Minister Luhut: Palm Oil Has Potential to Generate Revenue at US$60 Billion Per Year


JAKARTA, – Palm oil has an important role in the Indonesian economy. According to Coordinating Minister for Maritime Affairs Luhut Binsar Panjaitan, the commodity potentially generates revenue up to US$60 billion in a year.

That potential will be realized if Indonesia can increase the productivity of oil palm plantations, especially the small-scale ones managed by the farmers because their average production only 1.8 – 2 tons per hectare, while plantations managed by companies can reach 5 – 7 tons per hectare.

If, the productivity of people’s palm plantations is increased to 4-6 tons per hectare, it will add 40-45 million tons to the production of Indonesian palm oil.

“If the quality is maintained high, the price will be US$800 – US$850 per ton. So, it will generate state revenue at US$45 billion. With additional revenue from derivative products, it will reach US$60 billion,” said Luhut at the Seminar of Sustainable Business Challenges in Improving Palm Oil Performance, on Tuesday (5/8).

He added that CPO has a big contribution to Indonesia’s state revenue. Although coal is currently still on top, but the palm oil position is constant year by year.

In 2017, Indonesia’s palm oil exports reached US$18.5 billion or equivalent to 31 million tons, with India, European Union and China as the largest destination markets. In fact, the exports to India reached 7.6 million tons, Europe 5 million tons, and China 3.7 million tons.

However, Luhut acknowledged that Indonesia still faces various obstacles in exporting the palm oil commodity. One of them is that the European Union is considering to restricting the use of palm oil in the biodiesel marketed in the continent. In addition, India also has raised the import tariffs for CPO and its derivatives to 44% and 54%.

Luhut said the government will continue to apply aggressive trade diplomacy by promoting dialogue and lobbying, especially in explaining the steps have already taken by the government to encourage the implementation of sustainability principles in the palm oil industry. (KTN/TPP)