Palm Oil Development

& Poverty Alleviation

PROF. DR. SRI ADININGSIH M.SC
WORKING DRAFT
CHAIRPERSON OF PRESIDENTIAL ADVISORY COUNCIL
Last Modified 8/21/2017 4:16 PM SE Asia Standard Time
Printed 7/30/2017 10:05 PM SE Asia Standard Time
 Government Vision & Mission
Jalan Perubahan untuk Indonesia yang Berdaulat,

Last Modified 8/21/2017 4:16 PM SE Asia Standard Time

Mandiri dan Berkepribadian

Nawa Cita

3. Developing underdeveloped areas in Indonesia by strengthening remote

areas, small island and villages.

Printed 7/30/2017 10:05 PM SE Asia Standard Time

5. Improve human quality

6. Increasing productivity and competitiveness

7. Promoting economic independence by developing domestic strategic

sectors

2
 RPJMN 2015–2019 Macro Development Targets

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Indicator 2014 2019
(baseline)
Social development targets
Human development index 73.83 76.3
Community development index 0.55 Increase
Gini index 0.41 0.36
Increased % of community who participate in 51.8% Min 95%
health insurance programme through SJSN health (Oct 2014)

Printed 7/30/2017 10:05 PM SE Asia Standard Time

sector
Participate in SJSN project – labour sector
- Formal worker 29.5 million 62.4 million
- Informal worker 1.3 million 3.5 million
Macro economic targets
Economic growth 5.1% 8.0%
- GDP per capita (Rp. thousand) base year 2010 43.403 72.217
Inflation 8.4% 3.5%
Poverty rate 10.96% 7.0–8.0%
Open unemployment rate 5.94% 4.0–5.0%

Source: RPJMN 2015-2019

 Last Modified 8/21/2017 4:16 PM SE Asia Standard Time Printed 7/30/2017 10:05 PM SE Asia Standard Time
Priorities for Government Policy

Eradicating
Inequality
Alleviating
Poverty
Unemployment
Reducing
 Growth Rate of GDP by Industrial Origin (2012 – 2017: S1)
%, YoY

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Manufacturing Industry Trade Construction
GDP
Agriculture, Forestry and Fishery Mining Government

6 6.0
5.6 5.12
4.59 5.0 4.9 5.0 5.0
4.21 4.24
4 3.77

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3.25

-2

-4
2012 13 14 15 16 2017 S1

Source: CEIC 5
 Unemployment in Indonesia 2005 – February 2017

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Total unemployment (person milion) Unemployment rate (%)
14

11,9
12
10,93
11.24 10,01
10 9,39
10.28
8,96
9.11 8,32
8 8.39 7,7 7,56
7,39

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7.87 7,24 7,24 7,03 7,02
7.14
6 6.56
6.14 6.25 6.18
5.94
5.61
5.33
4

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Feb-17

Source: CEIC and BPS

 0
0

10
20
30
40
50
60
70
10
20
30
40
50
60
70
80
1970 1970

1976 1976

1978 1978

1980 1980

1981 1981

1984 1984

Source : BPS; CEIC (2017)

1987 1987

1990 1990

Poverty Rate, 1970-2017: Q1 (%)

1993 1993

1996 1996

1996 1996

1998 1998

1999 1999

2000
Number of poor people, 1970- 2017: Q1 (Person Million)

2000
2001
Urban

2001

2002 2002

2003 2003
Rural

2004
2004
2005
2005
2006
2006
2007
2007
2008
2008
2009
2009
Rural + Urban

2010
2010
2011
2011
2012
2012
Poverty in Indonesia 1970 – 2017: Q1

2013
2013
2014
2014
2015
7.72

2015
2016
2016
10,67 17,1

Q1
27,7

Q1
13.93
10.64

2017
2017 Printed 7/30/2017 10:05 PM SE Asia Standard Time Last Modified 8/21/2017 4:16 PM SE Asia Standard Time
 GINI Ratio (2010 – March 2017)
Rural National Urban

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0,440
0.43 0.43 0.43 0.43 0.43 0.43
0.42
0.42 0.42
0,420 0.41
0.41 0.41 0.41
0.41 0.41 0.41 0.41 0.41
0.41 0.41
0.40
0,400 0.40 0.40
0.39 0.39
0.39
0.38
0,380 0.38

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0,360

0.34
0,340 0.34 0.33
0.33 0.33 0.33
0.33 0.33
0.32
0.32 0.32 0.32 0,32
0,320 0.32

0,300
2010 March Sept March Sept March Sept March Sept March Sept March Sept March
2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017

Source : CEIC and BPS 8

 MULTILAYERED INEQUALITY IN
INDONESIA

Last Modified 8/21/2017 4:16 PM SE Asia Standard Time

INEQUALITY FACTS:
 Indonesia is 6th worst inequality of
wealth in the world (wealth GINI 84%)
 In 2016, the wealth of 4 richest
HOW TO CLOSE THE GAP?
 Government Commitment & National
Plan to reduce & tackle inequality
 Fair Work and Wages

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 Optimizing Tax Potential
billionaires in Indonesia MORE THAN
total wealth of bottom 40 percent of the  More public spending on Education
population (about 100 million people) and Health
 Ensuring Gender Equality
 Multilayered inequality:  Private Sector should take role:
(1) Market fundamentalism; (2)Political Secure employment contract, decent
Aspects; (3) Gender Inequality; opportunities for both men and
(4)Unequal access to quality healthcare women, provide on-job-training.
and education; (5) Unequal access to
infrastructure; (6) Unequal taxation
system;
Sumber:
Source: OXFAM
Oxfam (2017)– Briefing Paper (2017)
 National Development Agenda 2015-2019
I. Human Development
 Free 12-year compulsory education : Indonesian Smart Card
(2017 = 18.9 million students)

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 Indonesia Health Card (2017 = 92.4 million person)
 Prosperous Family Card (2017 = 6 million family)
 Labour Training/Internship (Vocational and Skill Training Center)

II. Increasing productivity and competitiveness

 Infrastructure Development (toll road, airports, ports, railways. Acceleration for Priority
Infrastructure, consisting of 225 infrastructure projects, 35000 megawatt electricity
program)
 Institutional (14 Policy Packages)

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 Incentives (to make easier doing business and providing facilities within Special Economic
Zone; giving tax incentives for labour intensive industry)

II. Developing Domestic Economy

 Rehabilitation /Irigation Development (3 Million Ha) and Developing 49 Dam until
2019
 Suppress interest rates of People's Business Credit (the government distribute KUR worth
IDR100 trillion, interest rate 9%)
Traditional Market (Developing/Revitalizing 5000 local markets until 2019, Realization :
2015 =1002 market; 2016 = 878 market)

Source: RPJMN 2015 – 2019; Coordinating Ministry for Economic Affairs ; Office of Presidential Staff (2016)
 State budget for the Priority Program:
Education and Health

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Government spending on Education and Health showed an increasing trend

Budget Education % Share of budget Education & Health to

government expenditure
Budget Health

550
550 521 525
500 483
450 437 25 25
25
400 392

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IDR 352
Trillion 350 303 24 440
416.7 420
300
408.5
250 375.5
345.3
200 311
266
150 23
100 23
50 23 23 104 105 110
46.5 61.2 74.4
36 41
0
2011 12 13 14 15 16 17 2018

Note:
- 2011 – 2017 = Revised State Budget
- 2018 = State budget

Source: Ministry of Finance and CEIC

 State budget for the Priority Program:
Infrastructure

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Government spending on infrastructure showed an increasing trend

Budget Infrastructure % share to government expenditure

400 388

350 19
314
300
256

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IDR 250 15
Trillion
200
146 156 155 13
150
114
100
9 9
50 9
8
0
2011 12 13 14 15 16 2017

Note:
- 2011 – 2017 = Revised State Budget

Source: Ministry of Finance and CEIC

 Tax Revenue Realization (2013 – 2016)
IDR Trillion

83,5% of
83,3% of

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APBNP 2016
92% of APBNP 2015
92,07% of APBNP 2014
APBNP 2013

1,147 1,240 1,285

995

2013 2014 2015 2016

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Deficit APBN (% of GDP) 2005-2018
3
2.59 2.67
2.5
2.49 2.19
2 2.24 2.3
1.86
1.5 1.58
1.26
0.87 1.14
1

0.5 0.73
0.52
0 0.08
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Outlook 2018
2017
Note: 2018 = State budget
Source: Ministry of finance and DJP 13
 Technology tipping points in the next 10 years
10% of the world's population will use

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The first physician robot will 2021 clothing connected on the internet
be present in America
World The car will be
80% of the 2022 manufactured using 3D
Economic world's printer
Forum population will
conducted have an online More than 50% of internet
2023
presence consumption is used for home
a survey of
appliances (home appliances)
more than 30% of corporate audit function 2024
800 For the first time liver transplants are

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will be performed by artificial
intelligence produced from 3D printers
experts
and Smartphones will be able to Access to the Internet will be the
be implanted directly in the basic human right for everyone
executives
body
to predict
Travel will be done more Artificial intelligence will
what will 2025 join the companies as one
by car sharing programs
happen in (e.g., Uber, Grab) of their BOD
the next 10
10% of cars in the US are
years 2026
unmanned cars

