The limited cabinet meeting led by President Joko Widodo on 10 July 2024 concluded with an intention to expand the authority of the oil palm plantation fund management board (BPDP-KS) beyond just palm oil into cocoa and coconut. The addition of public service function under the finance ministry will be executed through the formation of two new deputies, namely deputy in charge of cocoa and deputy in charge of coconut.
The palm oil stakeholders have swiftly voiced their rejection against the intention as it is not clear how it will be funded. It is against the backdrop that the fund managed by BPDP-KS is collected from the palm oil industries and is used for the interest of palm oil industries”. The development of cocoa and coconut, therefore, should be financed separately outside the fund collected from the palm oil industries.
There is no denying that the new mandate is aimed to emulate the performance of Malaysia in managing the forestry and plantation sectors, developing Indonesia’s plantation sector as the backbone of sustainable Indonesian economy and at the same time tackling the problems of overlapping institutions and licensing.
Looking backward, around 100 years ago, Indonesia under the Dutch colonial government was the king of plantations in the world. At that time Indonesia was the world’s second largest producer of sugar. Currently, we’re not even included in the list of top-10 producers of sugar.
So are the productions of other plantation commodities, such as coffee, tea, tobacco, which also became the backbone of Dutch colonial economy and the drivers of development for other sectors and regions. The train industry, for example, had grown to transport plantation commodities in Central Java.
Currently, only the palm oil that can be the pride of Indonesia. Since 2006 Indonesia has managed to surpass Malaysia’s palm oil production and now controls around 60% of global production of palm oil and 40% of global production of vegetable oils. Indonesia’s productions of copra (dried coconut) and rubber are the second largest in the world. Our coffee production is the world’s fourth largest, while tobacco is far below, despite the fact that the number of our smokers is the fourth biggest in the world.
In 2015 the government established BPDP, which was assigned to develop seven strategic plantation commodities, namely palm oil, coconut, cocoa, rubber, coffee, tobacco, and sugarcane. Actually, the sugarcane had been discussed before to be managed by BPDP after the palm oil, but it is not clear until now.
It is stipulated in the government regulation (PP) No.24/2015 on collection of plantation fund, with a special mandate to develop the upstream and downstream industries of plantations, and not spices and foods. Since then the palm oil industries have been flourishing, in terms of research, education, replanting of smallholders’ plantations, and down-streaming into various products of foods, oleochemical and energy.
Palm oil exports have continually increased. Currently, it is the third largest contributor of Indonesia’s foreign exchange income, and even once it was the largest contributor. As a result, the palm oil fund can be collected from the palm oil industries and returned to the industries for its further development and strengthening.
It is the success story that has driven the decision to extend the mandate of BPDP to help finance the revitalization of other plantation commodities. For such purpose, the government can do a number of programs at the same time to solve the institutional problems of forestry and plantations, overlapping land areas, financing, and restore the glory of Indonesian plantations.
First, setting up the ministry of forestry and plantation. Malaysia learned from Indonesia in 1970s and established its ministry of plantation and commodity, which manages plantations from upstream to downstream: Palm oil, sago, woods and furniture, tobacco, rubber, jathropa, cocoa, pepper, and biofuel. Malaysia separates the ministry of foods and plantations from environment and forestry to optimize the economic contribution of plantation and forestry sectors for the state and the general public.
What’s interesting is that the industries of woods and furniture are under the ministry of plantations as industrial forest is seen as an economic function. But the function of forestry conservation (conservation areas, national parks, etc) is part of environment.
Indonesia once adopted this concept of department of forestry and plantation during the administration of President Habibie and President Abdurrahman Wahid. The forestry department deals with economic function of forestry and woods, which are also based on plantations, namely production forest (HP) and industrial forests (HTI).
Second, improving the governance of palm oil industry, which was discussed during the limited cabinet meeting led by President on 10 July. The root of the problems is the overlapping locations of oil palm plantations and forestry, which were not yet resolved until the set deadline by the end of 2023. A breakthrough that can be learned from Malaysia is the economic function of forestry as stipulated in the law (UU) No.20/2007 on spatial planning, such as function of cultivation, which should be consistently treated as the same with the plantations with cultivation function.
This can be implemented by combining the management function and the cultivation areas of production forest
HP and industrial forest (HTI) with plantations, in accordance with the law (UU) on spatial planning. For the purpose, there is a need for single authority over the national planology, by combining the planology function of forestry with the ministry of agrarian and spatial planning. This ministry in 2019 had combined the function of spatial planning of the National Land Agency (BPN) and the spatial planning of the ministry of public works.
Third, underlining the importance of tackling the climate change by establishing the ministry of climate change and environment, which will deal with the climate change, conservation areas and environment. The target should be to reduce carbon emissions in 2030 and net zero emission in 2060, and manages conservation and protected areas at least 40%—50% of the total land areas of Indonesia, as compared to the current level of around 30%.
Fourth, managing fund for development of plantations and forestry. This institution will have a big initial capital, which is the palm oil fund that has been managed by BPDP-KS at around Rp30 trillion and reforestation fund at Rp2 trillion to increase the function of production forests.
The revitalization of cocoa and coconut plantations is financed with export or import levies under a separate account from palm oil fund, for development and replanting of smallholders’ cocoa and coconut plantations with the aim to improve their sustainability and productivity.
Until now, the export contribution of plantations has been high. In 2023 the export contribution of plantations reached around US$50 billion, of which 70% contributed by the palm oil. It’s bigger than the contribution of the oil-gas sector of Indonesia, which has become a net importer. More optimization is needed to raise its contribution.
That way the next government can safely implement its program of developing the plantation sector and the economic function of forestry, and at the same time tackling the problems of overlapping land areas of forestry and plantations, toward reaching the sustainable “Indonesia Emas” (Golden Indonesia). (By Edi Suhardi, Sustainability Analyst and Executive Member of the Indonesian Palm Oil Association (GAPKI)
