Palm O’Corner at Balikpapan University: The Potential of Palm Oil Industry to Become a New Rising Star in East Kalimantan Economy
If we look at the economic structure (GRDP) of East Kalimantan in 2020, it shows that around 41.4% was contributed by the oil, gas and mining sectors. This shows that the sector is the main contributor to the East Kalimantan economy. The high dependence on non-renewable resource extraction activities has the potential to create economic instability in East Kalimantan in the future, given the dwindling and non-renewable availability of oil and gas and coal products. In addition, these activities contribute to an increase in GHG emissions.
The potential negative impact of dependence on the oil, gas and coal sectors, both on th economic stability and the social life of the community, as well as on the environmental sustainability in East Kalimantan must be minimized immediately. One of them is through an economic transformation from a sector that relies on is non-renewable resources into a more sustainable and renewable economic sector, which are also supported by downstreaming to increase added value.
The palm oil industry is an alternative solution for the economic transformation of East Kalimantan so that efforts to “shift gears” can be carried out at the right time before oil, gas and mining resources have run out and have an impact on socio-economic life. Related to this, PASPI (Palm Oil Agribusiness Strategic Policy Institute) collaborated with the Faculty of Economics Student Association (Himpunan Mahasiswa Fakutas Ekonomi/HMFE) held an education and literacy program about palm oil, namely Palm O’Corner at Balikpapan University on Saturday (26/6). This time around, the topic on Palm O’Corner was “The Palm Oil Industry as a Sustainable Social, Ecological, and Economic Locomotive for East Kalimantan”.
To discuss this topic, this Palm O’Corner webinar presents four speakers who are competent in their perspective fields, namely: Dr. Tungkot Sipayung (Executive Director of PASPI); Dr. Didik Hadiyatno, SE, M.Si (Lecturer of the Faculty of Economics, Uniba); Dedy Aspian Nur (Executive Secretary of GAPKI East Kalimantan); and Ramadhani Pratama Guna (Economist of Bank Indonesia East Kalimantan).
The first opportunity for presentation was given to Dr. Tungkot Sipayung, who discussed the development of the palm oil industry in East Kalimantan. In his presentation, he stated that palm oil contributed to the restoration of degraded areas due to the massive logging activities that occurred in East Kalimantan in the past to become new economic centers. East Kalimantan has also become a Top-5 oil palm plantation in Indonesia that is able to contribute to being a source of export foreign exchange that replaces oil and gas exports, absorbs labor, reduces poverty, and contributes to improving environmental quality through its role in carbon dioxide absorption and oxygen production as well as increasing biomass and carbon stocks.
Next presentation from GAPKI East Kalimantan represented by Mr. Dedy Aspian Nur also confirmed the previous explanation. The development of oil palm plantations in East Kalimantan in 2020 reached 1.27 million hectares consisting of 74 percent of nucleus plantations (companies), 21.3 percent of plasma smallholders, and the rest of independent smallholders. Although the company’s share is relatively larger, they still show their commitment to driving the community’s economy, especially smallholders, through their collaboration in accelerating the PSR program. This is indicated by the land that has received technical recommendations reaching 6.56 thousand hectares during 2017-2020.
In addition, GAPKI East Kalimantan also encourages its member companies to have sustainability certifications both ISPO and RSPO. There are 63 member companies of GAPKI East Kalimantan that already have ISPO certificates with a land area of 520.6 thousand hectares, while there are 12 companies that have RSPO certificates with a land area of 159.7 thousand hectares. GAPKI East Kalimantan also encourages smallholders to have ISPO certificates in accordance with Presidential Regulation 44/2020, where until 2020 there have been 2 KUDs that have been ISPO certified. This shows that GAPKI East Kalimantan always encourages plantation business actors (companies and smallholders) to fulfill the social, economic, and environmental sustainability aspects of their business practices.
If the previous speakers showed his point of view from the plantation company side, the Management lecturer at the Faculty of Economics, University of Balikpapan, Dr. Didik Hadiyatno, SE, M.Si explained a different perspective related to the relationship between the palm oil industry and MSMEs. In his presentation, he stated that along with the development of oil palm plantations, both in terms of land area and volume of production, there are also great opportunities for the development of MSMEs in this industry. For example, the utilization of palm oil waste which is processed into high economic value products such as animal feed or furniture products.
Closing the presentation session among the speakers, Mr. Ramadhani Pratama Guna mentioned that palm oil is a new rising star for the East Kalimantan economy. Especially in the midst of clean energy trends and domestic policies, especially the cessation of coal fired steam power plant (PLTU) operations, which has implications for stagnant coal demand. This is a signal of the huge potential of the palm oil industry for the East Kalimantan economy.
In his presentation, the economist of Bank Indonesia for East Kalimantan Province also mentioned that, in addition to supplying downstream industries in the East Kalimantan region, the oil palm plantations in this province also supply downstream industries in other areas. If it is mapped and compared to other areas such as West Kalimantan, the palm oil downstream index in East Kalimantan is lower and the trend even shows a decline (de-downstreaming). Therefore, Bank Indonesia is also strongly committed to encouraging the downstreaming of palm oil, for example through the MSME credit policy, the policy of reducing the benchmark interest rate, and supporting the MSME 4.0 program.
Therefore, it is hoped that the further development of the palm oil industry, both of plantation and downstream industry, as renewable and sustainable economic sector will further increase its contribution as the locomotive of East Kalimantan’s economy and can create a larger economic multiplier effect.
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