Source: World Economic Forum Report: Technology tipping points and Societal Impact 14
Last Modified 8/21/2017 4:16 PM SE Asia Standard Time Printed 7/30/2017 10:05 PM SE Asia Standard Time
 Value of Estate Crop Sub-sector, 2000-2017:S1 (IDR
Trillion)
500
429,68

Last Modified 8/21/2017 4:16 PM SE Asia Standard Time

400

300
224,98
200

100

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Contribution of Estate Crop Sub-sector to GDP & Agriculture
Sector, 2000-2017:S1 (%)
32 29.53
27.72

24

16

8
3.8 3.7

% PDB % Agriculture Sector

Source: Directorate General of Estate Crop (2017)
 Growth Rate of Agriculture Sector, Estate Crop sub-sector, GDP
2001-2017:S1
%, YoY

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Agriculture Sector Estate Crop subsector GDP
9

6
5.02 5.01

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5
4.9
4 4.0
3.3
3 3.25

Source: Directorate General of Estate Crop (2017)

 Estates area, 2010- 2017 Production of Estates,
(Mil, Ha) 2010-2017 (Mil,Ton)

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Palm Oil Rubber Coconut Palm oil Ruber Coconut

20 45

18 40

16
35
14
30
12
25

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10
20
8
15
6

4 10

2 5

0 0
2010 2011 2012 2013 2014 2015 2016* 2017**

Notes:
* = Preliminary
** = Estimation

Source: Directorate General of Estate Crop (2017)

 Total Employment of Estate crop sub-sector, 2011-2016 (million people)
Period Estate Crop subsector Agriculture Total of
Palm Oil Rubber Coconut Others Total Sector Employment

Last Modified 8/21/2017 4:16 PM SE Asia Standard Time

2011 3.65 2.31 6.95 8.02 20.93 41.49 108.21
2012 3.76 2.33 6.96 8.24 21.29 39.14 109.67
2013 5.18 2.39 6.98 7.74 22.29 39.5 110.81
2014 5.21 2.43 6.64 7.64 21.92 39.22 110.80
2015 5.41 2.55 6.57 7.67 22.09 38.97 114.63
2016 5.67 2.45 6.51 7.67 22.39 37.75 114.82

Printed 7/30/2017 10:05 PM SE Asia Standard Time

Contribution employment of Estate crop sub-sector, 2011-2016 (%)
Period Contribution employment of Estate crop sub-sector (%) Contribution
of Agriculture
Palm Oil Rubber Coconut Others Total Sector (%)
2011 3.4% 2.1% 6.4% 0.4% 19.3% 38.3%
2012 3.4% 2.1% 6.3% 0.4% 19.4% 35.7%
2013 4.7% 2.2% 6.3% 0.4% 20.1% 35.7%
2014 4.7% 2.2% 6.0% 0.4% 19.8% 35.4%
2015 4.7% 2.1% 5.7% 0.4% 19.3% 34.0%
2016 4.9% 2.1% 5.7% 0.4% 19.5% 32.9%
Source: Directorate General of Estate Crop (2017)
 Productivity of Estate crop, 2000-2017
Thousand/Ton/Ha

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Palm Oil Rubber Coconut
4,500

4,000 3,817

3,500

3,000

2,500

Printed 7/30/2017 10:05 PM SE Asia Standard Time

2,000

1,500 1,096

1,000
1,058
500

Notes:
* = Preliminary
** = Estimation

Source: Directorate General of Estate Crop (2017)

 Value of Export, Import and Trade Balance Palm
Oil, 2000-2016

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Billion USD
20

18

16
14,7
14

12

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10

-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Export Import Trade Balance

Source: Directorate General of Estate Crop (2017)

 Indonesia is the world's largest producer and
exporter of palm oil (2016, million tons)

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Top 5 Producer Palm Oil, 2016 Top 5 Exporter Palm Oil, 2016
1.3 0.9 0.57
2.2 0.7 0.55

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Indonesia Indonesia
Malaysia Malaysia
21 16.5
Thailand Guatemala
Colombia Benin
35 25
Nigeria Papua New Guinea

Sumber: Index Mundi (2017)

Source: Index Mundi (2017)
 1000
1500
2500

2000

0
500
Jan-10
Apr-10
Jul-10
Oct-10

Source: World Bank (2017)

Jan-11
$/ton, nominal USD

Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Palm Oil

Apr-13
Jul-13
Oct-13
Jan-14
2010 – 2017

Apr-14
Jul-14
Palm kernel oil

Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
674
1,165
Monthly Price Trend of Palm Oil and Palm Kernel Oil in World Market,

Printed 7/30/2017 10:05 PM SE Asia Standard Time Last Modified 8/21/2017 4:16 PM SE Asia Standard Time
 -
0.5
1.0
1.5
2.0
2.5
3.0
Million Ha
Aceh
Sumatera Utara
Sumatera Barat
Riau
Kepulauan Riau
Jambi
Sumatera Selatan
Kep. Bangka Belitung
Bengkulu
Lampung
D.K.I Jakarta
Smallholders

