Indonesian President Joko Widodo kept his promise (that he made in April 2016) by signing Presidential Instruction No 8/2018 on the Delay and Evaluation of Permits and Elevated Productivity of Oil Palm Plantations. Through this instruction expansion of oil palm plantations is cut short for the coming three years, while the government also seeks to evaluate and reorganize permits and procedures in this industry.
Although Widodo decided for a three-year stop on the issuance of new permits for palm oil plantations, he is not out on reducing Indonesia's crude palm oil (CPO) output. Instead of boosting CPO production through adding more plantations, Widodo advocates for rising palm oil output on the back of growing productivity per plantation. By using more efficient and effective farming techniques as well as the rejuvenation of existing generations of older trees, there is plenty of room for growing production.
The new Presidential Instruction also orders central and regional authorities to verify and reorganize the domestic oil palm plantations map. It is widely known that local governments in Indonesia have not had adhered to the best organizing and management principles when it comes to mining and agriculture. In exchange for money, many local leaders have granted licenses (over the past decades) without setting clear boundaries to the oil palm concession areas. This has resulted in several problems, including haziness about land ownership and the fact that part of the country's oil palm plantations are located on land that is defined as forest area.
The Indonesian Palm Oil Association (Gapki) said it received the presidential instruction but is still studying the content. However, GAPKI's Land and Spatial Division Head Eddy Martono said the instruction is a great opportunity to improve the data in this sector. Currently, there is a major lack of data, especially involving plantations that are controlled by smallholder farmers (for example, the size of the plantation and the ownership). He added that there is no need to revise palm oil production targets for the coming years, particularly because Gapki members have not been engaged in expansion programs since 2011.
According to data from Gapki, the total size of Indonesia's oil palm plantations has now reached 14.03 million hectares. Most - nearly 60 percent - is controlled by private companies, while around 40 percent is controlled by (smallholder) farmers. State-owned oil palm plantations only account for about 1 percent of the total. Indonesia is the world's biggest producer and exporter of palm oil.
Although the presidential instruction is good news for environmental organizations that have (long) criticized Indonesia for the destructive effect of the palm oil industry on the environment, the moratorium only lasts for three years and therefore only constitutes a drop in the ocean.
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Poll Indonesia Investments:
Do you agree with Indonesia's moratorium on palm oil concessions?
Voting possible: -
- Yes, Indonesia needs to raise efforts to protect the environment (80.4%)
- No, an expanding palm oil industry creates jobs and brings forex earnings (14.3%)
- I don't know (5.4%)
Total amount of votes: 112