The Contribution of Palm Oil Industry to Indonesia’s Economy

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Indonesia’s palm oil industry remains to be the main pillar of the country’s economic resilience in times of the ongoing pandemic. It is still the main contributor in earning foreign exchange and remains quite stable despite what’s been going on in the world. Based on the record from September 2020, the value of palm oil exports remained quite high, with around US$13.48 billion. 

The government continues to take steps to create business certainty and facilitation and a conducive climate for the industry, by passing certain policies and laws which regulate the management of land, permits and partnership in the palm oil industry. In terms of employment, the palm oil sector has a great impact because it’s a labor intensive sector. The development of the oil palm sector will not only benefit rural agricultural labor and agriculture worker households but will also have a positive impact on urban non-agricultural labor because this sector has close links with the financial sector. With this in mind, the aim of the policies imposed on the palm oil industry is to make farmers or the rural population become the landowners of the palm oil estates instead of just workers.

The fresh flow of investment is hoped to boost the role of the contribution of the palm oil industry to the national economy, as well, by creating more job opportunities, especially beyond Java island, and its contribution to the creation of added value to the economy could also become more significant.

It is predicted that Indonesia’s palm oil production in 2021 will significantly increase due to a better agricultural implementation, good and suitable weather condition and attractive price packages, with the estimation to reach around 49 million tons of CPO (Crude Palm Oil) and 4.65 million tons of PKO (Palm Kernel Oil). It is in line with what the government has committed to by continuing the B30 program which is predicted will increase biodiesel consumption to reach 9.2 millions KL, equivalent with 8 million tons of CPO.


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