CORE Economist: RI Must Rise to a Higher Class, Not the CPO King but the Global Palm Oil Processing Center

Photo: Special

JAKARTA - Indonesia is considered to need to accelerate the transformation of the palm oil industry from merely the world's largest producer of crude palm oil (CPO) to a global palm oil downstream center to increase added value, strengthen industry competitiveness, and encourage economic growth.

The Executive Director of the Center of Reform on Economics (CORE) Indonesia Mohammad Faisal said that although Indonesia has developed various palm oil derivatives, the development space for the downstream industry is still very large.

"So far, Indonesia has encouraged the downstreaming of palm oil. It's just that the downstreaming is not yet diverse. Therefore, there needs to be a strategy so that Indonesia can become a center for the downstreaming of the global palm oil industry," said Faisal in Jakarta, Thursday, July 23.

According to him, the government needs to prepare a clear policy direction to expand the palm oil-based manufacturing industry while providing fiscal and non-fiscal incentives to attract investment in the downstream sector.

In addition, strengthening the upstream sector is also an important requirement so that the supply of raw materials is maintained.

"Strengthening the upstream sector is important because it is impossible for us to build downstream industries if they are not supported by a strong upstream sector," he said.

Faisal assessed that the acceleration of palm oil downstream processing would provide a large multiplier effect on the national economy, ranging from job creation, increasing people's income to strengthening the national industrial structure.

On the other hand, the Executive Director of the Palm Oil Agribusiness Strategic Policy Institute (PASPI) Tungkot Sipayung said that downstreaming is the main strategy to increase added value and expand the market for Indonesian palm oil products.

According to him, Indonesia has a great opportunity to transform from being a CPO market leader to a major player in the world's oleochemical, biofuel, biomaterial and oleochemical industries.

"With palm oil downstream, we can change from being the world's CPO king to being the king of oleochemistry, the king of biofuels, the king of biomaterials, and the global king of oleochemicals," he said.

He gave an example of the success of the mandatory biodiesel program which was able to reduce fossil-based solar imports. In the future, the potential for downstream processing can also be developed to produce sustainable aviation fuel (SAF) or bioavtur based on palm so as to reduce avtur imports.

Apart from the energy sector, palm oil downstream is also considered to have the potential to reduce the import of organic chemicals through the development of the oleochemical industry.

Currently, Indonesia's oleochemical production capacity has reached around 19.93 million tons per year.