Palm Oil Levels Up: The 92-Million-Ton Target and Indonesia’s Path to a Green Industry

For years, palm oil has been at the center of heated debate. Some see it as Indonesia’s economic hero, while others accuse it of driving deforestation. But in the middle of those contrasting opinions, the Indonesian government seems more confident than ever: palm oil is the future of the nation’s green economy and energy independence.

The year 2025 is set to be a milestone for the palm oil industry. The government has announced an ambitious goal — to reach 92 million tons of palm oil production, while pushing the entire sector toward sustainability and environmental responsibility.

This ambition is not without foundation. The truth is, Indonesia’s palm oil productivity can still grow much higher. Currently, the national average yield stands at around 4 tons per hectare, while large plantation companies can achieve 10–12 tons per hectare. Just imagine if all of Indonesia’s smallholder plantations reached that level — not only would state revenues soar, but millions of small farmers would see their livelihoods flourish.

palm oil industry

Smallholder Palm Oil Replanting: The Key to Productivity Growth

According to Dida Gardera, Expert Staff for Connectivity and Service Development at the Coordinating Ministry for Economic Affairs, Indonesia has around 16.38 million hectares of palm oil plantations. Of that total, 53% is managed by private companies, 6% by state-owned enterprises, and 41% by independent smallholders.

This shows how crucial small farmers are to the industry — yet they face the biggest challenges. Many still use non-certified seeds, apply fertilizers incorrectly, and rely on basic infrastructure. As a result, their yields are much lower compared to large-scale plantations.

To address this, the government launched the Smallholder Palm Oil Replanting Program (Peremajaan Sawit Rakyat / PSR). Through PSR, old and unproductive palm trees are being replaced with high-yielding varieties that can double or even triple output. Within just a few years, smallholder productivity is expected to rise significantly.

But PSR isn’t just about replanting trees. It’s also about transforming how smallholders manage their farms — making them more modern, efficient, and self-reliant. The government provides financial assistance, technical training, and organizational support to ensure farmers can stand on their own feet.

“Through PSR, we want to help smallholder farmers achieve productivity on par with big companies,” said Dida. “If we succeed, Indonesia can hit the 92-million-ton target while keeping sustainability intact.”

Strengthening ISPO: Sustainability Is Non-Negotiable

While productivity is one focus, sustainability is another cornerstone of Indonesia’s palm oil strategy. One major step is the reinforcement of the Indonesian Sustainable Palm Oil (ISPO) certification, now governed by Presidential Regulation No. 16 of 2025.

Unlike voluntary certifications elsewhere, ISPO is mandatory for all industry players — from big corporations and state enterprises to independent smallholders. For smallholders, the government is offering a four-year transition period and will cover the certification costs entirely.

The goal is crystal clear: to make Indonesian palm oil more accepted in global markets, especially as countries tighten their environmental and social standards. Under ISPO, every participant must comply with key sustainability principles — from responsible land use and forest protection to fair labor practices.

Even more impressively, the government is developing a digital ISPO information system. This system will map plantation data, land ownership, and certification status in a transparent and traceable manner. It means every certified plantation can be tracked, verified, and confirmed as being on legal, non-conflict land.

This upgraded ISPO system is a game changer. It’s not only about improving Indonesia’s global image but ensuring that every drop of palm oil produced is legal, traceable, and responsibly sourced.

Beyond Cooking Oil: Palm Oil’s Role in the Green Economy

Gone are the days when palm oil was seen only as an ingredient for cooking oil. The world is now shifting toward renewable energy and green industries, and palm oil sits right at the heart of this transformation.

According to government data, over 200 palm oil–based products are already commercialized — ranging from cosmetics, soap, and margarine to biofuels and bio-aviation fuels (bioavtur). In fact, around 40% of Indonesia’s biodiesel content now comes from palm oil.

That means palm oil is not only a major export earner, but also a strategic part of Indonesia’s energy transition — helping to reduce dependence on fossil fuels. The B40 biodiesel program, with 40% palm-based content, continues to expand across transportation and industrial sectors.

Research is also advancing in the development of bioavtur, a jet fuel derived from palm oil. Test flights with Garuda Indonesia have already shown promising results. Imagine a future where planes fly using jet fuel made partly from Indonesian palm oil — that’s no longer science fiction.

