The growth prospect of palm industry was extremely bright considering the ever rising demand due to natural causes like increased population which automatically jacked up demand for frying oil, growing downstream Industry and lastly development of alternative energy as substitute to world demand for CPO which influenced demand for CPO significantly. It was predicted that this bio-fuel would change the world’s dependency on non-renewable energy.
Price of bio-fuel was today relatively expensive, but it line with increased production capacity and consumption prices would by perdition be cheaper. Competition between palm-based bio-fuel vs. soybeans based or corn-based fuel, generally consumed by developing nations, ended up with palm-based bio-fuel as winner since the production cost was cheaper.
Besides, in terms of volume palm oil was way above soybean and corn. Indonesia was among the few countries being advantaged by the change of energy platform of the world, since tere were only two countries which were prevalent the palm plantation industry, i.e. Malaysia and Indonesia. In Malaysia the growth of palm industry tend to slow down due to limited space, while in Indonesia the potential for expansion was still wide open.
However the challenges faced by the palm industry was not easy. Joko Supriyono, Secretary General of the Indonesian Palm Producers Association (GAPKI) disclosed in Jakarta on Monday (19/11) that macro-wise the prospect of palm industry in Indonesia was favorably good, but many obstacles had to be faced in terms of management and expansion among other”.
Firstly, overlapping policy and rules at the central and regional level, such as problem is permit application for land clearing which made investors hesitant and cost to increase.
Secondly, inadequate infra structure especially around export harbors. It was predicted that with significant growth of palm plantations (unless supported by increased harbors capacity, expansion or addition of new seaports) the palm industry would be interrupted because there would be vast volumes of materials being unexplored, while absorbing capacity of the domestic market being limited especially when the Government's bio diesel program did not progress as expected.
Thirdly the growth of downstream industry was not as fast as growth of the palm industry itself, resulting in low selling price of Indonesian palm.
Fourthly and lastly, there was no clear and well coordinated grand strategy by the Government to develop this industry, although the Government had declared that the palm industry was the premium sector for non oil-gas exports and absorption of workforce.
Other points to be observed was , according to Joko, fluctuation of CPO price In short term and medium term amidst weakening of CPO price in the global market in Semester one 2012. Somehow export of palm oil and by product up to July 2012 grew by 7% compared to same period the previous year. It was predicted that the if climate condition was supportive, the expectation for Indonesian CPO products in 2012 of 25.5 million tons would be attained in the hope that export would be 18 million tons.
In facing the above challenges, players of the palm industry must grab the momentum of growth of the industry which so far had accommodated 3.5 million workers. “The point was that we must maintain Indonesia’s position as the world’s greatest CPO producer country amidst Government’s optimism to set target for CPO production at 40 million tons in 2020” Joko remarked.
Business News - November 23, 2012