Palm oil productions are increasingly important to Indonesian economy for Indonesia is recognized as a world leader for palm oil. In recent years, the significance of the industry has increased in the country due to rising demand for edible palm at home and in other countries. Statistics of the Center for International Forestry Research (CIFOR) state that increased demand for edible palm oil nationally and in countries such as India and China has made Indonesia a top global producer of crude palm oil (CPO). Along with Malaysia, Indonesia provides for about 90% of the world supply for palm oil. However, behind all this advancement and aggressiveness for palm oil industry, gloom lurks in as Indonesian rainforests vanish together with their almost-extinct wild animals, as well as the human rights violation of palm oil labors.
Palm Oil Production in Indonesia
The main driving force for expanding palm oil production in Indonesia is rooted in high levels of consumption of the oil. Palm oil, which is an edible vegetable oil, is used mostly for food products. An end product of the oil is biodiesel that is in great demand as well. It is forecasted that Indonesia will produce about 30 million metric tons of CPO and export about 18 million tons in 2014. In 2011, about 7.8 million hectares of land in Indonesia was covered by palm oil plantations and by 2020, the country planning to double its production to 40 million tons produced annually would need to dedicate another 4 million hectares of land to palm oil production. According to the World Bank, half of the CPO production in Indonesia is exported and half of the remaining that is processed into cooking oil is exported as well.
Indonesia has a long history of palm oil cultivation. Most of the palm oil plantation estates (about 75%) are located in Sumatra and Kalimantan. These are usually managed by smallholder operations that are credited for the palm oil expansion in recent years. The country started off with palm oil production for export purposes, but today, it is facing a tough dilemma of coping up with the export demand along with domestic consumption and biodiesel prospects from the industry.
Prospects in the Palm Oil Industry
The country has plans to increase its refining capacity this year by 50% to 45 million tons. The growing developments have led to the government considering changing the palm oil export structure, and after discussion with the relevant ministries, the change will be implemented from next year. The changed structure may involve removal of tax on palm meal, biodiesel and hydrogenated palm oil products. The government stated in 2013 that there should be a policy to ‘boost the consumption of palm oil for biodiesel’.
Many national and international companies are keen to invest in the growing palm oil industry. The current key players of the industry include PT Bakrie Group, PT Astra Agro Lestari Terbuka, Surya Dumai Group, Cargill (Singapore), Wilmar International (Singapore), Triputra Agro Persada, Kallista Alam, Sinar Mas Agro Resources, and Musim Mas.
The Grimmer Side of the Picture
While the country is putting full force of expanding production, growing the industry and enhancing profitability there are severe consequences emerging from the practice as well. Indonesia is rapidly losing virgin rainforest due to massive deforestation for palm oil. Burning of the forests land clearing has caused pollution and harm to the environment, thus making Indonesia the 3rd highest greenhouse gas emitter in the world. Several species are threatened for extinction owing to the loss of their habitat as companies go for land clearing even before permits are received. To name a few, Orangutans, the Sumatra Tiger, Sun Bear, Proboscis Monkey, Sumatran Rhinoceros and the Clouded Leopard are at great danger. In fact, in the past 2 decades about 50,000 Orangutans have been killed due to deforestation. In addition, there have been major human rights violations resulting from the aggressive pursuing of palm oil productions. This includes child labor and local communities being left with no choice but to become plantation workers to support their families.
With great advancement, there are great consequences. In the battle for progress, the decision lies with the Indonesian government with regards to what it prioritizes and how well it conserves its resources.
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