“Palm oil’s advantage lies in its productivity, which is about four times higher than other vegetable oils like sunflower or rapeseed,” Dida explained. “That makes it the most efficient and sustainable option to meet global vegetable oil demand.”

The Unsung Heroes: Smallholders and Plantation Workers

Behind the shining export numbers and innovation headlines, there are millions of small farmers and plantation workers — the true backbone of the palm oil industry.

Surjadi, a lecturer at the Faculty of Economics and Business, University of Indonesia, reminds us that the social dimension of palm oil must never be overlooked. Economic progress, he said, should always go hand-in-hand with community welfare and environmental protection.

Most smallholders own only 2–3 hectares of land. Many struggle to access fertilizers, quality seedlings, and affordable financing. To help them, strong farmer groups and cooperatives are essential — giving them more bargaining power when dealing with mills or large corporations.

Government agencies and private companies, Surjadi added, should act as partners and mentors, not just buyers of fresh fruit bunches (FFB).

He also highlighted the importance of protecting plantation workers’ rights. They deserve decent living conditions, fair wages, and clear employment status. True sustainability, he emphasized, is not just about protecting the forest — it’s about valuing the people who work within it.

No Downstream Without Upstream

Meanwhile, Eddy Martono, Chairman of the Indonesian Palm Oil Association (GAPKI), issued a clear reminder: the country’s downstream industry will never thrive if problems at the upstream level remain unsolved.

Over the past five years, national palm oil output has largely stagnated. Increasing smallholder productivity, he said, is crucial for ensuring stable supply to downstream industries like biodiesel, oleochemicals, and other value-added products.

Eddy praised the biodiesel program as a major economic driver for rural communities. Before biodiesel took off, fresh fruit bunch (FFB) prices sometimes fell below production costs. Many farmers even left ripe fruit unharvested because it wasn’t worth the effort. But when biodiesel demand surged, prices stabilized, and village economies revived.

“Now, local economies in palm oil regions are alive again,” Eddy said. “FFB prices are stable, farmers’ purchasing power is up, and people can truly feel the impact of downstream integration.”

Palm Oil and Indonesia’s Green Future

Looking at the big picture, the government’s strategy for the palm oil industry is starting to form a clear and holistic framework.First, raise productivity and efficiency through PSR.
Second, strengthen sustainability compliance with ISPO.
Third, expand downstream processing and green innovation.

Together, these three pillars are shaping palm oil into not just an export commodity, but a key engine of Indonesia’s green economy. With strong policy coordination, palm oil can also play a vital role in achieving the country’s Net Zero Emission 2060 target — particularly through biofuel and low-carbon product development.

Of course, challenges remain. Issues like deforestation, land fires, and negative international campaigns still pose hurdles. But if Indonesia continues improving governance, enforcing ISPO standards, and empowering smallholders, it can prove that palm oil is not the problem — it’s part of the global solution.

From Plantations to the World: Indonesia’s Palm Oil Ready to Shine

The journey of Indonesia’s palm oil industry has been long and transformative — from crude exports, to biodiesel innovation, and now, toward a new era of sustainable green industry.

The 92-million-ton target is more than just a number. It’s a symbol of Indonesia’s determination to make palm oil not only an economic powerhouse, but also a pillar of energy independence and sustainable development.

If all stakeholders — the government, private sector, farmers, workers, and communities — work hand in hand, palm oil will not only remain a source of national pride, but also stand as a global example that scale and sustainability can coexist.

Because at the end of the day, palm oil isn’t just oil —it’s Indonesia’s green future.

 

Palm Oil: Not Just for Big Corporations, But a Driver of People’s Economy from Villages to the World

For years, many people have misunderstood Indonesia’s palm oil industry. It’s often seen as a business dominated by big corporations — massive plantations, heavy machinery, and huge factories owned by conglomerates.But behind that image lies a different reality: millions of ordinary Indonesians depend on palm oil for their livelihood.

The palm oil industry is much more inclusive than most people think. It has become the locomotive of Indonesia’s national economy, driving growth from the village level to the global market. In other words, palm oil doesn’t just grow on trees — it grows livelihoods, communities, and opportunities.

Palm Oil and Rural Economy: When Trees Become a Source of Hope

If you’ve ever visited villages in Kalimantan, Sumatra, or Sulawesi, you can clearly see how palm oil has transformed rural life. Decades ago, many of these villages relied only on small-scale farming or forest products. Today, palm oil villages look different — better roads, solid houses, thriving small shops, and children attending higher education.

