Coordinating Minister for Economic Affairs Airlangga Hartarto ensures the government will continue to bolster both the palm oil industry's economic resilience and socio-environmental sustainability through a string of policies.
According to Airlangga, the agricultural, forestry, and fisheries sector is the third-largest contributor to Indonesia's GDP. Social distancing measures across various regions have disrupted the agricultural product distribution and thus causing a downtrend. Even so, the agricultural sector is far more pandemic-resilient than their industrial counterparts.
"Whereas the palm oil industry employs over 16 million people and contributes an average of $20 billion per annum. We also see the palm oil industry still positively contribute to the economic activities amid the COVID-19 pandemic," Airlangga told an online conference held by the Indonesian Palm Oil Association (Gapki).
The minister forecasts palm oil demand to recover as economies reopen. Palm oil price is expected to rise to $668 per metric ton next year from $650, following the increasing demand from large trading partners and biodiesel policy.
"But the real question is how we can affirm that the palm oil industry contributes not only to the economy but also the social and environmental aspects of the community. And the answer is effectively implemented regulations and among them is the recently enacted job creation law," Airlangga said.
The 2020 Law on Job Creation helps create more jobs by boosting investment and ease of doing business. This also manifests in the government's interest to improve people's welfare while being in line with environmental protection, he added.
Also, President Joko "Jokowi" Widodo has rolled out several instruments for a more sustainable palm oil industry.
The 2018 Presidential Instruction on Palm Moratorium and Palm Oil Productivity Escalation aims to restrain further plantation expansion and ensure the permits have met the sustainability standards. The 2019 Presidential Instruction on the National Action Plan on Indonesian Sustainable Palm Oil comprised the 2019-2024 roadmap for the government and stakeholders to balance socio-economic development and environmental conservation, Airlangga said.
In March, the president also signed a regulation to support the Indonesian Sustainable Palm Oil (ISPO) certification system. The government has made the certification mandatory for both companies and farmers, although smallholders have five years to become certified.
The government has allocated funds for plantation replanting in Riau, North Sumatera as well as South Sumatera. The program is to ensure land legality, increase productivity, income, and sustainable practices by smallholders.
Replanting is also included in the government's plan for national economic recovery. To this end, the government has teamed up with companies.
"Among these cooperation is to expedite the replanting process through subsidized microloans [KUR] disbursed by banks," Airlangga said.
Thank You, B30!
According to Gapki's Chairman Joko Supriyono, the pandemic has taken a toll on palm oil exports following lockdowns worldwide. However, the domestic consumption was able to withstand its impact thanks to the government's mandatory use of B30, a diesel fuel made of 30 percent palm oil biofuel.
"The government is consistent and persistent in implementing the B30 mandate despite the low fossil fuel price. This helps to stabilize our domestic consumption," Joko said.
"We will continue to support the government program to maintain the sustainability of the biofuel mandate as well as to ensure 100 percent recovery in the domestic market," he added.
Joko highlighted the domestic consumption increase was also thanks to oleochemicals. This palm oil derivative is commonly used in personal hygiene products such as hand sanitizers and soap, which have become a staple to keep the virus at bay.