Communication Division of IPOC 2020
Mail: [email protected]