Indonesia is the world’s biggest palm oil grower as well as the world’s biggest exporter of crude palm oil (CPO). Traditionally, palm oil exports are ranked among the top three export products of Indonesia (along with coal and natural gas). As such, palm oil is of crucial importance for the Indonesian economy.
It is not only one of the country’s key foreign exchange earners (Indonesia is estimated to have collected some USD $16.5 billion through palm oil exports in full-year 2018) but the palm oil industry also provides employment to millions of Indonesians. Around six million Indonesians are directly employed in this industry, while up to 50 million Indonesians are believed to obtain their income – indirectly - from the country’s palm oil industry. Hence, it is a significant contributor to rural incomes and rural economies in Indonesia, particularly on the islands of Sumatra and Kalimantan.
The palm oil industry therefore has a massive impact on local economies - as well as on the whole national economy - of Indonesia. When global palm oil prices are low, foreign exchange earnings decline and people’s purchasing power tends to fall accordingly in provinces that - to a large degree - depend on the palm oil industry. Even companies that are engaged in sectors that may seem unrelated to palm oil then even feel the negative effects of low palm oil prices. For example, motorcycle sales are bound to drop when palm oil prices are down.
Read the full article in the July 2019 edition of our monthly research report. You can purchase the report by sending an email to email@example.com or a WhatsApp message to the following number: +62(0)8788.410.6944
Poll Indonesia Investments: