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<\/p>\nAn increasingly greater challenge has stood in the way of Indonesia to grow its palm oil industries bigger and stronger since becoming the world\u2019s largest producer and exporter of palm oil products in 2006. Based on data from the United States Department of Agriculture (USDA), in 2022\/2023 Indonesia contributed around 59% to the world\u2019s palm oil production and gained 43% market share in the global market of vegetable oils, which include soybean, sunflower and rapeseed as its main competitors.<\/p>\n
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Assuming such a global high position on the \u200b\u200bworld market ocean, Indonesia has to weather through the growing headwinds in the forms of tariff and non-tariff barriers imposed by certain importing countries. The non-tariff barriers have been tacitly implemented under the pretexts of environmental and social-related issues, which are annoyingly harped by negative campaigns against the palm oil.<\/p>\n
Apparently, after being confronted with such challenges, Indonesia has realized that it could not just rely on the global front to expand export market or reorient its exports from traditional markets to the non-traditional ones. It has also turned inward to develop its downstream palm oil industries on three subsectors, namely palm-based oleo-food subsector, oleochemical subsector and bioenergy subsector.<\/p>\n
Based on the government\u2019s policies, Indonesia\u2019s palm oil down-streaming program is aimed to realize four goals. First, to increase added value. Second, to reduce Indonesia\u2019s dependence on the global market of vegetable oils. Third, to change the composition of Indonesian palm oil exports from being dominated by crude palm oil (CPO) to a domination of processed products (intermediate products and finished products). Fourth, to substitute imports of products that can be replaced by palm-based products.<\/p>\n
Before 2010, when Indonesia started intensifying its down-streaming program, the industrial down-streaming process of palm oil was only seen in the importing countries. As a result, the added value from down-streaming, which amounts to US$32.8 billion per year, was only enjoyed by the importing countries.<\/p>\n
Initially, Indonesia\u2019s down-streaming process only saw a slow progress. But after the government\u2019s decision to increase export levy of CPO, its downstream industries saw a robust growth. According to the Palm Oil Agribusiness Strategic Policy Institute (PASPI) Executive Director Tungkot Sipayung, Indonesia has reached a significant progress in developing its downstream industries. \u201cIn 2010, Indonesia\u2019s palm oil export consisted of around 70-80% crude palm oil (CPO). But in 2022, its CPO export decreased to around 10% while its palm-based downstream products rose to around 90% of total exports of palm oil products. Its kind of downstream products also increased from just 54 kinds in 2010 to 179 kinds of downstream products by early 2024,\u201d he told a seminar recently in Jakarta.<\/p>\n
Prominent among its palm oil down-streaming program is the production of bioenergy since 2008. It has managed to produce biodiesel, biogasoline and bioavture. While the biogasoline and bioavture are not yet in commercial production despite being ready, it has started the commercial production of biodiesel since 2010. It upgraded it in stages from the initial B10 to B20, B30 and B35 since February 2023. Its biodiesel industry has not only allowed Indonesia to cut its imports of fossil fuels and reduce carbon emissions, but it has also lifted its position into the global top-3 producers of biodiesel after the USA and Brazil.<\/p>\n
But despite the achievements, Sahat Sinaga, Acting Chairman of the Indonesian Palm Oil Council (DMSI), said that there are still a number of problems that should be seriously and thoroughly addressed if Indonesia wants to see its downstream palm oil industries growing bigger and stronger as the mainstay of Indonesian economy. \u201cThose problems are concerned with processing technologies, research and development (R&D), business schemes, global trade barriers that include European Union Deforestation Regulation (EUDR) and expansion into non-tradisional export markets. The processing technologies are still controlled by the Western countries,\u201d Sahat told journalists during a palm oil workshop in Bandung recently.<\/p>\n
According to Sahat, foreign investors are reluctant to invest in Indonesia\u2019s downstream palm oil industries because of several factors, which are mainly related to legal uncertainty and inconsistency of regulators.<\/p>\n
Tungkot concurred with Sahat, saying that besides the legal uncertainty, Indonesia\u2019s palm oil industries are not in a harmonious relationship from the upstream to downstream. \u201cThey go their own way. The upstream industry and downstream industry are not yet well integrated, which contributes to the already unconducive condition in the industry,\u201d he told the press recently.<\/p>\n
Tungkot said that actually there is still bigger chance for Indonesia to further expand the downstream industries in Indonesia. \u201cThe further and deeper the development of downstream industries the greater added values that will be reaped by Indonesia. It will also make Indonesia more competitive at the global market. But the challenge along the advancement is the requirement for more and more innovations,\u201d said Tungkot.<\/p>\n
But according to him, Indonesia\u2019s downstream palm oil industry players are slow to innovate. \u201cFactors which impede their adoption of innovations include the fact that palm oil companies have no culture of creation and innovation. Innovations have not yet become a main indicator of company performances. It is partly caused by unsupportive policies applied by the government,\u201d he said.<\/p>\n
Tungkot said that there have been many inventions made by many researchers who utilized the funds provided by the oil palm plantation fund management board (BPDPKS) for research and development (R&D) activities. But not many of their inventions and innovations are adopted by the industry players for commercial development.<\/p>\n
It seems that by attributing it to the vision of \u201cIndonesia Emas\u201d (Golden Indonesia) in 2045, Indonesia still has a lot of catching up to do in the palm oil down-streaming program, as part of Indonesia\u2019s national down-streaming program, which also includes mining industry. Indonesia has envisioned that its down-streaming program will transform it into the global center of downstream palm oil industries as part of its national goal of \u201cIndonesia Emas\u201d (Golden Indonesia) by 2045, which marks the country\u2019s centenary as an independent nation. It also expects that the down-streaming program will make Indonesia as global price leader of palm oil through the operation of its palm oil futures market.<\/p>\n