period 2003-2005, the rate of output growth of palm plantation is much higher
than that of agriculture as a whole, i.e. at almost 18 percent versus 8 percent. Table 10. Gross Domestic Product Contribution of Palm Oil Industry in
Indonesia, Year 2003-2005
Sector 2003
2004 2005
Growth rate per year
Palm Rp trillion 31.3
35.3 43.4
17.8 Agriculture Rp trillion
313.7 331.5
365.6 8.0
Non-oil gas Rp trillion 1900.2
2060.6 2427.6
13.1 Total GDP Rp trillion
2086.8 2261.7
2729.7 14.5
Share in agriculture 9.9
10.65 11.9
9.1 Share in non-oil gas
1.7 1.71
1.8 4.1
Source: BPS, 2006.
5.2. Development of Crude Palm Oil Production
In Indonesia, the CPO industry has been one such source of growth in the Indonesian manufacturing industry. In the last twenty years, production has grown
from less than 400 000 tons of CPO to over 4 million tons. In addition, with production costs among the lowest in the world, investment levels are expected to
remain high. Currently, there are 320 industries producing CPO in Indonesia with total production capacity of 13 520 ton TBS per hour. Most of these industries are
found in Sumatera and Kalimantan The production of palm oil has been on an increasing trend since 1980
when the country could only produce 721 172 tons. In 2005 Indonesia produced 12.4 million tons and registered a growth rate of approximately 15.6 percent
annually in the period 2000-2007. This production increased to over 13 million in 2006 and about 14 million in 2006 as indicated in Table 11.The biggest growth
was experienced by smallholder farmers 20.7
percent
and followed by private sector 15.9
percent
while the government plantations grew at about 8
percent
The production is expected to increase in the coming years as the government has put in place measures that would ensure expansion of the area
under cultivation of oil palm. It has been projected that the production in 2008 will be over 15 million tons while in 2009 it will be above 16 million tons. This is
expected to include contributions by smallholders, government and private plantations.
The smallholders will have their production increase from 5.43million tons in 2007 to 5.87million tons in 2008 and 6.31million tons in 2009. The private
plantations are expected to increase their production from 6.8 million tons in 2007 to 7.2 million tons and 7.6million tons in 2008 and 2009 respectively. In the same
period, production from government plantations will increase from 1.96 million tons in 2007 to 2.1 million tons in 2008 and 2.2 million tons in 2009.
Table 11. Production of Indonesian Palm Oil in tons, Year 1997-2009
Year Smallholders Government
plantations Private plantations
Total
1997 1282823 1586879 2578806
5448508 1998 1344569
1501747 3084099 5930415
1999 1547811 1468949 3438830
6455590 2000 1905653
1460954 3633901 7000508
2001 2798032 1519289 4079151
8396472 2002 3426739
1607734 4587872 9622345
2003 3645942 1543528 5172859
10362329 2004 3847157
1617706 5365526 10830389
2005 4500769 1449254 5911592
11861615 2006 5130635
1935826 6324346 13390807
2007 5431096 1964017 6756870
14151983 2008 5870626
2060625 7189393 15120644
2009 6310155 2159429 7621916
16091500
Source: BPS, 2006. Note: The values are forecast for that year
From the world perspective, in 1962 world production of CPO recorded 1.2 million tons and in 2005 reached 33.33 million tons. Figure 9 shows that the
world CPO production grew steadily and relatively faster as compared to other oil yielding sources such as soya bean, groundnut, cottonseed, coconut, sunflower
and fish and since 2004 the growth of CPO production tends to dominate these other sources. During the period 2001-2005 the world CPO production grew on
average rate of 8.78 percent per year. From 2004, the growth of CPO production in 2005 is 7.7 per cent, compared to e.g. soya oil 5.5 percent, rapeseed oil 6.3
percent and sun oil 3 percent.
Source: Oil World, 2006.
Figure 9. Growth of the World’s Vegetable Oils from the Year 1999 to 2005
With respect to the relative position in the world CPO production, based on oil world 2007 database, Figure 10 presents a development trend of world
production share of Indonesian CPO for the period 1997-2008. In 1997, the share
was about 30 percent and around 44 percent in 2007. Based on Oil World data, it was estimated that in 2008 total CPO production in Indonesia would reach 18.9
million tons, and about 58 percent of this total would be supplied to domestic industries as raw material such as soap industry 3 percent, margarine industry 3
per cent, cooking oil industry 37 percent and oleo chemical industry 5 percent. The figure shows that there has been continuous growth of Indonesian
CPO production in the world market. From the year 1999, there has been positive growth in Indonesian CPO as it only reduced in 2003 when it recorded 37.19
percent share from 37.50 percent in 2002. It then picked up in the year 2004 and has been expanding at a steady rate.
0.00 10.00
20.00 30.00
40.00 50.00
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Pe rc
e n
t sh
a re
Year
Indonesia production share
Indonesia production share
Source: Oil World, 2007.
Figure 10. World Production Share of Indonesian Crude Palm Oil, Year 1997 to 2008
Note: The values are forecast for that year However, the CPO production in Indonesia has in the past been lower than
that of Malaysia. In the period 1997 to 2005, Malaysia has been recording higher production of CPO than Indonesia. In 1997, Malaysia had 9.069 million tons
compared to Indonesian 5.449 million tons of CPO. The trend continued up to the
year 2005 when Malaysia produced 14.96 million tons while Indonesia recorded 13.92 million tons of CPO.