Source: Directorate General of Estate Crop (2017)

Jawa Barat
Banten
Jawa Tengah
Total Area Palm oil : 12,308,674 HA

D.I. Yogyakarta
Jawa Timur
Bali
Nusa Tenggara Barat
Nusa Tenggara Timur
Government Estate

Kalimantan Barat
Kalimantan Tengah
Kalimantan Selatan
Kalimantan Timur
Kalimantan Utara
Sulawesi Utara
Gorontalo
Private Estate

Sulawesi Tengah
Sulawesi Selatan
Sulawesi Barat
Sulawesi Tenggara
Maluku
Smallholders: 4,756,271 HA

Maluku Utara
Private Estate: 6,799,819 HA
Areal Palm Oil by Farming Category, 2017

Papua
Government Estate: 752,584 HA

Papua Barat

Printed 7/30/2017 10:05 PM SE Asia Standard Time Last Modified 8/21/2017 4:16 PM SE Asia Standard Time
 10

0
1
2
3
4
5
6
7
8
9
Million Ha
Aceh
Sumatera Utara
Sumatera Barat
Riau
33,229,381 Ton

Kepulauan Riau
Jambi
Sumatera Selatan
Kep. Bangka Belitung
Bengkulu
Lampung
Total Production Palm oil :

D.K.I Jakarta
Smallholders

Jawa Barat

Source: Directorate General of Estate Crop (2017)

Banten
Jawa Tengah
D.I. Yogyakarta
Jawa Timur
Bali
Nusa Tenggara Barat
Nusa Tenggara Timur
Kalimantan Barat
Government Estate

Kalimantan Tengah
Kalimantan Selatan
Kalimantan Timur
Kalimantan Utara
Sulawesi Utara
Gorontalo
Private Estate

Sulawesi Tengah
Sulawesi Selatan
Sulawesi Barat
Sulawesi Tenggara
Maluku
Maluku Utara
Production Palm Oil by Farming Category, 2016
Smallholders: 10,865,685 Ton

Papua
Private Estate: 19,927,225 Ton

Papua Barat
Government Estate: 2,436,471 Ton

Printed 7/30/2017 10:05 PM SE Asia Standard Time Last Modified 8/21/2017 4:16 PM SE Asia Standard Time
 Number of Poor People by Province, 2017: S1 (Person Million)
5,000

4,000

Last Modified 8/21/2017 4:16 PM SE Asia Standard Time

3,000

2,000

1,000

Printed 7/30/2017 10:05 PM SE Asia Standard Time

Poverty Rate by province, 2017: S1 (%)
30
25
20
15
10 10.64
5
0

Source: BPS (2017)

 RPJMN 2014-2019: Agro-industry

Last Modified 8/21/2017 4:16 PM SE Asia Standard Time

Policy and Strategic Direction :
Increased productivity, export quality of agricultural commodities,
potential for export and import substitution will be achieved through
strategies:
− Revitalization of plantations and horticulture is directed primarily at
product tire plants and declining productivity, through:

Printed 7/30/2017 10:05 PM SE Asia Standard Time

1. Support for the of replantation crops and horticulture, along
with the main export commodities and export potential
2. Intensification of maintenance and fertilization as needed

Sumber: RPJMN Buku I (2017)

 RPJMN Target 2014-2019
“Improving value-added and competitiveness of agricultural commodities”

Last Modified 8/21/2017 4:16 PM SE Asia Standard Time

Main Commodity Production Target 2014-2019
No. Commodity Baseline 2019 Average
(2014) 2015-2019
1. Estate crop of Production (thousand ton)
Palm oil 29.344 36.420 4,3

Printed 7/30/2017 10:05 PM SE Asia Standard Time

Rubber 3.153 3.810 3,5
Cacao 709 870 3,0
Tea 144 163 0,5
Coffee 685 778 1,8
Coconut 3.031 3.491 1,4

Source: RPJMN 2015-2019 (2017)

 Summary

Last Modified 8/21/2017 4:16 PM SE Asia Standard Time

Eradicating poverty, reducing unemployment and
alleviating inequality are the priorities for Indonesian
government

Policies have been implemented, and be able to reduce

Printed 7/30/2017 10:05 PM SE Asia Standard Time

unemployment, poverty and inequality, but the number is
still high

Palm oil industry plays an important role in the Indonesian

economy, especially in reducing unemployment, poverty
and inequality. Government is aware of this and trying to
boost the development of sustainable palm oil industry

29
Last Modified 8/21/2017 4:16 PM SE Asia Standard Time Printed 7/30/2017 10:05 PM SE Asia Standard Time
30