Approach and Strategy for Developing Oil Palm Plantation in
Indonesia The hybrid of the oilpalm tree which produces the crude
palm oil(CPO) has certain uniquefeatures not found in other
vegetable oil crops. Among these features is that the oil palm is
ahighly productive crop and its main product oil and many
byproducts are versatile in their uses.The palm oil yield is !."#
tons of vegetable oil$ha per year in terms of CPO and palm
%ernelcrude oil (P&CO). Other vegetable oil crops have lower
yields. 'oybean has an oil yield of only#.() rapeseed *.+) and
sunflower *." t$ha per year (Table *). This means that one has to
plant*" ha of soybean to produce the amount of vegetable oil
produced in a hectare of oil palm. ,nli%e manner- one needs to
plant ( ha of rapeseed- + ha of sunflower- or ( ha of coconut trees
toproduce the volume of vegetable oil produced in .ust ahectare of
oil palmtrees. /ewgenerations of planting materials of oil palm in
the form of ramets developed .ointly by
0PO1and'21iotechin'abahshowspotential yieldof *#.#tonsof oil$haper
year. Amongthevegetable oil crops- palm oil is the cheapest.Table
*. Productivity and percent contribution of various vegetable oil
crops.Crops Oil Yield/ha Percent WorldProduction*. Palm Oil !."#
3+"- 'oybean #.(# "43. 5apeseed *.+# *+(. 'unflower *."# 6 +.
Coconut *.+# ( !. Others **TOTA7 *##As a perennial crop- oil palm
trees grow fast and is early maturing) the first fruit matures in
.ust"( months after field planting as compared to four to five
years for coconut trees. Oil palm
treesremainproductivefor""to3#yearswhenthenewlydevelopeddwarf
hybridsareusedforplanting. Palmoil ismucheasier
togrowthanthecoconut treesintermsof cultureandprocessing for oil.
As a perennialcrop it is less affected by climate change compared
to theannual vegetable oil crops. ,t also helps mitigate climate
change as it is a heavy sin% of CO" inthe atmosphere and induce
higher rainfall. Palm oil is versatile- 6#8 is used for food- *98
for oleochemicals and *8 for biofuel. Palm oil isahealthy oil %nown
for reducingobesity- thereasonwhymanyfood processorsin:'A
mi;soybeanoil withpalmoil tohelpovercomeobesity. Palmoil
reducestheamount of badcholesterol andimproveshumansight
duetoitshighamount of >1) to oil is now found useful in
theproduction of quality organic fertili?er and generation of
biogas and electricity. The leaves and trun%s can be processed
cheaply to produce quality papers and biodegradableplastic products
such as lunch bo;es and other products thereby replacing in the
mar%et thenonbiodegradable synthetic plastics which are very
destructive to the environment. ,t ispredictedthat
thesecondgenerationsof biofuel will comefromtheprocessingof oil
palmbiomass @ empty fruit bunches- trun%s and leaves. The
technology is now available and foundhighly profitable.>igure *.
0ass 1alanceThe success in the production of this highly productive
and versatile crop made many countriesproducing rapeseeds- soybean
and other vegetable oil crops apparently threatened.Aovernments of
these countries are suspected to fund /AOs involved in
antipalmoile;pansioninthe A'=A/asanindirect
tradewar.0anageableproblemsbrought about byincrease in palm oil
production such as deforestation- apparent pollution of rivers by
palm oilprocessing waste- health problem and reduce biodiversity-
loss of habitat for the orangutans arebeing blownout beyond
proportion and fed to the media which reach the Philippines.
Theseproblemsarenoweffectivelyaddressedbypalmoil
producingcountries. >or e;ample- the,ndonesia sustainable palm
oil (,'PO) was created to address concerns in ,ndonesiaBhile
production of palm oilis carried out in tropicalAsia- Africa- and
7atin America- 9#8 isproduced by three members of the A'=A/-
namelyC ,ndonesia- 0alaysia and Thailand (Table"). This is because
high productivity of oil palm is concentrated in the tropical ?one)
within *#o/orth or 'outh of the equator- where the whole of
0alaysia- ,ndonesia- part of Thailand- and0indanao- Philippines are
located. Among these countries- Thailand has the least area
suitablefor palm oil production @ less than D of the Philippines.
Palm oil can be grown in many parts ofthetropical worldbut not
asproductiveaswhengrownwithin*#o/orthand'outhof theequator.
