Transition of development policies related to the palm oil industry in Indonesia

The palm oil industry has great socioeconomic benefits in Indonesia, including the employment of more than about 15 million people as of 2010 and the addition of export revenues to the country’s economy. The development policies of the national government directed and promoted the enlargement of the palm oil industry after independence in 1957. With independence, the national government nationalized all Dutch private companies including the palm oil plantations. From that point on, palm oil plantations were mainly managed by national and state companies. As the transmigration policy was instituted, smallholders’ plantations also spread to Sumatera and Kalimantan Island. Due to the sharp economic recession due to the Asian crisis in 1997, the government decided to create new policy that open for foreign investment, this policy then caused more decrease of tropical rainforest. This paper discusses the transition of the Indonesian palm oil industry from the first period to the present, in which the predominant strategy has been to increase the added value and competitive capacity of Indonesia’s palm oil while ensuring environmental and socioeconomic sustainability.