Palm oil industry in Indonesia- Statistics & Facts

Indonesia was by far the world’s leading producer and exporter of palm oil in 2018, with an output of around 40.6 million tons, and export volume of 29.3 million tons. Together with Malaysia, they made up almost all of the world’s production and exports of palm oil. Unlike Malaysia, however, which exported almost all of the palm oil it produced, Indonesia was also one of the world’s biggest consumers of palm oil, using it as both cooking oil and in biofuels.

Palm oil production in Indonesia is concentrated on two of its five major islands: Borneo and Sumatra. In 2018, five provinces on these two islands accounted for around two-thirds of all palm oil produced in Indonesia. Palm oil plantations in Indonesia are largely divided into three types of administration: government-owned, independent and nucleus estate smallholders, and large private-owned plantations. Among the companies involved in palm oil production, Wilmar and Golden Agri-Resources make up two of the largest players in the industry.

Palm oil production is land-intensive, and much of Indonesia’s rainforest had been cleared to make way for plantations. The detrimental effects of oil palm cultivation, such as deforestation and air pollution through slash-and-burn land clearing practices, have in recent years come under increased global criticism. As of 2019, only a fraction of the palm oil produced in Indonesia was certified sustainable. The increasing awareness of environmental degradation from palm oil production has led to growing consumer backlash against palm oil in the Western market. As part of their efforts to reduce greenhouse emissions, the European Union plans to ban the use of palm oil in biofuels by 2030.
Indonesia’s palm oil industry also faced challenges from increased protectionism in the global market. Its biggest export market, India, introduced tariffs on palm oil in 2019 in a bid to safeguard its domestic soybean and sunflower oil markets.

In order to ensure a steady demand for its palm oil, and to reduce its dependence on the global export market, the Indonesian government introduced a policy of mandatory use of B30 biodiesel for the transport sector in 2019. By 2020, the government planned to roll out the use of biodiesel with a 40 percent mix. Indonesia’s B30 bio-content is primarily made of crude palm oil (CPO). The planned expansion of domestic biodiesel use, and in turn increased domestic demand for CPO, was estimated to create a value-add of close to 14 trillion rupiah in 2020. It was thus hoped that the domestic market would offset any future decrease in exports of Indonesian palm oil.

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Palm oil industry in Indonesia

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