>igure ".Table ". 7eading countries in the production of palm
oil in terms of area and production in "##9.COUNTRY PRODUCTION
PERCENT OILPRODUCTIONAREA (a! ("###! CRUDE PAL$ OIL (CPO!PRODUCTION
($T!*. ,ndonesia 4-+##.## "(-+## (98". 0alaysia (-+##.## *6-!##
3483. Thailand !"+.## *-+## (8(. /igeria (!#.## 6+# "8+. Colombia
39#.## 6*# "8!. Others *-*"!.## 3-#44 !8TOTA7 *(-!#*.## (9-334
*##8Aiventhestrongdemandfor palmoil- wherewill
thefutureproductioncomefromEThe,ndonesian government has a vision
of becoming the Fbest sustainable palm oil producer in theworldG-
with the ob.ective of producing (# million tonnes of palm oil by
"#"#- of which +# percentwouldbeforfoodand+#percent
forenergy(Hiwan- "##9). Thismeansnational
productionwouldhavetodoubleinthene;t *#years.
Areenpeace("##9)estimatedthat tomeet thisdemand- an
additional3##-### hectares of new land would have to be planted
with oilpalmannually. ,n view of limited land availability- the
e;pansion of oilpalm in 0alaysia is e;pected to slow-particularly
in Peninsular 0alaysia and 'abah.2owever- the 'arawa% 'tate
governmenthasrecentlyannouncedthat it isopeninglargetractsof
landfor oil palmcultivation. Thiswillincrease the nationalland area
under oilpalm from (.!4 million ha to +.( million ha. (Bong-"#*#).
Other countriesaree;pectedtoe;pandtheir plantedareastomeet
risingglobal demand.Thailand is e;pected to increase its oil palm
area by 6#-### ha per year until "#*" (Iallinger-"#*# pers.com).
There are reports that Chinese companies are negotiating for
e;tremely largetractsof landinI5CongoandJambia(=conomist- "##9) for
establishment of oil palmplantations.
'imilarly-0alaysiancompaniesareloo%ingat similare;pansionin1ra?il-
intheAma?onbasin. 0alaysiaand1ra?il hasset upa.oint
venturetoopenupabout *##-###hectares for oil palm in 1ra?il. (/ew
'traits Times- "##9). There is also substantial interest
ine;panding the limited areas of oil palm presently growing in Best
Africa. =;pansionof theindustryonthis scaleis causefor
considerableconcernamongmanysta%eholders- particularly local
communities which may be affected by these developments
and/AOs.%uita&ilit' o( Land7and suitability for oil palm
cultivation has been well %nown such as 'oil classes with
differentdegrees of suitability are well researched. Terrain and
soil type limitations must not beoverloo%ed in newoil
palmplantation development as they would influence the cost
ofproductionaswell astheecologyof theareaasinthecaseof peat lands.
0arginal landparticularlyinsuboptimal
climatic?oneshouldbeavoidedasthelongtermprospectsofprofitability
cannot be assured. Cost of plantationdevelopment and subsequent
cost ofproduction on marginal land and climate ?one are invariably
high- ma%ing return to investmentunattractive in the long run.The
country of ,ndonesia is a huge archipelagic nation whose e;tent is
roughly 3-"## miles eastto westand *-*## miles north to south.
,tencompasses over*#-###islands.The five mainislandsof
thearchipelagoare'umatra- Hava- 1orneo- 'ulawesi- andBesternPapua.
Theislands of 1orneo and Bestern Papua are shared with other
nations. 1orneo (also %nown as&alimantan) is shared with
0alaysia and 1runei. Bestern Papua (also %nown as ,rian
Haya)sharestheislandof/ewAuineawith Papua /ew Auinea. ,n
,ndonesia-theprovinceis thehighest tier of subnational government.
Theislandof 'umatraconsistsof theprovincesofIaerah ,stimewa Aceh-
5iau- Hambi- 1eng%ulu- 7ampung- and /orth- 'outh- and
Best'umatra.,ndonesiaKs region of 1orneo is called &alimantan-
while 0alaysiaKs region of 1orneois called =ast 0alaysia. On 1orneo
there are four ,ndonesian provinces- they are =ast- 'outh-Best and
Central &alimantanThe fasted e;panded palm oil area were in
/orth 'umatra- 5iau- and 'outh 'umatra ('umatera'elatan) on the
island of 'umatra. On the island of 1orneo- were conducted on the
province ofBest &alimantan (&alimantan Tengah). Palm oil
producing areas have slowly e;panded sincethe early "#th century
when the palm was first introduced. The island of 'umatra has long
beenthe largest producer. The oldest largescale plantations were
first established in *9** on Acehand /orth 'umatra province. 'ince
those early days- palm plantation development spread southand to
the other areas of ,ndonesia. The highest producing provinces on
'umatra- are /orth'umatra- 5iau- and 'outh 'umatra.=ven though the
bul% of ,ndonesiaLs production remains on'umatra- 4#to6#percent
accordingtosomesources- rapide;pansionisoccurringontheisland of
1orneo) the second largest producing area in ,ndonesia. ,n recent
years- there hasbeenagrowinge;pansionof palmoil
plantationsontheislandof 1orneoMparticularlyinCentral -Best and
=ast &alimantan.,mportant- but secondary areas of e;pansion are
