Indonesia's Palm Oil Industry​

 

 

The economic significance of palm oil for Indonesia cannot be underestimated. In 2006, the country became the world's leading producer of palm oil, and in 2012, produced 28 million tons of palm oil. Today, Indonesia and Malaysia reportedly produce 86% of the world's palm oil. In Indonesia, 3.7 million people are believed to be employed in the palm oil industry.

 

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​Gross Domestic Product 
 

Indonesia’s GDP of $878.2 billion in 2012 was ranked #16 in the world out of 195 countries according to the International Monetary Fund.

 

GDP per capita, according to the International Monetary Fund, was $3,910 in 2012, ranked #104 out of 182 countries. The CIA Factbook estimates that in 2012, 11.7% of the population lived below the poverty line.

 

The Jakarta Globe reports that "government data as of September 2012 showed that 28.59 million people [in Indonesia] were living in poverty, with income at less than $1 a day."

 

Forbes reports that Indonesia's 40 richest people were worth $88.6 billion in 2012. In this group, nine gained their wealth at least in part through the palm oil industry and have an accumulated net worth of $34.24 billion.

 

Exports by Commodity 

Palm oil is the third largest export-earner in Indonesia, outranked only by coal and petroleum. Indonesia is also the second-largest producer of natural rubber in the world, which is also its fourth-largest export earner.

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In 2012, Indonesia exported $17.6 billion worth of palm oil around the world, according to United Nations Comtrade data. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Crop Estates

 

 

The following table indicates the number of hectares dedicated to various major commercial crops by year in Indonesia. Of these crops, oil palm plantations use the most land, followed by rubber plantations and then sugar cane.

 

In 2009, Indonesia Agriculture Minister Suswono said the government has allocated 

18 million hectares for oil palm plantations, according to a Jakarta Post news report. Total dry land in Indonesia is estimated at 57 million hectares, according to Indonesia's Ministry of Agriculture.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Where the Oil Palm Trees Grow

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The Indonesian islands of Sumatra and Kalimantan (the Indonesian name for Borneo, which is divided between Indonesia, Malaysia, and Brunei) are the most productive palm-growing areas in the world. Within these areas, the top Indonesian palm-producing provinces are Riau, North Sumatra, and South Sumatra in Sumatra, and Central Kalimantan, East Kalimantan, and West Kalimantan.

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Palm Oil Plantation Mapping​
 

As of 2009, Indonesia had 7.9 million hectares (19.5 million acres) of palm oil plantations with another 1.8 million hectares (4.45 million acres) licensed for that use and a total of 18 million hectares (44.48 million acres) which could be allocated. Sawit Watch, an Indonesian watchdog NGO which advocates against negative social and environmental impacts of palm oil production in that country, has mapped oil palm plantation holdings across Indonesia. See their GIS-based interactive maps for geographical data.

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Palm Oil Production by Ownership

 

 

While production of palm oil from state-owned palm plantations has remained relatively steady since 1996, according to the Directorate General of Plantations of the Ministry of Agriculture, production from smallholder and private plantations has risen steadily and more dramatically, as the following chart shows.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Labor Force

 

The work of planting, cultivating, and harvesting palm fruit, while labor intensive, does not demand a skilled workforce. Securing and maintaining a reliable workforce is one of the industry's key challenges, according to the management consulting and technology services firm Accenture in its 2013 report. 

 

Of Indonesia’s nearly 120 million-strong labor force, an estimated 38.9% of workers are involved in the agricultural sector. The Indonesian palm oil sector alone directly and indirectly employs between two and three million people, according to the International Finance Corporation. 

 

The following charts show data from the Indonesia Ministry of Agriculture related to the agricultural sector and labor force in Indonesia. Labor laws in Indonesia allow children to work when they are 12 years old, though the new Manpower Law will raise that age to 15 for regular work and 18 for work of a hazardous nature. The International Labour Organization estimates that 3.2 million Indonesian children between the ages of 10 and 17 are active in the workforce.

 

Migrant workers in agriculture may include Indonesians who travel in and around Indonesia to work on the many plantations and migrants from poorer neighboring countries such as Myanmar (Burma) and Sri Lanka. Indonesians may also migrate out of the country, some of them working on palm oil plantations in Malaysia.