Palm O’corner at University of Riau: Palm Oil is Economic Locomotive for Riau
PASPI (Palm Oil Agribusiness Strategic Policy Institute) held the Palm O’Corner at the University of Riau in collaboration with the Student Executive Board (BEM) of the Faculty of Agriculture and the Student Association (HMJ) of Economics Department on Saturday (24/4). The topic that was raised at Palm O’Corner was “The Contribution of the Palm Oil Industry to the Riau Economy”. This topic is very interesting to discuss, considering that Riau is the main center for palm oil with plantations area reaching 3.39 million hectares or about 21 percent of the total area of oil palm plantations in Indonesia. Apart from being an oil palm center province, around 64 percent of oil palm plantations in Riau belong to smallholders.
Palm O’Corner at the University of Riau presented speakers, namely: Dr. Tungkot Sipayung (Executive Director of PASPI); Ando Fahda Aulia, Ph.D. (Lecturer at the Faculty of Business Economics, University of Riau); Hotmatua Hasibuan (GAPKI Riau); Dr. Cn. Ir. Gulat Manurung, MP, C.APO (Chairperson of the DPP APKASINDO) and Dr. Mulono Apriyanto (Expert Council of DPW APKASINDO Riau).
Dr. Tungkot Sipayung mentioned again that Riau has the largest palm oil plantation area in Indonesia with a production proportion of 20 percent of the national palm oil production. This shows that Riau has a quite large role in the national palm oil industry. With the significant development of palm oil, it shows that Riau has succeeded in making a rapid “gear swap” from unsustainable oil mines (oil and gas) below to more renewable oil mines (palm oil) at the top.
The development of oil palm centers in Riau has succeeded in attracting other economic sectors so that it has resulted in the development of new economic centers such as in Pasir Pengaraian, Bangkinang, Siak Sri Indrapura, Rengat, Tembilahan, Bengkalis, and others.
The Executive Director of PASPI who is also known as an economic observer again explained the PASPI study (2014) which states that the contribution of the palm oil industry provides other economic benefits such as poverty alleviation, increasing GRDP, and absorbing labor. A large number of transactions between plantation communities in Riau and communities in other areas also shows the role of Riau’s oil palm plantations which can become an economic locomotive for other regions. Apart from economic benefits, oil palm plantations in Riau also provide ecological benefits that are not widely seen by the community, namely the role of oil palm as the “lung” of the ecosystem.
Presentation from Ando Fahda Aulia, Ph.D. proves the results of the PASPI study (2014) which shows that the contribution of the palm oil industry and its derivatives supports 39.3 percent of Riau’s GRDP, where its contribution is greater than the mining and quarrying sector. In addition, the palm oil industry is also able to absorb labor, as shown by as much as 46.09 percent of Riau’s workforce concentrated in the agricultural, plantation, and forestry sectors, especially in the oil palm plantation. For oil palm farmers, their income is around 1.6 times greater than the income of coconut farmers and almost 2 times greater than rubber farmers.
However, what must be considered is that the income of oil palm farmers in Riau, they have very high-income dependence on oil palm so that if there is a fluctuation in the price of palm oil, it will cause a shock to their economic households. Therefore, a lecturer from the University of Riau who is also a Doctoral graduate from Flinders University Australia suggested that the oil palm farmers need to diversify in agricultural activities.
Continuing the findings of the lecturer at the Faculty of Business Economics, University of Riau, Dr. Mulono from APKASINDO explained the results of his analysis which showed that the household expenditure of oil palm farmers in Riau for both food and non-food products was higher compared to non-palm oil farmers. This level of consumption expenditure is the approach used to measure the level of welfare between oil palm and non-oil palm farmers in Riau. The results of the analysis show that oil palm farmers are more prosperous than non-palm oil farmers as seen from the proportion of oil palm farmers with a sufficient and decent living status is higher than non-oil palm farmers, and vice versa.
On the other hand, smallholder farmers in Riau are currently still facing various problems, one of which is low productivity due to to the use of ilegitim seeds is not superior and the technical culture is not optimal. To maintain the sustainability of smallholder oil palm plantations which have proven to be contributing to Riau’s economy, the existence of oil palm plantation companies helps independent smallholders to replanting their plantation and facilitate the procurement of superior oil palm seedlings.
GAPKI Riau representative, Mr. Hotmatua Hasibuan, explained that oil palm plantation companies in Riau would also help independent oil palm farmers to carry out sustainable cultivation so that they can have sustainability certificates such as ISPO / RSPO / ISCC, in addition to assisting oil palm farmers in replanting and receiving harvest yields. With this sustainability certification, the FFB harvested from smallholder plantations will receive a higher price and wider market access so that it has an impact on increasing their income and welfare.
Thus, the income of farmers and workers in oil palm plantation companies will move the wheels of other economic sectors so that Riau’s economy can continue to grow. Not only growing but the economy that palm oil-based in Riau has also proven to have high immunity, especially during the Covid pandemic. This is shown from the contraction of Riau’s GRDP in 2020 which is not as deep as the economic contraction in Sumatra or the national region. This means that the people of Riau should be grateful for the area of palm oil that can thrive in Bumi Lancang Kuning.
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