'ulawesiand Bestern Papua (or ,rian Haya). =ven with the e;pansion
areas- 'umatra will continue tobe the leading production center for
the foreseeable future. >igure 3. Palm Oil Plantation in
,ndonesiaTable 3. Areas of Oil Palm Plantations in Indonesia )##*
)#)#(Pro+ected!No Pro,ince Area (a-! Area (a-!A Sumatra* /anggroe
Aceh Iarussalam """-369 3(#-###" 'umatera :tara *-#93-#33
*-###-###3 'umatera 1arat (69-### +##-###( 5iau *-(6!-969
3-###-###+ Hambi 3+#-### *-###-###! 'umatera 'elatan (*!-###
*-###-###4 1ang%a 1elitung **"-4!"6 1eng%ulu 6*-+3" +##-###9
7ampung *(+.!*9 +##-###. Java*" Hawa 1arat 3-4(4 *3 1anten *4-34+ D
Kalimantan*( &alimantan 1arat 3(9-*#* +-###-###*+
&alimantan Tengah +63-### *-###-###*! &alimantan 'elatan
39*-!4* +##-###*4 &alimantan Timur 3#3-#(# *-###-###E
Sulawesi*6 'ulawesi Tengah (3-#3" +##-###*9 'ulawesi 'elatan 4"-*33
+##-###"# 'ulawesi Tenggara 3-!#" +##-###/ Papua"* Papua (#-669
+##-###Total *0#12033" "2043#0###Climate and 'oil 5equirements,t is
generally %nown that the following conditions promote ma;imum Palm
growth C- humid tropical lowland climate- evenly distributed
precipitation of *4+# to 3### mm per year-distributed evenly over
the year(i.e. with no very mar%ed dryseason). - A mean minimum
temperature of "#o @ "3oC and a mean ma;imum temperature of "6o @
3"oCwhichis peculiar totropical countriesisbest suited. ,f
thetemperatures fallsbelowthis-particularly at night to say below
*9oC bunch development is affected and yield reduced. Arowthin
young seedlings stops at temperature below *+oC.- Constant sunshine
amounting to at least + hours per day over all the months of the
year and asmuch as seven hours per day during some months .- 2igh
atmospheric humidity and high CO" concentration. Oil Palm can be
grown on a wide rangeof soils- the best being the coastal alluvial
clay- riverine and coastal alluvial and soils of volcanicorigin.
=;tension of oilpalm plantation in ,ndonesiagrows very fast. ,t
isestimated more than !-*#million hectare of oil palm plantation in
"##4- that spread out at several climatic conditions- fromvery wet
to slightly dry ?one. Climatic condition is one of the important
factors determining oilpalmproductivity- besides other factors
suchas genetic plantingmaterial andagronomicmanagement
practices.One parameter that commonly used to represent climatic
condition is water deficit. Bater deficitisaresult of
acomple;interactionbetweenelevation- drymonth- rainfall
andsunradiation.Planters have %nown a significant effect of water
deficit per year was not suitable for oil palmbecause its
productivity will drop by +( @ !+ 8 so that this area is not
economically feasible.Areaswithnowaterdeficit isdesirableforoil
palm- but waterdeficit lessthan"##mmstille;cellent for oil
palm.Bater deficit of "## @ 3## m is light constraint for oil palm-
while area with3## @ +## mm water deficit is a marginal land for
oil palm plantation ( Caliman N 'outhworth-*996 ).The oil palm
development is estimated still increased for the ne;t decade due to
the increasingdemend of palm oil for domestic mar%et and e;port
purposes.2owever- development of the oilpalm to marginal land- in
term of climate and soil fertility- is unavoidable.Therefore- the
purposeof this research is to provide information on agroclimatic
suitability class and agroclimatic ?onesof oil palm in
,ndonesia.The importance of this information are C*)7ow average
temperature ( O *6 oC) that will inhibit plant metabolisms such as
carbohydratetranport and flowering")Cloud formations on the
windward sides of the hills reduce sunshine considerably (Billiams
and2su- *94#).3)0ost of the areas are dominated by hilly topography
that restrict agronomic management and harvesting- so that it will
reduce oil palm production.,n addition at high altitude we have to
face soil and water conservation problems.>igure (. =levation of
,ndonesiaTabel (. Agroclimatic JoneCli5ate and %oil Re6uire5ents,t
is generally %nown that the following conditions promote ma;imum
Palm growth CP 5ainfall of *4+#mm to 3### mm- distributed evenly
over the year (i.e. with no very mar%ed dry season). P A mean
minimum temperature of "## @ "3#C and a mean ma;imum temperature of
"6# @ 3"#Cwhichis peculiar totropical countriesisbest suited. ,f
thetemperatures fallsbelowthis-particularlyatnight
tosaybelow*9#Cbunchdevelopment isaffectedandyieldreduced.Arowth in
young seedlings stops at temperature below *+#C.P Constant sunshine
amounting to at least + hours per day over all the months of the
year and asmuch as seven hours per day during some months .P 2igh
atmospheric humidity and high CO" concentration. Oil Palm can be
grown on a wide rangeof soils- the best being the coastal alluvial
clay- riverine and coastal alluvial and soils of volcanicorigin.
