lndonesian Palm Oil lndustry: Challenges and Prospects M. Fadhil Hasan Senior Economist INDEF Indonesian Palm Oil Association Jakarta, Indonesia Presented at Indonesia Synergy’s Discussion Series “Can Indonesia Develop and Promote Sustainable Palm Oil?” Canberra, 20 July 2012
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lndonesian Palm Oil lndustry: Challenges and Prospects...Indonesia is the Largest Palm Oil Producer •Indonesia is the largest CPO producer, reaching about 23.5 million tosn in 2011
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lndonesian Palm Oil lndustry: Challenges
and Prospects
M. Fadhil Hasan
Senior Economist INDEF
Indonesian Palm Oil Association
Jakarta, Indonesia
Presented at Indonesia Synergy’s Discussion Series
“Can Indonesia Develop and Promote Sustainable Palm Oil?”
Canberra, 20 July 2012
Roles of CPO in the Indonesian Economy
• Pro-growth; the export volume of CPO is 16.5 million tons in 2011, contributing significantly to foreign export earnings of US$ 19.7 billions (about 10% of total export earnings).
• Pro-job; the palm oil industry creates about 4 million employment opportunities , consisting of farmers, plantation and industry workers.
• Pro-poor; palm oil industry supports regional development and poverty alleviation, especially in rural areas of Outside Java
• However, rapid expansion of large-scale plantation often triggers land-conflicts and declining natural forests, stimulating debates at the policy level and the fields
Total 30.284 33.664 34.751 35.709 37.971 Source : USDA, 2011
World Demand for Palm Oil (1000 tons)
Source: Oil World, 2010
World Production of CPO: Increasing
0
10
20
30
40
50
60
70
80
90
1995 2000 2005 2009 2010 2015 2020
M T
on
Indonesia
Malaysia
World
Source : Oil World (2010) and IPOA (2011)
Country 2010 / 2011 2011 / 2012
Indonesia 24,100 25,900
Malaysia 18.200 18.470
Thailand 1.400 1.600
Colombia 800 900
Nigeria 880 880
Other Countries 3.300 3.400
Total 48.680 51.150
Estimates of CPO Production, 2011/2012
Source : Oil World (2010), USDA (2011)
Production of Vegetable Oils: Increasing
0
5
10
15
20
25
30
35
40
45
50
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Palm Oil
Soy bean
Sunflower
Rapeseed
Production growth of vegetable oils in the last five years:
Palm Oil 9%, Soya 3,5%, Rape 8,5%, Sunflower 7,9%
Source : Oil World (2010)
Expansion of three major vegetable oils from 2005 to 2009: Soybean 4.6 millionsha, rapeseed 5.1 million ha, Oil palm 2,8 million ha
Vegetable Oil Oil Production Traded
Period 2011/12 | 2010/11 2011/12 | 2010/11
Metric Ton Metric Ton Metric Ton % Metric Ton %
Soybean 43.72 41.74 10.17 15.85 10.26 16.69
Canola 22.97 23.57 3.64 5.67 3.60 5.85
Cotton Seed 5.34 4.92 0.18 0.28 0.17 0.28
Sunflower 13.33 12.15 5.03 7.84 4.57 7.43
Peanuts 3.92 4.12 0.22 0.34 0.20 0.33
CPO 51.10 48.68 39.50 61.56 37.60 62.15
PKO 5.86 5.54 3.35 5.22 3.11 5.06
Coconut 3.40 3.17 2.08 3.24 1.98 3.22
Total 149.64 143.89 64.17 100.00 61.49 100.00
Production and Trade of Vegetable Oils (000 ton)
Source : USDA, 2011
FUTURE PROSPECTS OF PALM OIL
The World Bank (2009) estimated that 7.6 billion people will occupy the earth as early 2020. The assumes that the growth rate of world population is 11.6%
The International Finance Corporation (IFC), expects to see the per capita demand for staple food rise by 5% in the same period
Transferred to the need for vegetable oils, this means an additional production requirement of around 27.9 million tonnes vegetable oils in the year 2020
If this demand is to be met with palm oil alone, the cultivated area to be increased by 6.3 million hectares of additional land.
This presupposes, the productivity of the palm oil plantations will increase by 10% within the next 10 years
The situation would look even more precarious if the need be met by soybean. In this case an additional 42 million hectares of land would be needed – more than five times the area in the palm oil industry.
By combining the four main vegetable, the area expansion needed are: palm oil (3,9 million hectares); soybean (6.5 million hectares); rapeseed (14 million hectares); and sunflower (9.7 million hecatres):
As notes:
productivity of soybean 0.37 ton/ha/year and of palm oil 4.14 ton/ha/year (Oil World, 2010)
Future prospects are quoted from Aly Rashad Abdel-Moemin (2011)
Indonesia is the Largest Palm Oil Producer
• Indonesia is the largest CPO producer, reaching about 23.5 million tosn in 2011 and growing at 5,1 percent per year.
• Land expansion of oil palm from 2001 to 2009 in average is 372.000 ha/year or increased by 7 percent per year.
• The growth of palm oil industry in last decade is the largest level ever, similar to the growth level in the 1980s at the initial introduction of oil palm industry.
• However, the productivity gap between smallholders and large-scale plantations is widening (2.86 ton/ha vs. 3.54 ton/ha).
Source: Central Bureau of Statistics, 2011 * Preliminary data
• In term of production, the share of smallholders’ plantation 36% (7,6 million tons), while those of state-owned and private plantation are 12% and 52%, respectively.
• In terms of land area, the share of smallholders is 41%, while that large-scale plantation is increasing to 48%, and the remaining 11% is state-own enterprise, but tend to decrease.
0
2 000 000
4 000 000
6 000 000
8 000 000
10 000 000
12 000 000
14 000 000
2004 2005 2006 2007 2008 2009 2010*
Tabel 1.1 Produksi Kelapa Sawit Indonesia Tahun 2004-2010*/