Indonesia recorded more production of CPO from the year 2006 than Malaysia. It has been predicted that Indonesia will continue to increase its
production of crude palm oil ahead of Malaysia. In the year 2007, Indonesia produced 17 million tons of CPO as compared to 15.9 million tons produced in
Malaysia. In 2008, the production of CPO in the two countries is expected to increase to 18.9 million tons for Indonesia and 17 million tons of Malaysia.
0.00 10.00
20.00 30.00
40.00 50.00
60.00
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Pe rc
e n
t
Year
Indonesia production share
Malaysia share
Source: Oil World, 2007.
Figure 11. Malaysian and Indonesian Crude Palm Oil World Production Share, Year 1997-2008
Note: The values are forecast for that year
Considering the share of CPO production in the world market, Malaysia has been contributing a higher percentage in terms of production than Indonesia.
From 1997 to 2000, Malaysia has been contributing about 50 percent of the world CPO except in 1998 as represented in Figure 11. Indonesia on the other hand has
been having below 40 percent share up to the year 2005 when its share rose to
41.4 percent. However, its share surpassed that of Malaysia in 2006 and the trend is expected to continue.
Other important CPO producers in the world include Thailand, Nigeria, Columbia, Venezuela, and Cote d’Ivoire. However, total CPO productions from
these competitors are always much smaller than those from Indonesia and Malaysia. In 2005, Indonesia and Malaysia together produced 85 percent of
needed CPO which accounts for about 23 percent of needed vegetable oils in the world.
Between 2005 and 2007 the other CPO producing countries produced on average, less than 15 percent of the world CPO. Even, in the last five years, while
the CPO production in Indonesia and Malaysia kept growing annually, the productions in the other competitors have more or less stagnated.
Table 12. World Crude Palm Oil Producing Countries in 2005 to 2008
Country
Production in 000’ tons 2005
2006 2007
2008
Ivory Coast 320
330 320
330 Nigeria
800 815
835 860
Costa Rica 210
198 220
226 Honduras
180 195
210 220
Mexico 43
50 57
62 Brazil
160 170
190 210
Colombia 661
711 775
840 Ecuador
319 345
370 407
Indonesia 14100
16080 17000
18900 Malaysia
14961 15881
15900 17000
Thailand 700
855 965
1050 Papua New Guinea
310 365
380 400
Other countries 1083
1161 1226
1295 World 33846
37156 38448
41800 Source: Oil World, 2007.
Note: The values are forecast for that year
Due to increased expansion of plantations under palm oil in Indonesia, there has been a major increase in the production of palm oil compared to other
countries. In the year 2005, Indonesia produced about 14 million metric tons of palm oil as compared to 15 million produced by Malaysia. The production
increased to 17 million in 2007 as compared to that of Malaysia that recorded about 16 million metric tons as observed in Table 12. The increase is also
expected to be recorded in 2008 which has been projected to be about 19 million and 17 million metric tons of palm oil for Indonesia and Malaysia respectively.
According to the CPO yield, it was found that most of the countries had between two and three tons per ha as has been reported in Table 13. The least
yield was recorded in Ivory Coast that had 2 tonsha in 2005, 1.98 tonsha in 2006 and 1.9 tonsha in 2007. Its yield for 2008 also is expected to slightly increase to
1.94 tonha. Costa Rica had its yield fluctuating from 4.2 tonsha in 2005 to 3.74 tonsha in 2006. In 2007, it increased to 4 tonsha.
Table 13. World Palm Oil Productivity in the Year 2005-2008 Yield
in tonha
Country 2005
2006 2007
2008
Ivory Coast 2.00
1.98 1.90
1.94 Nigeria
2.16 2.16
2.14 2.12
Costa Rica 4.20
3.74 4.00
3.90 Honduras
2.61 2.67
2.80 2.82
Mexico 2.39
2.27 2.38
2.38 Brazil
2.81 2.79
2.88 2.88
Colombia 3.90
3.87 3.88
3.82 Ecuador
2.13 2.13
2.08 2.11
Indonesia 3.82
3.91 3.74
3.77 Malaysia
4.21 4.32
4.20 4.35
Thailand 2.22
2.53 2.57
2.56 Papua New Guinea
3.52 3.97
3.96 4.00
Other countries 2.18
2.25 2.29
2.24
W0RLD 3.68 3.78 3.66 3.72
Source: Oil World, 2007. Note: The values are forecast for that year
It is worth noting that although the production of palm oil has been high in both Malaysia and Indonesia, the crop yield per ha has also been on the higher
side especially for Malaysia. Both countries had above 4 tonha yield recorded from 2005. There has been an impressive positive growth in Papua New Guinea
in terms of yield. It has recorded an increase from 2005 when it had 3.52 tonsha, 3.97 tonsha in 2006 and is expected to reach 4 tonsha in 2008.
Based on recent data from Indonesian bureau of statistics BPS, Figure 12 shows that the growth level of output from the CPO industry for the period 2000-
2004 was almost 28 percent compared to 3.8 percent of total output of manufacturing industry. During the period 2003-2004, the CPO production
increased by 49.05 percent, which was much higher than that of total output of manufacturing industry by 19.07 percent. In 2004, CPO ranked as the second
most important non oil and gas product, and the number one manufactured product in Indonesia.
Source: BPS, 2006.
Figure 12. Output Share of Crude Palm Oil in total Output of Manufacturing Industry, Indonesia in the Year 2000-2004
5.3 Development of Crude Palm Oil Export