A7rocli5ate %uita&ilit' Class1asedonseveral climatic components
and their intensity- thecriteria used todetermineAgroclimate
suitability class is presented in Table +. Table +. Agroclimate
suitability class for oil palm ('iregar et.- *996)Class 'uitability
Criteria'* 2igh suitable Optimal (normal) ) none or one light
limitingfactor'" 0oderate suitable 0ore than one light limiting
factor or one moderatelimiting factor'3 0arginally suitable 0ore
than one moderate limiting factor/ /ot 'uitable One or more strong
limiting factorsTabel !.Land Use 7andacquisitionisama.or
businessdecisionthat requiresinformedtechnical
inputssocialanalysisandrealisticvaluationandforecast. Thereisareal
dangerof unwisedecisionbycompany .ust to .ump into the wagon of
e;pansion and$or due tohost of other reason.>igure +. =ffective
7and =valuationLicensin7 Plantations in IndonesiaBhen the modern
state of ,ndonesia was established- a large number of plantations
establishedby colonial authority already e;isted. 2owever- in
accordance with 7aw/o. 6!of *9+6regarding /ationali?ation of Iutch
Companies- these plantation companies were ta%en over
bytheAovernment asstateownedcompanies. Thelawwasfurther
regulatedbyAovernment5egulation /o. " of *9+9 regarding 7aw
=nforcement Principles on the /ationali?ation of IutchCompanies.
This government regulation set out criteria for the%inds of Iutch
companies
thatshouldbenationali?edandestablishedthenationali?ationprocedure.+(>urther
regulationswereissuedlistingthecompaniesthusta%enover bythe'tate.
>or e;ample- pursuant toAovernment 5egulation /o. " of *9+9- the
government issued Aovernment 5egulation /o. ( of*9+9 on
/ationali?ation Criteria of Iutch Tobacco Agriculture$Plantation
Company- which listedsome 36 tobacco companies that should be
nationali?ed.Prior to the 1asic Agrarian 7aw (1A7 )of *9!#- these
plantation companiesL rights over
landweredefinedbyIutchlawsasrightsofErfpacht andConsessie.
UndertheBAL, howeer,Erfpacht ri!htswere converted into ma;imum"#
year leaseholds on 'tate lands- whileConsessie ri!hts holders could
apply to confi rm their concession rights. ,f such rights were
notapplied for-or the applications did not comply with the
requirements of the Agrarian 0inister-they would lapse after a
ma;imum of fi ve years.++ As far as this study could determine-
thereare no longer any plantations in ,ndonesia claiming rights in
land under Iutch law. 0ostlarge oilpalm plantations havebeen
establishedin,ndonesiaunder the 1A7 bywhichcompanies are awarded
temporary rights of e;ploitation or cultivation for
periodsinitially of 3+years e;tendablefor "+years. These tenures-
%nown as"a# $%naUsaha(2A:)- andcorresponding 2A1("a# $%na
Ban!%nan& for constr%ctin! b%ildin!s s%ch asmills-
areconsidered equivalent to leaseholds on 'tate lands. Acquisition
of these rights is regulated by anumber of further laws- which set
out the conditions and procedures under which 2A: may beissued and
plantations licensed. 0inisterial Iecree of Agriculture /o.
46!$&pts$&1.*"#$*#$9! regarding the 7icensingofPlantation
1usinesses firstly defined Plantation 1usinesses as cultivation
activities
andPlantation,ndustriesasindustriesprocessingplantationproducts-
bothof whicharetoberegulated and developed sub.ect to the authority
of 0inister of Agriculture. :nder the decree-Plantation 1usinesses
must acquire a Permanent Permit for establishing plantation crops
or aQPermit of Plant Type AlterationL if they decided to change the
crop type. Plantation,ndustriesrequireaPermanent Permit
andan=;pansionPermit.Authoritytoissuesuchpermitswasdelegated by
the0inister of Agricultureto the Iirectorate Aeneral of
Plantationsfor allplantation licenses for lands covering more than
"## ha. 2owever- for plantations that cover "+to "## ha.- the
authority to issue a permit was delegated to Provincial Aovernors.
All suchlicenseswereissuedsub.ect tothecompaniesfirst
securing7ocationPermits(i'inlo#asi& for the preparator(
actiities re)%ired to set %p plantations and plants. Once armed
withthese permits- companies may acquire the rights of utili?ation
and e;ploitation of the land ("a#$%na Usaha * "$U& from the
A!rarian +inistr(. "oweer, these licenses may be revo%edC if
thecompany fails to adhere to the regulation stipulated in the
license- varies the location- changesthe crop type- or e;pands the
crop area without permission) if the 2A: is revo%ed or e;pires)
ifthelicenseisreturnedtotheissuingauthorityor) if
thecompanyviolatespublicordersore;isting laws and regulations.
