InfoSAWIT, JAKARTA – Coordinator Minister in Maritime and Investment, Luhut Pandjaitan as his capacity as Taskforce Chairman for Improving Palm Oil Governance and Optimizing the Revenue, by the last month, announced pragmatical decision to deliver mercy and legalized 3,3 million hectares (of 16,8 million hectares palm oil plantations in total) “illegal palm oil plantations” in forestry regions which have been identified in comprehensive audit.
Pandjaitan told that to legalize illegal plantations and put them into tax system, supervised by related ministry or institution, but punish them by delivering much administration, would be the cheapest correction in labor system, and delivering smaller impacts than hazard moral risks because the plantations involve many smallholders.
But whatever the argument is or will be, the finding of 3,3 million hectares of ‘illegal’ palm oil plantations because of overlapping in forest regions, validated perception that developed for all these years that public and corporate governance was very bad in natural resource sectors in Indonesia, particularly in palm oil industries which deliver much temptation.
As the biggest palm oil producer in the world with about 16,8 million hectare of palm oil plantations and one biggest consumer, Indonesia has the strong position to lead this industry and shape the markets globally. Besides, Indonesia which has full of good areas to develop palm oil plantations, could increase its palm oil production and the numbers of its population that reached more than 270 million would keep developing and this enable to expand vegetable oil markets in this country.
Biophysics aspects, such as, rain, sunshine, and adjustable land with wide areas, make Indonesia as the best country to develop palm oil. The valuable natural resource, if it is well – managed with good governance and best agricultural practices, could be the major support to encourage sustainable development.
But just like in many developing countries, Indonesia gets ‘the curse of natural resource’ or paradoxical situation where a country gets bad work in economy though having valuable natural resources. Indonesia fails to take advantages on abundant natural resources to trigger economic progress sustainably because of the bad governance and misconduct.
Indonesia now faces governance issue by itself in palm oil industries, particularly about the ‘wrong’ policy in upstream and downstream sectors, and market intervention. We now harvest what the government poured in series of policies which are full of emotion. Natural resource misconduct and bad governance, particularly corruption, fail to optimize the advantages of palm oil development.
Apart from its vita roles, palm oil industries are in misery because of close anti-market policies, such as, export quota, domestic marketing obligation, domestic price obligation that ran since the early of 2022 to stabilize palm cooking oil price in the domestic that the government published after palm cooking oil was very expensive because of vegetable oil supply disturbance massively in the globe.
The government would fully implement biodiesel in palm oil – base (35 percent/B35) mixture next month after the program was introduced in February 2023. Indonesia would escalate to escalate the mixture to be 40 percent as the way t minimize fossil fuel imports.
The relatively cheap commodity, useful, and as the biggest vegetable oil used, would fulfill more than 40 percent of vegetable oil demands in the world by using less than 6 (six) percent of the total areas dedicated to produce vegetable oil. That is why food and fuel should closely compete to get crude palm oil (CPO).
Considering that palm oil industrial structures are complex and vital roles in economy for hiring more than 17 million workers and involving more than two million smallholders, the government needs to immediately reform palm oil industrial governance. There is no other way to maintain palm oil advnatages for economy in a whole besides the government should improve the regulation and governance by reducing bureaucracy and minimizing risks about policy substitution.
Without good coordination, it is impossible for the government to design development policy which is integrated for the vital industries. There should be three approaches to do to chance the ‘curse’ of natural resource to be a blessing and could increase natural resource management for the interests of the country and people.
The first and the most important thing is it needs to escalate institutional capacity and regulatory framework in palm oil management to provide coherent supporting system.
The taskforce which has been established could be escalated and consolidated to be the powerful institution in the central government that would have authority to publish policy, regulate, manage permits, implement development programs, conduct research and development, coordinate every activity that has something to do with palm oil and its derivative products.
The new institution would coordinate every government’s institution that has something to do with palm oil both in the central and in region by perfecting Palm Oil Plantation Fund Management Agency which exists now that manages palm oil or everything that has something to do with it in one spot.
The second is that the government must launch a comprehensive standard in production, trade, and palm oil use by harmonizing sustainable principles and ethics in every palm oil supply chain. The standard should base on sustainable development goals (SDGs) that many countries accept, good governance, and balance every environmental conservation action with responsible economic development.
The government is planning to revise President’s Regulation Number 44/2020 about ISPO (Indonesia Sustainable Palm Oil) to be able to face nowadays and the future challenges, such as, market acceptance, European Union Deforestation Regulation (EUDR), and other issues. EUDR would make other sustainability standards to be less relevant. It is the right time to adjust with the shift of the balance.
The last is that Indonesia should work hard to clean up the corruption images but create conducive business environment to get better companies’ governance.
The urgency of powerful anti-corruption and public and corporate governance improvement in palm oil industries would trigger the better economic progress to encourage this country to better welfare.
By: Edi Suhardi/Analyst of Sustainable Palm Oil
