Indonesia's Industry Ministry selected the industrial estate in Berau (East Kalimantan) as the center for the downstream palm oil industry in Kalimantan. Furthermore, Panggah Susanto, the Industry Ministry's Director General for Agriculture industry, said the government proposes to select Berau as one of the palm oil centers within the Palm Oil Green Economic Zone (POGEZ) scheme. Berau is chosen to replace Bontang because the former has 3,400 hectares of (clear and clean) industrial land available, while land in Bontang still falls under "protected forest" status.
Moreover, Berau is also selected because existing infrastructure is adequate. There is a power plant (2x63 MW), a water treatment plant (3,700m3 capacity) and a harbor that is currently primarily used for pulp and paper shipments of Kertas Nusantara. Berau is also envisaged to become the local center for oil and coal.
Earlier, the Indonesian government announced that it was preparing three palm oil industrial zones - within the Palm Oil Green Economic Zone (POGEZ) scheme - in a bid to strengthen the downstream industry of Indonesia, the world's biggest palm oil producer and exporter. These estates will produce a number of palm oil products, including biodiesel, olein and palm stearin (used for cooking oil, margarine and shortening).
This POGEZ is part of the deal that was made between Indonesia and Malaysia in 2015. Both nations, together good for about 85 percent of the world's total crude palm oil (CPO) supply, agreed to the establishment of an intergovernmental palm oil council last year called the Council of Palm Oil Producer Countries (CPOPC). This new institution aims to control the global CPO supply, stabilize prices, promote sustainable practices in the palm oil industry, and to enhance the welfare of oil palm smallholders (in some respects it resembles the role of OPEC in the oil sector).
Both Indonesia and Malaysia will provide fiscal incentives to boost industrialization within the POGEZ scheme. The palm oil industrial zones will mainly be developed through partnerships with both state-owned enterprises and private companies.
Downstream products that are produced through the POGEZ program should meet sustainability standards so it can be sold at premium prices. This would also imply that the products can be shipped to various nations worldwide (due to environmental issues it has become increasingly difficult to export palm oil products to Singapore and the European Union). Developing the downstream palm oil industry is also important to boost Indonesia's exports. Up to the present the nation heavily relies on raw natural resources for its export performance.
Indonesia's Reference Crude Palm Oil Price in 2016:
Indonesian Palm Oil Production and Export Statistics:
(in USD billion)
¹ indicates forecast
Sources: Indonesian Palm Oil Producers Association (Gapki) & Indonesian Ministry of Agriculture