According to PASPI (2022), villages that depend on palm oil grow significantly faster than non-palm oil villages.

small oil palm farmers

Between 2016 and 2021, economic growth indicators such as income, infrastructure, and business activity all improved more rapidly in palm oil areas.

This is what economists call the multiplier effect — when income earned from palm oil circulates within local communities. Farmers spend their earnings on daily needs, home improvements, education, and even new businesses. That money then moves through local markets, boosting sectors like trade, transportation, and services.

Palm oil, in short, has turned remote villages into new rural economic centers.

Palm Oil Farmers: From Growers to Prosperous Families

One of the strongest proofs that palm oil benefits ordinary people lies in the income of smallholders. Based on PASPI (2023), the average income of palm oil farmers reached nearly IDR 30 million per year in 2021 — far higher than that of non-palm farmers in the same regions.

Why is that? Because palm oil offers stable and sustainable income. Unlike seasonal crops, palm trees produce fruit all year round. Moreover, many farmers are now part of cooperatives or partnership programs with companies, giving them access to high-quality seedlings, technical guidance, and processing facilities.

Palm oil also creates thousands of indirect jobs — from plantation workers and truck drivers to mill operators and local vendors. When the palm oil economy thrives, so does everyone around it.

In many villages, palm oil farming has become the backbone of local prosperity. Families who once lived in poverty can now afford better housing, education, and healthcare. Palm oil doesn’t just grow wealth; it grows dignity and independence.

Palm Oil and SMEs: Breathing Life into Local Businesses

Around palm oil plantations, small businesses are everywhere. Coffee stalls for plantation workers, repair shops for transport vehicles, grocery stores, food vendors, fuel sellers, and local traders — all emerge thanks to the money circulating from palm oil activities.

Small and medium enterprises (SMEs) in palm oil villages have grown rapidly, supported by stronger purchasing power and consistent cash flow. Many families that once relied solely on farming now run side businesses, from home-based shops to small transport services.

Palm oil, therefore, is not only about producing crude palm oil (CPO). It’s about building vibrant local economies that empower communities and reduce poverty.

Regional and National Impact: Palm Oil Powers the Economy

Palm oil’s economic contribution extends far beyond village boundaries. According to PASPI (2022), districts and regions that serve as palm oil centers generally record higher Regional Gross Domestic Product (RGDP) growth compared to non-palm regions. This means palm oil helps strengthen Indonesia’s regional economies.

At the national level, the contribution is even more impressive. Data from the Central Statistics Agency (BPS) processed by PASPI (2023) shows:

• Output value of the palm oil industry rose from IDR 234 trillion in 2000 to IDR 1,119 trillion in 2021.
• Value added increased from IDR 172 trillion to IDR 510 trillion in the same period.

These are not just numbers — they represent palm oil’s crucial role as one of Indonesia’s largest non-oil and gas export earners and a major source of national economic growth. The industry employs millions of workers directly and indirectly and contributes significantly to Indonesia’s GDP.

Palm oil also supports infrastructure development in rural areas. Roads, bridges, and public facilities in many remote regions exist today thanks to palm oil activities and local tax contributions.

Global Impact: The World Also Benefits from Palm Oil

Interestingly, palm oil’s benefits are not limited to Indonesia. Importing countries such as India, China, the European Union, and several African nations also gain enormous economic value from palm oil trade.

According to European Economics (2016), total income generated by palm oil–importing countries reached USD 32.8 billion in 2013/2014. That figure shows how vital palm oil is in the global economy.

These countries rely on palm oil for a wide range of industries — food, cosmetics, pharmaceuticals, and bioenergy. Every ton of palm oil exported from Indonesia contributes to job creation and industrial growth overseas.

In short, the world also prospers thanks to Indonesia’s palm oil.

Palm Oil and Sustainable Development

When we talk about sustainability, palm oil has often been controversial. Yet, it also plays a key role in achieving the United Nations Sustainable Development Goals (SDGs), particularly:

• No Poverty (SDG 1) – by providing livelihoods for millions of smallholders,
• Decent Work and Economic Growth (SDG 8) – through job creation and income distribution, and
• Responsible Consumption and Production (SDG 12) – via sustainable farming practices.

