Industrial Clusters in The Palm Oil Industry in Indonesia

Gorga Parlaungan Yokohama National University The Joint Japan World Bank Scholarship Program Regional Conference “Capacity Development Asia” Jakarta, June 4, 2008

5 million ha in 2005 and increasing) Further prospect in manufacturing industries. increasing contribution to non-oil-and-gas exports More than 50% of total crops production beginning in 2000 Involves 1.Palm Oil in Indonesian Economy      One of main export commodities.18 million families in employment Growth in production and plantation area (5. Source: DGEC 2006 . including biodiesel.

00% 70 Total Export Value (USD bil) Share of Palm Oil Export 60 4.00% 40 3.00% 30 2.CPO and PKO export 80 6.00% Source: DGEC 2006 (processed) .00% 50 5.00% 10 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 0.00% 20 1.

000 10.World Vegetable Oil and Fat Production 40.000 Rapeseed oil Sunflower seed oil Tallow & grease 30.000 20.000 15. 292 (processed) .000 25.000 5.000 0 1980 1985 1990 1995 2000 2005 Source: Basiron 2007 p.000 Palm oil Soyabean oil 35.

Palm oil production tree Fresh fruit bunch CPO Palm Kernel Various Palm Oil and fats Palm Kernel Oil Palm Kernel Meal Margarine. candles feed Oleo chemicals livestock biofuels Source: Kehati 2006 p. 7. Chips Cosmetics. soaps Paints. Mayonnaise. detergents. grease. Pahan 2007 . Cooking Oil.

employee dependency. security. .Problems of Palm Oil Industry     Monopsony. and control of working environment and wages Domination of large business groups. environmental degradation issues Social unrest-> work culture. no links with SMEs in manufacturing industry Export mostly in crude palm oil.

000.000 8.000.000 6.000 tons 10.000 2.000.000.Crude palm oil domestic consumption and export Domestic Export 12.000 4.000 0 1998 1999 2000 2001 2002 2003 2004 2005 Source: DGEC 2006 (processed) .000.

127 .Palm Oil Industry in Porter’s Diamond Model Firm strategy and rivalry Chance Factor conditions Demand conditions Related and supporting industries Government Source: Porter 1990. p.

joint action Absence of benefits to micro and SM industrial agents. . dominance of large enterprises Linkages based on networks Absence of cluster attributes: social capital.Palm Oil Industry Indonesia      Competitive in agriculture sector Monopsonic.

face common challenges and opportunities” (UNIDO 2001.Clusters “Geographic concentration of interconnected companies and institutions in a particular field” (Porter 1998. p. p. thus. 9) Attributes:     Proximity Linkages Interaction Critical Mass . 78) “Sectoral and geographical concentrations of enterprises that produce and sell a range of related or complementary products and.

Why Clusters?      Shared capital and risks. due to the extreme specialization inside the cluster and its high productivity Imitation facilitates faster adoption of innovation Establishment of social capital within the cluster. distributors and human resources Knowledge spillovers Complementarities Learning from interaction with customers and suppliers (when network to markets exists). Pressure for higher performance in head-to-head competition Fast change reaction. due to the easy access to specialized suppliers.     . in early stages as well as further in penetrating global market Cost savings.

Revenue up to USD 1.46 billion / year (Roda et al 2007) East Java clove cigarette industry. presence of linkages to markets. 15. outperforms international competitors (Kuncoro 2007. Tambunan 2005) Features: root from strong home demand. Wibowo 2003. historicknow-how basic.   .271 enterprises from sawmills.Industrial Clusters in Indonesia  Jepara furniture cluster.000 workers. warehouses. 221. to showrooms.

  . to promote SMEs and strengthen the industrial structure. based on country-specific and regional characteristics Seedbed for cluster in palm oil derivative industry.Recommendations  Policies that support the palm oil derivative industries Further studies on the most appropriate cluster in palm oil industry.

Barlow. Cadène. INRISE.. Jakarta Porter. Agribusiness Management from Upstream to Downstream). Porter. Pahan. KadinJetro. (Complete Guide on Oil Palm. (1990).. Atlas of Wooden Furniture Industry in Jepara. M. U. Lipid Sci. (2003)... Indonesian Path Towards Sustainable Energy: a Case Study of Developing Palm Oil as Biomass in Indonesia. M. UNIDO. Towards a New Industrialized Economy 2030?) Penerbit Andi. . (2006). 77-90. Kehati. Z. (Portrait of Indonesian Cigarette Industry). D. Guizol. I. T. S. P. (2007). Kuncoro. Y (2007). E.. Santoso. New York: The Free Press. (2001). Manajemen Agribisnis Dari Hulu Hingga Hilir. Indonesia. Menuju Negara Industri Baru 2030? (Indonesian Economic Industry. Roda.References:               Bank Indonesia (2007). G. M. A. Tambunan. (1998).. I. Palm Oil Production through Sustainable Plantations. B. 109. The Competitive Advantage of Nations. Export Performance and Competitiveness. The Indonesian Oil Palm Industry. & Development. Panduan Lengkap Kelapa Sawit. Potret Industri Rokok Indonesia. 7 (2). Eur. T. Kajian Ekonomi dan Keuangan. 2006 Economic Report on Indonesia. Harvard Business Review. Promoting Small and Medium Enterprises with a Clustering Approach: A Policy Experience from Indonesia. Technol. R. J. R.. Ekonomika Industri Indonesia. The Estate Crops Statistics of Indonesia 2004 . 43. Wibowo.-M. Indonesian Crude Palm Oil: Production. J. (2007). 138-154. L. & Fauzan. (2006). Tambunan. Zen. Penebar Swadaya. T (2003). DGEC (2006). The Development of Clusters and Networks of SMEs. (2007). Clusters and the New Economics of Competition. Watch. Ministry of Agriculture of Indonesia.2006. Oil Palm Industry Economic Journal 3 (1) Basiron.. E. Directorate General of Estate Crops. & Gondowarsito. (2005). Yogyakarta. M. C. P. Journal of Small Business Management. Institute. A.

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