The Indonesian palm oil industry faces numerous domestic and global challenges. Economically, the growth of palm oil plantations has not been in line with the economic prosperity of producing regions. The palm oil industry has also been found to have negative environmental and social impacts. While global regulations, such as the European Union on Deforestation-Free Regulation (EUDR) in Europe, encourage the implementation of sustainability certification, the achievement of legality and various sustainability certifications in Indonesia remains low. Economically, the government is suspected of losing trillions of rupiah in potential tax revenue from the palm oil industry, while policies such as land amnesty and the licensing system remain rife with corruption. More recently, the B35 to B50 biodiesel plan is suspected of requiring the expansion of palm oil plantations, potentially increasing deforestation.
In 2018, the government issued Presidential Instruction No. 8/2018 concerning the Suspension of Permits and Evaluation of Oil Palm Plantations, aimed at improving sustainable governance and environmental preservation. This policy aimed to reduce deforestation, forest fires, and carbon emissions, while also increasing oil palm productivity without land expansion. Unfortunately, this policy was discontinued after it expired in 2021.
Studies from an economic perspective show that the cessation of palm oil permits accompanied by replanting will have a better economic impact in the long term, including on GDP, income, tax revenue, and employment. A moratorium accompanied by replanting is projected to generate economic output of up to IDR 27.3 trillion in 2045, better than a non-moratorium that reduces output. The income of the community and the business world is also more positive with the moratorium, especially if replanting is implemented. Meanwhile, although palm oil exports may decrease, the moratorium will increase competitiveness in the international market that cares about the environment.
Meanwhile, a study using the Environmental Carrying Capacity (D3TLH) perspective, developed through modeling on the islands of Sumatra, Kalimantan, Java, Bali, Nusa Tenggara, Sulawesi, Maluku, and Papua, concluded that the upper limit (cap) for palm oil in Indonesia is 18,148,602.96 ha, or 18.15 million hectares. Much of the existing palm oil plantation is located in inappropriate locations, including non-protected forests, wet and dry agricultural lands. The islands of Sumatra and Kalimantan have a surplus of palm oil plantations, while Java, Sulawesi, Papua, and Maluku experience a deficit. Palm oil development is no longer feasible on all islands because many regions have exceeded their environmental carrying capacity, especially in ecologically vulnerable areas.
Based on economic and environmental findings and analysis, civil society is pushing for policies to support improved governance, data consolidation, increased productivity, and generally increase the economic impact of the palm oil industry. The simultaneous moratorium and replanting scenario would generate a GDP output of IDR 30.5 trillion and employ 827,000 people during the estimation period. Meanwhile, the palm oil expansion scenario without a moratorium would result in a negative GDP output of IDR 30.4 trillion and only create 268,000 jobs during the same period. Civil society is pushing for the issuance of a Presidential Regulation, accompanied by policies from relevant Ministries, to halt the issuance of new permits for palm oil plantations. This step is crucial for a better economic impact of the palm oil sector without neglecting the conditions of environmental carrying capacity and carrying capacity. In addition, this policy is expected to improve more sustainable palm oil governance, ensure national and regional economic sustainability, and support Indonesia's commitment to reducing carbon emissions.
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