Institutions like BPDPKS and the government continue to promote sustainable palm oil through the Indonesian Sustainable Palm Oil (ISPO) certification. This ensures that production respects environmental, social, and governance (ESG) principles — protecting forests, workers’ rights, and local communities.

Today, more plantations are replanting with high-yield, eco-friendly seeds, improving waste management, and investing in green technology. This transformation shows that palm oil can be both profitable and sustainable.

Changing the Narrative Around Palm Oil

Despite its contributions, palm oil still faces a lot of negative narratives. Critics often highlight deforestation and environmental concerns while ignoring the social and economic transformation it brings to rural communities.

Yes, challenges exist — but the industry has evolved rapidly. Many producers now adopt transparent, traceable, and sustainable supply chains. Partnerships between companies, smallholders, and governments are improving environmental practices while maintaining livelihoods.

What’s often missing in the conversation is the human story behind palm oil — the millions of families who rely on it to escape poverty and achieve a better life. For them, palm oil is not just an industry; it’s a symbol of hope and progress.

Conclusion: Palm Oil Is the People’s Economy That Reaches the World

Looking at all these facts and figures, one thing is clear: palm oil is not just for big corporations — it’s the lifeblood of millions of Indonesians.The industry has:

ü  Improved the welfare of farmers and rural communities,

ü  Stimulated regional and national economic growth,

ü  Contributed significantly to Indonesia’s GDP, and

ü  Generated global economic benefits through international trade.

With its vast reach, palm oil stands as both a people’s economy and a pillar of the global economy.

So next time someone says palm oil only benefits a few rich companies, you can tell them:

“Check the data. Palm oil fuels the livelihoods of millions — from small villages in Kalimantan to factories in Europe.”

Sources:

• PASPI (2022). Economic Growth in Oil Palm Villages vs Non-Oil Palm Villages.
• PASPI (2023). Oil Palm Farmers’ Income Growth Data.
• Central Statistics Agency (BPS), Input-Output Table (Processed by PASPI, 2023).
• European Economics (2016). Palm Oil Importing Countries’ Income Report.
• BPDPKS (2024). Palm Creates Inclusive Economic Benefits from Local to Global.

Palm Oil and Sustainable Development: Indonesia’s Green Economic Backbone

When people talk about Indonesia’s palm oil industry, opinions often split in two. Some see it as the country’s main economic driver; others associate it with deforestation or environmental controversy. But behind those debates lies a more complex truth: palm oil is deeply woven into Indonesia’s economic, social, and environmental landscape — and it plays a key role in achieving the United Nations Sustainable Development Goals (SDGs).

1. Palm Oil: The Heart of Indonesia’s Economy

Palm oil is more than just a commodity — it’s a livelihood for millions. Indonesia is the world’s largest producer and exporter of palm oil, supplying more than half of global demand. According to data from PASPI (Palm Oil Agribusiness Strategic Policy Institute, 2023), the industry supports over 16 million people, directly and indirectly.

Smallholders — local farmers managing less than 25 hectares — account for around 40% of the total plantation area. This shows how palm oil empowers rural communities and provides income stability in regions that were once isolated from mainstream economic activity.

2. A Key Player in the Sustainable Development Goals (SDGs)

Palm oil’s contributions can be traced across multiple SDGs.

• SDG 1: No Poverty – Millions of small farmers have escaped poverty thanks to palm cultivation.
• SDG 2: Zero Hunger – Beyond being an export product, palm oil supports national food security.
• SDG 7: Affordable and Clean Energy – Palm oil plays a major role in Indonesia’s bioenergy program, especially in biodiesel (B30).
• SDG 8: Decent Work and Economic Growth – The industry creates millions of jobs.
• SDG 13: Climate Action – Through ISPO and RSPO, many producers are adopting sustainable practices.

3. The Biofuel Revolution: Green Energy from Palm Oil

Indonesia’s B30 program blends 30% palm-based biodiesel with petroleum diesel, placing the country among global leaders in renewable energy transition. This program not only reduces carbon emissions but also stabilizes domestic palm oil demand, giving smallholders consistent market access.

4. Environmental and Social Challenges

Deforestation, land disputes, and greenhouse gas emissions have long been issues raised by critics. However, sustainability transformation is already happening. Many plantation companies are reforesting buffer zones, improving waste treatment, and adopting zero-burning policies. Sustainability is now a requirement for global competitiveness.