,n0arch*999- the0inistryof
>orestryand=stateCropsreleasedaregulationthat limitedplantation
concession si?es. ,n this regulation- tree crop plantation
development area was set at"#-### hectares in any one province- and
up to a ma;imum of *##-### hectares in the wholecountry for a given
company. ,nlinewiththegovernmentLspromotionof
aQpeopleLseconomyL,e#onomi #era#(atan&the,ndonesian government
has encouraged investors to cooperate with local farmers
andcooperatives in the ownership and operation of oil palm
plantations through five new schemeswhich offer incentives to both
cooperatives andprivate enterprise. The program is
e;tremelycomplicated and few people- including government
representatives at the provincial level- seemto%nowhowit will
beimplemented. 0anyplantationcompaniesandnewinvestorshavetherefore
put off their plans to develop further plantations
untilgovernmentLs intentions aboutthis regulation become clear.
2aving reali?ed that the industry is concerned about this
regulation- the 0inistry of >orestry and=state Crops has gone to
great lengths to reassure the plantation sector that the
newinvestment schemes would only affect new investors- and would
not affect e;isting plantationfirms. 1ut they have urged e;isting
plantation firms to adopt these schemes- Qbecause they willcreate a
senseofbelongingfor the local peopleL andQencourage the
localpeopletoprotectplantation areas from looting- theft and
damageL. The 0inister of Agriculture issued a revised Iecree
regulating plantations in "##4. The Iecreeset out further
requirements for the management- control anddevelopment ofat least
"# 8 oftheir areafor local farmersor
cooperativesthroughfle;ibleschemesthat agreedbybothparties. with
the e;pressed aim of ma%ing plantation businesses more efficient-
competitive andsustainable- in order to increasepeopleK income
andliving standards- increase foreigne;change revenue- generate
more raw material for industry- and promote employment. The Iecree
also imposed additional conditions under which permits could be
revo%ed includingCif the company had not established itself on the
land after three year) had not started plantingafter four years)
didnot managetheplantationprofessionally- transparently-
participativelly-efficientlyandeffectively) didnot
sustainablymanagenatural resources) failedtocarryourimpact
assessments) did not collaborate with cooperatives and small N
mediumscaleindustries) carried out land clearing using fire) failed
to prepare a business plan and feasibilitystudy) did not apply for
permits to change crop types or e;pand the area or) did not report
onbusiness progress each semester. To assure the 0inistry that
companies had satisfied theserequirements they had to comply with a
comple; series of permitting stepsLand ri7htsThere are three ma.or
types of land rights in AP7 (Area for other %ses & recognised
under 1A7Cha# mili#- ha# !%na and ha#pa#ai.Hak milikis an
individual land property right granted in perpetuity under 1A7 and
the ownercan lease the land to others. The total land owned by a
household can not e;ceed "" ha.
Only,ndonesiannationalsandstatutorybodies(badanh%#%m)appointedbythegovernment
(e.gstateban%s- agrocooperatives- religious and social nonprofit
ma%ing organisations) mayacquire ha# mili#.This right should be
registered and the holder given a certificateC in practicefew
smallholders in 'outh 'umatra have registered rights .Hak Guna
Usaha (/U! or The right of e;ploitation is the right to use state
land for agriculture-fisheries- etc. 7arge company plantations are
operated under an 2A: that is granted for "+ to3+ years and can be
e;tended for a further "+) a de facto !# or9#years.An 2A: can
beacquired by ,ndonesian nationals and by >oreign
Companyestablished under,ndonesian lawand domiciled in ,ndonesia.
