JAKARTA – The palm oil industries have a strategic role in driving Indonesian economy. Besides being top export commodity, the industries employ more than 16 million people, consisting of smallholders, plantation workers, and derivative industry players.

Expert Staff on Connectivity and Service Development at the economic coordinating ministry, Dida Gardera, said that Indonesia has around 16.38 million hectares of oil palm plantation areas, of which 53 percent are owned by the private sector, 6.0 percent by the state-owned companies (BUMN), and 41 percent are owned by smallholders.

“The productivity of Indonesia’s palm plantations can be still increased. Currently, the productivity among smallholders still averages at below 4.0 tons per hectare, while big companies’ productivity has reached between 10–12 tons per hectare. It is expected that through the program of replanting (PSR), the productivity can be raised up to two or three times within the next four years,” Dida said during a public discussion with a theme of “The Role of Palm Oil Industries In Sustainable Economy Toward Golden Indonesia 2045”, which was organized by Tempo Media Group in Jakarta, on Tuesday (4/11/2025).

Dida said that the main advantage of palm oil compared to other vegetable oils, such as sunflower oil and rapeseed, lies in its efficiency, and  productivity that can reach four times higher than others. “Palm oil is a commodity with the highest productivity and efficiency in the world. It is the most sustainable choice to meet the global needs of vegetable oils,” he said.

To strengthen its aspect of sustainability, the government is optimizing the sustainability certification system of palm oil through the Indonesian Sustainable Palm Oil (ISPO) certification. Based on the presidential regulation (Perpres) No:16/2025, ISPO covers all supply chain of palm oil industries from the upstream to downstream sectors.

“The ISPO certification is obligatory. For smallholders, the government has given a transition period of four years, and all costs of certification will be paid by the government,” said Dida.

The government is also developing the information system of ISPO to ensure traceability and transparency of data on plantation areas. Through the system, every certified plantation area can be verified to ensure free from forest areas and not overlapping with others. “This will become a game changer in the governance of palm oil industries in the future,” he said.

Besides focusing on the certification, the development of biofuel, biogas, and non-food derivative products from palm oil are also part of the transition toward green economy. Currently, there are around 200 derivative products of palm oil that have been commercialized, ranging from cosmetics to biofuel and bio-avtur. “Even, 40 percent of the content of our biodiesel comes from palm oil,” he said.

Lecturer of Economy and Business at the University of Indonesia (UI), Surjadi emphasized the importance of social dimension of palm oil sustainability. According to him, the economic development should go along with the public welfare and conservation of environment.

“Independent smallholders play an important role in the supply chain of palm oil, but most of them only have around 2–3 hectares of plantation areas and are still facing problems in getting fertilizer and funding,” he said.

Surjadi underlined the importance of mentoring the smallholders to empower them to manage plantations more efficiently and get added value from their harvest. “Ideally, the smallholders should join groups and get mentoring from big companies or government to allow them having a strong bargaining power,” he added.

He also highlighted the need to pay attention to oil palm plantation workers. According to him, plantation workers are part of the palm oil ecosystem that should ensure their rights to have decent living and formal employment status.

Based on the research conducted by IPB University, which is published in the Forest Policy & Economics (2020), Surjadi stated that conflict between economic development and environment conservation can be minimized. “The research shows that win-win solution can be achieved. With the right management, oil palm plantations in peat lands can reduce emissions while keeping productivity,” he said.

Meanwhile, the Indonesian Palm Oil Association (GAPKI) Chairman Eddy Martono said that the target of national production of palm oil is set at 92 million tons in 2045, which is almost twice higher than the current production at around 53 million tons.

“If the upstream sector is not improved, the downstream sector will not run optimally. The production of palm oil has been stagnant during the last five years. Therefore, GAPKI has been continually pushing for the increase of productivity and efficiency of smallholders’ plantation areas,” said Eddy.

He highlighted the success of biodiesel program, which is able to maintain the price of palm fresh fruit bunches (FFB) at stable level. “Before the implementation of biodiesel program, the price of palm oil was even once below the production cost. As a result many smallholders did not harvest their FFB and let them rot on the palm trees. But now due to the program, the price of palm oil can be stabilized and regional economies had been growing,” he said.

Through various programs of corporate social responsibility (CSR) on education, health, infrastructure, and people empowerment, GAPKI has been continually seeking to strengthen the sustainability of palm oil industries. (*)