5. Rural Development and Social Progress

Palm oil plantations have turned remote regions into thriving economic centers. New roads, schools, clinics, and markets often appear as by-products of palm industry growth. This progress aligns directly with SDG 9 (Industry, Innovation, and Infrastructure) and SDG 11 (Sustainable Cities and Communities).

6. Global Trade and National Pride

Palm oil is Indonesia’s most valuable agricultural export, contributing over US$30 billion annually. Efforts to promote sustainable palm oil through ISPO certification and digital traceability show that the industry is evolving — from controversy to credibility.

7. Looking Ahead: Toward Green and Inclusive Palm Oil

The future of palm oil depends on balance — between productivity and ecology. Government policies that encourage smallholder empowerment, sustainable certification, and renewable energy integration are key. From bioplastics to bioenergy, palm oil can drive Indonesia’s green economy well into the next decade.

Conclusion

Palm oil is not just an agricultural product; it’s part of Indonesia’s identity — a symbol of resilience, creativity, and sustainability. Behind every plantation are real people and stories: farmers, families, and communities building their dreams one harvest at a time.

The Green Dream: A Village Growing with Palms

In this era, the prevailing public perception in society often considers the palm oil industry to be solely focused on economic profit and tends to disregard aspects of social development, particularly education. One frequently cited narrative is that the presence of oil palm plantations does not support the development of community education in remote areas. However, that view is not in line with the existing reality.

In remote and isolated areas where access to education is still very limited, the presence of oil palm plantations has brought about a significant transformative impact on the education sector. Generally, oil palm plantations are located in remote areas that previously had minimal public facilities. However, to meet the needs of workers and their families, many palm oil companies have built educational facilities, ranging from Early Childhood Education (ECE) to Elementary School (SD) and Junior High School (SMP) in the vicinity of the plantations.

In the early stages, the educational facilities established by this plantation company were specifically for the children of their employes. As time went on, access to this education was expanded, allowing the surrounding community to also enjoy the same benefits. Research by Edward in 2019 revealed that in several districts that are palm oil plantation centers, there was a significant increase in the number of schools, with the majority being educational institutions built and managed by plantation companies, not state institutions.

Corporate contributions to the education sector go beyond just building schools. In many cases, companies also renovate existing school buildings, provide learning materials such as books and computers, offer scholarships to outstanding students, and provide allowances to teachers. In addition, some companies even offer special transportation services in the form of school busses and build educational facilities like "smart houses" or "learning houses" designed to improve literacy and skills for children in surrounding villages.

Thru the existence of these various initiatives, community access to education has not only increased quantitatively but also qualitatively, creating a more inclusive and adequate learning ecosystem in underdeveloped areas. The contribution of the palm oil industry doesn't stop at the primary education level. With the increased income of farmers due to palm oil plantation activities, families around the plantations have better economic means to afford their children's education up to higher levels like university.

Research has shown a positive relationship between the income of palm oil farmers and their ability to finance education up to diploma, bachelor's, and even master's levels. Additionally, the allocation of funds from the management of palm oil export levies by the Palm Oil Plantation Fund Management Agency (BPDPKS) makes a significant contribution in the form of scholarship programs. Between 2015 and 2021, BPDPKS has disbursed funds amounting to Rp 186 billion to support the education of 3,265 students from oil palm farmer families across Indonesia.

Two key aspects that illustrate the real contribution of the palm oil industry to education are the availability and affordability of learning facilities, as well as the increased financial capacity of the community to access educational services. Thus, the palm oil industry not only plays a role in providing educational infrastructure but also in increasing the purchasing power of the community so that they can make optimal use of education.

The view that oil palm plantations do not care about the education of rural communities is now empirically refuted. With various programs ranging from school construction to scholarship provision, the palm oil sector has become a significant player in advancing education in remote areas of Indonesia. Amidst the green expanse of palm trees, a new hope also grows for the village's young generation: a bigger dream, better education, and opportunities for a brighter future.

Reference: - Sukiyono, K. (2024). Smallholder palm oil and sustainable development goals. *Sustainable Futures*, 6(1), 112–123.

- INSTIPER Yogyakarta. (2023). The Role of the Palm Oil Industry in the SDGs. *https://jurnal.instiperjogja.ac.id*

- Musim Mas. (2023). Social Impact Report. *https://www.musimmas.com*

 - Sinar Mas Agrib