/o ma;imum land area is specified but the right must be recordedat
the 7and 5egistry Office. 7and registered under 2A: can be used as
security for a mortgageLand matters e;cept for mining and forestry
are under the .urisdiction of the /ational 7andAgency (1adan
Pertanahan /asional 1P/) formed to administer all matters relating
tothe 1asic Agrarian 7aw of *9!# such as the registration of land
rights and the granting ofrights and various permits to use the
land. and may be transferred to other parties @ by sale- e;change
or giftwith the permission of2eadof 1P/.Hak pakai gives the holder
the right to use a particular area of land that is held in either
in stateor private ownership. ,n practice- the right is scarcely
used for private land since other titles-such as the right of lease
or the right of landpledging- play a greater role. "a# pa#aiis
timelimited and- in principle- can be transferred when no other
regulations apply. 5esident foreignersand foreign corporations with
representatives in ,ndonesia can be awarded ha# pa#ai. The rightfor
private land to be registered is not reali?ed as the implementing
regulations do not e;ist.Of the remaining two land titles- "a# !%na
ban!%nan is a title on land which gives its holder aright for a
fi;ed period of time- on a construction built on land owned by
another party- while "a#Pen!!%naan lain are rights of lease-
sharecropping- lodging- landpledging- etc.Challen7es and
De,elop5ent %cenariosThefive%eychallengesfor theOil
PalmPlantationIevelopment in,ndonesiaC
(*)LandLegality-(")increasing Tight labor situation-
(3)Productivity gap- (()ncreasing nput!ost- and (+) Social
Tension"Land legality",n ,ndonesia- companies can apply to district
(#ab%paten) authorities for accessto land. The process involves
several permits and requires negotiation with local communitiesand
individuals.An area selected for oilpalm developmentshould not
involve primaryforest( 'elected Production >orest-Production
>orest N Conversion >orest ?one) and those with
highconservation values. 7ogged over Conversion >orest ?one can
still be considered for oil palmdevelopment but fields located on
those conversion forest shall have the F>orest release
permitGfrom the minister of >orestry. ncreasing Tight Labor
Situationis the most serious constraint and presently the industry
inothersislandof Hawaishighlydependent
onwor%ersfromoutside(fromHava- 7ombo%or1ugis). Bhile efforts have
been made to mechanise various field and milloperations-
overallprogress has been rather slow- particularly for harvesting
fresh fruit bunches- the most labourintensive
operation.Productivity Gap. A ma.or concern is the large gap
between the actual production of palm
oilperhectareandthecropLsgeneticpotential.Thegaphasbeenwideningwithtimeasplantbreeders
have continued to improve the inherent productivity of oil palm but
the yields realisedhave remained static or even declined.ncreasing
nput!ostcontinuesbecauseofthe
increasingfertilisersprice-labourcostandland aqcuisition
cost.Social Tension-The ,ndonesian oil palm industry faces social
problem at every places in allparts of ,ndonesia- the main problem
is the land itself. Competing land and resource claims arethe basis
of latent conflicts in all parts of ,ndonesia- and can easily turn
into violent communalconflict.#nvironment",ncreasing pressure from
importing countries and various sta%eholders requiresthe industry
to ta%e more positive action on promoting sustainable development.
1e%/ielsen(*99+) stated that Fwhether we li%e it or not- we cannot
avoid to pay attention to theenvironmental issues which have become
of worldwide importance to this world focusG. ,n addition to the
above challenges- Company has raised concerns over increasing
difficulty inmaintainingdisciplineamongthewor%forceandtheshortageof
dedicatede;ecutivesandofficers. These have a negative impact on the
efficiency of plantation management.De,elop5ent %cenariosThree
development scenarios are analysed based on (a) 'ustainable palm
oil production entailslegal scenario- (b) economically viable
scenario (c) socially beneficial management andoperations and (d)
environmentally appropriate scenario. The conclusion is that only
through aconcertedeffort todeveloptheareacanbalanceddevelopment
occurthat leadstoregionaleconomicgrowth- povertyalleviationaswell
aspositiveenvironmental outcomes. Plantersshould be committed to
environmentallyfriendly agricultural practices. /evertheless-
recognising the increasing important role that environment will
play in the "*stCentury- Planters shall adopt the followingCa.
:nderta%es the =nvironmental ,mpact Assessment (A0IA7) for all land
development pro.ects in,ndonesia as required by national law.
0itigating measures are being implemented as requiredunder this
assessment.b. Bill support the 5'POLs effort in underta%ing
pro.ects that will enhance the production and useof sustainable
palm oil. These pro.ects are divided into the following broad
groups P development of new plantations P responsible investment in
oil palm P plantation management practicesc. ,mplementing and
continuous improvement on the various 1est 0anagement Practices
(10Ps)in Aroup =states and 0ills.Thereisageneral consensusthat
thePlantersareacanbedevelopedinwaysthat wouldimprove the welfare of
localcommunities- create revenue for the 5egency and conserve
theforest and peat areas. This requires not only detailed %nowledge
of the biophysical conditions ofthe area and prioritising the
conservation of the most sensitive areas (such as peat domes)-
butalso a strong commitment by the Aovernment of ,ndonesia at all
levels.Approach and %trate7' (or De,elopin7 Oil Pal5
PlantationThestrategicapproachisbasedonthreemainpillarsC
(*)tospeeduplandlegal permit forapprovalof plantation pro.ects and
maintain good relationships with the localcommunity andadat
leaders- (") focus on productive area scheduled for plantingand
implement oil palm bloc%management (10)- (3) to enhance yield and
profitability- the effective use of inputs includingfertili?er-
andsoil qualityof intensivelymanagedoil
palmproductionsystemsthroughbestmanagement practices and (() To
assist planters in the identification- evaluation-
andimplementation of the Cost and Profitability 'tructure of the
Oil Palm Production ProcessAn area selected for oil palmdevelopment
should not involve primary forest ( 'electedProduction >orest N
Production >orest) and those with high conservation values.
