Five Forms of Indonesian Palm Oil Revolution

In the history of world economic development, the green revolution has brought the world community apart from the catastrophic food shortage. In Indonesia the green revolution occurred in rice farming which brought Indonesia from the world’s largest rice importer country to a self-sufficient country in rice in 1984. Indonesia’s rice production increased from only about 2.4 million tons in 1970 to 25 million tons in 1984 and 33 million tons in 1995 or an increase of almost 14 times in 25 years.

Perhaps, it has escaped from the attention of development experts, Indonesian oil palm plantations also experienced rapid development and could be categorized as oil palm revolution. Indonesia’s CPO production increased rapidly from around 2.4 million tons in 1990 to around 37 million tons in 2017 or in 27 years increased 16 times. Unlike the rice revolution in Indonesia, which was funded and driven by the Government, the oil palm revolution was driven and funded by businesses, that are private and smallholder investment.

Big-push strategy seems to explain the revolution in the development of Indonesian oil palm plantations. The combination of corporate investment (state-owned and private enterprises) with the pattern of corporate partnerships with farmers in the development of oil palm plantations in underdeveloped areas can be categorized as big-push investment. The big-push strategy gave birth to a wide-area and production revolution, a smallholders’ oil palm revolution, a growth revolution for new economic centers, a revolution in Indonesia’s share in world palm oil and a revolution in Indonesia’s palm oil exports. There are at least five forms of revolutionary change in the development of Indonesian oil palm plantations.

First, the Area and Production Revolution. Indonesia’s oil palm plantations have increased from 4.1 million hectares (2000) to 14 million hectares (2017). Second, the Smallholders’ Oil Palm Revolution. The rapid development of oil palm plantation partnership patterns between corporations and farmers, gave birth to the acceleration of community oil palm plantations as one of the important business actors. The acceleration of the growth of community oil palm has changed the composition of the revolutionary national oil palm plantation concessions in 1980 the share of community palm oil was only 2 percent, increasing to 26 percent in 1990 and in 2017 the share of community oil palm has reached around 40 percent.

Third, the Revolution of Growth in the New Economic Centers. Oil palm plantations in rural areas are the locomotive of rural economic development. Through the development of oil palm plantations new investments are increasing rapidly in such a way that they can transform underdeveloped areas into new centers of growth in the countryside.

Fourth, the Revolution of Indonesia’s Share in World Palm Oil. The acceleration of the increase in Indonesia’s CPO production continues, in 2006 Indonesia’s share succeeded in surpassing Malaysia which was previously the world’s largest producer of palm oil. And currently in 2017 Indonesia’s share is 58 percent while Malaysia’s share is only 29 percent of world palm oil production.

Fifth, the Indonesian Palm Oil Export Revolution. The export value of CPO and its derivatives has increased from USD 1.08 billion (2000) to USD 21.6 billion (2011), then to USD 23 billion (2017). The value of palm oil exports is the largest net export for the size of a group of commodities in the Indonesian economy.

The foreign exchange from palm oil exports from the perspective of development is also of higher quality and sustainable because (1) it is produced from oil palm plantations in 190 districts in Indonesia, (2) around 40 percent is contributed by community/smallholders’ oil palm plantations, (3) the composition of processed products downstream domestic is getting bigger and (4) is produced by the creativity of the plantation actors and not using subsidies from the government.

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