The Immunities of Palm Oil Industry Become a Strong Economic-Covid Locomotive in Q1-2020
Since March 2020, the Covid-19 outbreak has been declared as a pandemic because its spread has been increasingly widespread in almost all countries and until now the number of world cases continues to increase. Beside to causing hundreds thousands of deaths, Covid-19 and lockdown policies in order to reduce the transmission of the spread of the virus also have an impact on the stopping of economic activity temporarily. This condition cause economic growth in some countries to slow down.
OECD has released data about economic growth of G20 countries in Q1-2020. China as the initial country infected with the Covid-19 virus, also has experienced negative economic growth about -9.8 percent. European Union countries also experienced a slowdown in the economy such as France (-5.8 percent), Spain (-5.2 percent), Italy (-4.7 percent) and Germany (-1.4 percent). The US as a superpower country also experienced an economic slowdown of -1.2 percent
The Covid-19 epidemic also had an impact on Indonesia’s economic growth. According to BPS, Indonesia’s economy in the first quarter of 2020 grew by 2.97 (YoY), where the Indonesian economy also slowed when compared to the first quarter of 2019 which was 5.07 percent. Meanwhile, the Indonesian economy in the first quarter of 2020 also experienced a contraction toward quarter IV-2019 (q-to-q) of 2.41 percent. Indonesia’s slowing economic growth occurred in most business fields.
Among the many economic and industrial sectors affected by the decline in economic activity such as the cessation of production activities in the current pandemic period, but until now the impact has not been felt by the palm oil industry. In fact, the role of the palm oil industry as the locomotive of Indonesia’s economy still exists amid the threat of the Covid-19 outbreak.
This is because the palm oil industry has the immunity and resilience to survive amid the Covid-19 pandemic. Oil palm plantations as the spearhead of the palm oil industry are quite advantageous because of its location in remote areas far from the city center. In addition, low man-land and man-space ratio and the solid automation show that the pattern of work in oil palm plantations that have been spaced with minimum human interaction or have implemented natural physical distancing so it can minimize the virus transmission and have implemented a health protocol.
The input that used in oil palm plantations are also mostly from local input, meaning that it is not affected by the import market which is experiencing obstacles due to a pandemic. Oil palm plantations in remote areas are also contribute to the independence of the rural or regional economy due to the symbiosis of mutualism between oil palm plantation communities and rural communities that produce food, horticultural and livestock needs.
In the downstream side, palm oil is a versatile input cause can produces food products such as cooking oil, margarine, biscuits etc. as well as hygiene products (personal care) such as soap, detergents, hand sanitizers to biodisinfectants, where these products are needed by people in the current pandemic. This condition has implications that the palm oil industry from upstream to downstream are an industry that is not included in the economic sector that is lockdown due to Covid-19.
The implication of the strong immunity of the palm industry in the midst of the Covid-19 pandemic also creates high immunity of economy based on palm oil. It can be seen from the operations both at the upstream to downstream levels are still running normally and there are no oil palm company has closed or laid off its employees. APKASINDO also reported that there were additional workers in oil palm plantations from people who had previously worked in the non-palm oil industry that was laid-off by their company.
One of indicators of the palm oil industry remained normal during the pandemic can be seen from stable palm oil production. Based on GAPKI data (2020), palm oil production (CPO + PKO) increased from 3.81 million tons in January 2020 to 4.04 million tons in April 2020. Although in February and March, the production decreased to 3.61 million tons and 3.58 million tons respectively, but the declining in palm oil production is normal and occurs every year (Figure 1).
The Indonesian export performance of palm oil and derivative products also showed a fairly good performance in the early quarter of 2020. Based on BPS’s data, the export volume of palm oil and its derivatives have increased from 2.39 million tons to 2.65 million tons.
The export value of palm oil and its derivatives also showed an increase from USD 1.69 billion to USD 1.82 billion during the January-March 2020 period. However, the export value decreased to USD 1.64 billion in April 2020. One of the factors that influenced the decline in the value of exports was caused by the decline in CPO prices. CPO prices (CIF Rotterdam) in MPOB’s website showed that decreased from USD 831 per ton to USD 562 per ton in the January-April 2020 period. The decline in CPO prices is a result of the decline in global demand due to the outbreak of Covid-19 and lockdown policies in various importing countries.
Despite the decline in the exports value during this period, but cumulative exports value of palm oil products have contributed to foreign exchange exports reached USD 7 billion. Palm oil exports also contributed to Indonesia’s trade balance surplus of USD 2.62 billion in quarter I-2020.
The data and facts above shows the large role of the palm oil industry as an economic locomotive in the middle of Covid-19 pandemic and the recovery in the New Normal era. A long as the sun still shining on the earth, the plants can still produce palm oil and other biomass products, so that the palm oil as a economic locomotive will continue to move and produce benefits and multiplier effects that can save the national economy amid potential global economic recession due to the Covid-19 pandemic.
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