7ogged overConversion >orest ?one can still be considered for
oil palm development butfields located onthose conversion forest
shall have the F>orest release permitG from the minister of
>orestry.1ase on 0initer Iecree /o. 34!$&pts,,$*996
stipulates that oil palm plantation developmentscan be approved in
places the provincial land use plan (5T5BP) classifies as nonforest
lands.2owever- the land use classification in the 5T5BP prepared by
the Provincial Aovernment andthe forest classification in the
>orest :se Plan according to /ational Aovernment (TA2&)
stillnot match each other. 1ecauce of this- approval must be
obtained from the national 0inistry of>orestry and Plantations
for release from forest land in order to convert from forest land-
thingsmay not necessary proceed as the provincial government
e;pects. ,f the trees from the convertion forest land (for which an
application was made for the releasefrom forest land) are to be
logged (logging is necessary for site preparation) and used (sold)-
thecompanymust applytotheprovincial government forawoodusepermit
(,?inPemanfaatan&ayu or ,P&).The intention ofCompany here
is to speed up this part of procedure for approval of
plantationpro.ects by pushing everything at the provincial level-
because approval of release from forestdesignation at the national
level is slow.>igure !. >low of Process Permit
O&tainin7 Land Titles &' P$A Co5panies >or a new
prospective P0A company- which requires land to conduct
itsbusiness- one crucial procedure must be followed in respect of
land. Thisregards the processing of the Location Permit.The
7ocation Permit allows a P0A company to acquire the land needed for
its operation-and also serves as license for the transfer of rights
and forutili?ing the land for its investment. The 7ocation Permit
must be obtained from the 2ead of Iistrict (B%pati& with
.urisdiction where such land is located.Bithin *" 3! months
(depending the acreage of land) after the issuance of this 7ocation
Permit- the P0A company must proceed to relinquish the
landfromitsoriginal landowners. ,f
thecompanyhadpreviouslyobtaineda7ocationPermit thenit
needstocautiouslyobserveitsPermit- asthecompensated of theproperty
should be in accordance with it. The investment license issued for
the company also contains provisions on the land- ifany- required
for the intended investment.Therefore- if the properties
compensated by the company are more than the hectarage stated in
its investment license- this will not be allowed unlessthe company
first files anapplication with 1&P0 for a revision of its
investment license to include a larger landarea. A company- having
obtained adecree granting its right in the land- will be e;pected
to utili?e the land in accordance with the terms of the decree and
of its investment approval.Please note also that there is a strong
policy in ,ndonesia against foreign ownership or control of land.
2ence- the P0A companies- while granted therights in land necessary
to ma%e their pro.ects viable- are not allowed to lease hold land
beyond that which is actuallyrequired and specifically licensed for
their pro.ects. EN8IRON$ENTAL $ANA/E$ENT=nvironmentalmanagement in
,ndonesia is regulated by 7aw /umber "3 of *994. The 7aw defines
the management of the living environment as anintegratedeffort
topreservethefunctionof livingenvironment
whichincludesthepolicyforthe regulation-utili?ation- development-
conservation-restoration- supervision- and control of the living
environment.A$DAL and Licensin7Any underta%ing and$or activity
causing asignificant and important impact towards theenvironment
must have an Analysis concerning the=nvironmental ,mpact Analisis
,+en!enai -ampa# Lin!#%n!an , .A+-AL/& to obtain a license to
cond%ct the %nderta#in! and$or activity. 'uch license isgiven by
the competent officialin accordance with thelegislative regulations
in force. This license must set forth the conditions and
obligationstoconduct the efforts to control the environmental
impact.,n the issuance of a license to conduct an underta%ing or
activities the following shall be observed CRthe spatial layout
plan)Rthe opinion of the community)Rthe considerations and
recommendations of the competent official in connection with
theunderta%ing and$or activity.The decision on the license to
conduct such underta%ing or activity is published. Bithout a
decision on the license- anyone is prohibited to conduct awaste
disposaltoenvironmentalmedia. The competency to issue or refuse a
license application is with the0inistry of =nvironment. Any person
isprohibited to conduct an importation of waste of dangerous and
to;ic material. ,/IO/=',A/ 7=AA7 T=/:5=' N P=50,T9or5s o(
TenureRi7hts i5plications$ain
&ene(iciariesLi5itationsProvincial Land Use Plan (5encana Tata
