Amid Climate Risks and New Governance Standards, Government and Industry Must Strengthen the Foundations of Palm Oil to Safeguard Long-Term Economic and Social Resilience
Jakarta, 5 February 2026 — The increasing frequency of disasters and climate-related risks across various regions in Indonesia serves as a reminder that climate change is no longer a long-term challenge, but a present-day reality affecting social and economic resilience as well as strategic national sectors. In this context, strengthening the foundations of the palm oil industry should be viewed as an effort to reinforce one of the key pillars of Indonesia’s economy.
This issue was the main focus of the Prasasti Insights forum entitled “Reshaping Indonesia’s Palm Oil Foundations in an Era of Climate Risk and New Governance Standards”, organized by Prasasti Center for Policy Studies.
Fuad Bawazier, Board of Trustees of Prasasti, emphasized that recent disaster events in several parts of Indonesia should serve as a shared reference point in formulating cross-sectoral policies. “Economic resilience in the era of climate change requires more adaptive and sustainable governance approaches, including in the energy and food sectors,” he stated.
Fuad further underscored that within the framework of national resilience, the palm oil industry occupies a highly strategic position. Indonesia is currently the world’s largest producer of crude palm oil (CPO), accounting for approximately 58 percent of global production. The sector supports around 2.6 million smallholder farmers and provides up to 16.5 million direct and indirect jobs across more than 300 districts and 25 provinces. From an economic standpoint, the palm oil industry generates more than IDR 1,100 trillion in annual output, with added value of approximately IDR 510 trillion per year, while also playing a critical role in maintaining Indonesia’s trade surplus through exports and biodiesel.
“These figures demonstrate that palm oil is not merely a commodity, but a strategic national asset that underpins regional economies, the livelihoods of millions of families, and Indonesia’s food and energy security,” Fuad remarked. Nevertheless, he also highlighted that the magnitude of these contributions has not yet been matched by sufficiently strong structural foundations and governance frameworks to address existing challenges.
Responding to this issue, Piter Abdullah, Policy and Program Director of Prasasti, added that one of the key obstacles lies not solely in policy design, but in governance implementation. “Institutional fragmentation, lengthy bureaucratic processes, high regulatory volatility, and weak implementation monitoring often undermine policy effectiveness and ultimately affect business confidence,” he explained.
Therefore, strengthening the palm oil industry going forward must be built upon a solid analytical foundation, open policy dialogue, and cross-stakeholder collaboration. Piter affirmed, “Prasasti is committed to continuing strategic studies that are focused, data-driven, and grounded in on-the-ground realities.”
Meanwhile, Gundy Cahyadi, Research Director of Prasasti, presented findings indicating that the current performance of Indonesia’s palm oil industry remains insufficient to meet long-term targets, “including those aligned with the Vision of Indonesia Emas 2045. Relatively underperforming production growth risks creating future output gaps if not anticipated early on.”
According to him, the industry’s primary challenge lies in the absence of a clearly integrated vision and policy direction along the entire value chain. “Without alignment from upstream to downstream, efforts to enhance productivity, downstream processing, and value creation risk being fragmented and unsustainable,” he stated. Under such conditions, the industry’s capacity to maintain long-term competitiveness will continue to weaken.
The Prasasti Insights forum featured two panel discussion sessions. Panel I, titled “Palm Oil New Paradigm: Driving Economic Excellence, Safeguarding Sustainability,” examined the need for a new paradigm capable of balancing economic performance with sustainability and climate agendas. Panel II, “Story from the Plantations: Enhancing Competitiveness and Securing Future Growth,” explored industry practitioners’ perspectives from the field, addressing productivity and downstreaming challenges, as well as opportunities to strengthen the future competitiveness of the palm oil sector.
The event was held with the support of Lead Partners: the Palm Oil Plantation Fund Management Agency (BPDP), PTPN 4 Palmco, and KLK Agriservindo, as well as Supporting Partners: BRI, Bank Mandiri, Saraswanti Anugerah, and Pupuk Indonesia. (*)