5uang Bilayah @ RTRW)Joning of >orest Area- non >orest Area
and for others useCompanies ,ssued by 7ocal Aoverment and Approved
by Central Aoverment. Plantation businesss can only be proposed in
non forest area.$orest %one !onsensus(Tata Auna 2utan
&esepa%atan T/:)Joning of >orest Area- non >orest Area
and for others use. TA2& 'hall be automatically e;pired if 5T5B
have already been approved by Central AovernmentCompanies ,ssued by
0inister of >orestry and local Aoverment. Plantation businesss
can only be proposed innon forest area.&rea 'or Setlement and
(thers(&awasan Pengembangan Penggunaan lain:PPL)Plottingof
'ettlement Area and related pro.ects7ocal Aovernment ,ssued by
0inister of >orestry and local Aoverment.Production &rea o'
)on $orest (&awasan Pengembangan Areal Produ%si non
2utan:PP)Plotting of Productive Area for non forestCompanies ,ssued
by 0inister of >orestry and local Aoverment.Timber #state(2utan
Tanaman ,ndustryTI)Plotting of Timber =state AreaCompanies ,ssued
by 0inister of >orestry and local AovermentTransmigration
&rea (Area Transmigration T")Area has been decided and
developed for Transmigration Aovernment ,ssued by 0inister of
>orestry and local AovermentPlanned 'or Transmigration &rea
(Area Transmigration T))Area has been decided for transmigration
pro.ect and plannedto develop Aovernment ,ssued by 0inister of
>orestry and local Aoverment)atural *eservation (&onservasi
Alam @ CA )orestryProduction $orest(2utan Produ%si P)Only for
forest consession Company ,ssued by 0inister of >orestry*ight o'
ownership (2a% mili%)Transferable- right of ownership- may be used
as collateral for loans,ndividuals @ not available to
corporationsor collectives7and reverts to 'tate if abandonedor is
used Qnot in accordanceL with 1A7 (1asic Agrarian 7aw)*ight o'
e+ploitation, cultivation Temporary (up to 3+ years) can only be
transfered with permit fromthe minister- right of e;ploitation$
cultivationCompanies Only for areas over +hectares. Can only be(2a%
guna usaha) e;tended two times for a ma;imum of a further 9#
years*ight to usebuildings( 2a% guna bangunan)Temporary right to
use (and construct) buildings,ndividuals and
,ndonesiancorporations0a;imum term +# years.'ub.ect to
regulationswhich do not e;ist.*ight o' use (2a% pa%ai)Temporary
right to use state 7and ,ndividuals on 'tate landsAranted for a
definiteterm*ight o' lease (2a% sewa)Temporary right to use 2ouse
or 7and,ndividuals Only available forstructures- not availableon
'tate lands&llocated Land (Arahan 7ahan) The first step to get
land for plantation companies ,ssued by Iistrict 7evel of /ational
7and Agency ( 1P/ &abupaten ) or by Iistrict Ievelopment 1oard
(1APP=IA ) and signed by 1:PAT,)Plantation -usiness Permit (,.in
:saha Per%ebunan )Temporary Plantation Permit 'hall be
automatically cancelled if no activity on pro.ects during " or 3
years starting from the date of it issuanceCompanies (7ocal or
>oreign),ssued by Iistrict 7evel ofPlantation Iepartment (
I,'1:/ &abupaten ) and signed by 1:PAT, . 0a;imum term 3 years
'ub.ect to regulations which do not e;ist.LocationPermit (,.in
7o%asi) Temporary 7ocation Permit 'hall be automatically cancelled
if no activity on pro.ects during " or 3 years starting from the
date of it issuanceCompanies (7ocal or >oreign),ssued by 2ead of
Iistrict ( 1:PAT, ) 0a;imum term 3 years 'ub.ect to regulations
which do not e;ist.#nvironmental mpact &nalysis (Analisis
0engenai Iampa% ing%ungan A0IA7)Pro.ect activity can not be started
without A0IA7 certificateCompanies (7ocal or >oreign)Ta%en by
A0IA7 Consultantand must be approved by =nvironmental 5egional
Office (1AP=IA7)!adastral Survey Cadastral 0ap based on The
1oundaries 'urvey and 7and use (by local people) surveyCompanies
(7ocal or >oreign)ta%en by The /ational 7and Agency (1P/
Province)('urvey &adastral)!ompensation 'or land and
vegetation(Aanti 5udi tanahdan Tanam tumbuh)To ,dentified and to
Compensate usage and cultivation land of local peopleCompanies
(7ocal or >oreign)Compensation for land and vegetation on
individual basis and ta%en by CompanyProvincial .alidation
!ommittee ( PA/,T,A 1)Panitia 1 5ecommendation to 0inisterof
/ational 7and Agency (1P/) for issuing Iecree of 2A:Companies
(7ocal or >oreign)Panitia 1 which is responsible for totally
verifying land data /ecree o'HGU ( '&.2A: ) 1asic right for
issuing Certificate of2A: and 7and Ta; (1P2T1)Companies (7ocal or
>oreign)issued by 0inister of /ational 7andAgency (1P/) based on
Panitia 1 recommendation.Only for areas not e;cced than "#
###2ectares per company in one provinceLand Ta+(1ea Pemiili%an 2a%
atas Tanah dan 1angunan 1P2T1)1P2T1 S + 8 ; /HOP ; 'i?e(2a)
Companies (7ocal or >oreign)'hould be paid before issuing
Certificate of 2A:Ta+ on Purchase .alue o' Land and -uilding(/ilai
Hual Obye% Pa.a%)Tabel of /HOP,ndividual or Companies
