MEDAN: Rian Cipta Ginting’s two-hectare piece of land lies besides a stunning stretch of gently flowing river. It is brimming with the type of greenery that is overwhelmingly common around North Sumatra – indeed rural Indonesia – oil palm trees.
The land was inherited from his grandparents and for more than a decade it has provided the 33-year-old with an almost guaranteed income.
But times have been better for this palm oil smallholder to the extent that he has started weaning himself off relying on what has been an agricultural gem for the entire nation.
When Indonesian president Joko “Jokowi” Widodo suggested last month that farmers begin to diversify their palm crop – he named durians specifically as a solution – Rian was already one step ahead.
Rian Cipta Ginting’s palm plantation is in a picturesque area outside Medan. (Photo: Jack Board)
“I personally still want to keep my plantation but I’m no longer making it as my primary source of income. I have already started planting rambutans. We need to have a back-up plan,” he told CNA.
President Jokowi’s comments were a response to growing concerns about uncertainties rattling through one of the country’s most important sectors. “Are there other commodities that have a better market? We have become the greatest CPO producer,” he said, referring to crude palm oil, of which Indonesia produced 47 million tonnes last year.
The government is scrambling to find a fast but lasting solution to the vagaries and fluctuations of the palm oil market. Small producers in particular have been riding a price wave for years and currently the local price has sunk to less than half than it was in 2010.
A global oversupply coupled with scrutiny over the impact of palm oil production has seen the prospects of the millions who rely on the commodity in Indonesia threaten to spiral.
Durians could yield better economically than palm oil for some producers, according to the president. (Photo: Jack Board)
That looming reality is being felt hard in North Sumatra, the heart of the industry. Amid outside criticism of the sector, there remains a pride connected to palm oil in this province. It was here that the very first plantations began more than a century ago.
“Many people in North Sumatra are living off palm oil. They are really, really worried,” said Dr Suroso Rahutomo, the head of the research division of the Indonesian Oil Research Institute.
The Indonesian Palm Oil Association (GAPKI), a non-government organisation that lobbies for the industry, estimates that one million people in the province are directly involved in the sector.
Planting durians will not amend global headwinds or convince environmentalists to drop their campaigns against the commodity, but it is an attempt to buffer vulnerable producers.
Jokowi’s comments were also a reminder from a president seeking re-election to a powerful lobby group – the Indonesian Farmers Association – that he is not neglecting a huge voting bloc.
Oil from palm trees is controversial given concerns about its environmental impact. (Photo: Jack Board)
“It does make sense. There are enough oil-palm planted areas in Indonesia already. It is also logical not to become overly dependent on one crop, especially for smallholders,” said Bhimanto Suwastoyo, the content manager of media platform The Palm Scribe.
The demise of the market is not unexpected. The country’s explosion of palm oil plantations of the 1980s and 90s means crops, which have optimal life spans of about 25 years, are now starting to degrade and yield less.
Less predictable are moves by international importers; the European Union is taking action that will make a significant dent to the health of Indonesia’s exports of palm oil. It is planning to cap the consumption of palm oil on sustainability grounds, and eventually phase it out altogether by as early as 2030, drawing official protest from Jakarta.
“It could set a precedent and encourage not only other countries to follow suit but also prompt other industries to review their stands on palm oil,” Bhimanto said.
The government has already put a moratorium on the expansion of any palm plantations around the country. But Indonesia’s domestic consumption is currently insufficient to cover the glut of production that already exists.
There is a current oversupply of palm oil production in Indonesia, which the government wants to overcome with bio-diesel. (Photo: Jack Board)
“Innovation is the answer,” says Dr Suroso in Medan, the centre for developing technology and innovation that could overhaul the palm oil sector.
Already the Jokowi government has been bold in enforcing a law that all diesel fuel used in the country contain 20 per cent bio-content. That will increase to 30 per cent within the coming years and during a recent presidential debate Jokowi claimed that the country was moving towards B100, pure palm oil to run in engines.
Dr Suroso and a team of researchers have successfully developed B50 biodiesel, which can power a conventional Toyota project vehicle. In February, it was test driven on a mammoth 2,000 kilometre road trip to Jakarta, and has apparently matched a conventionally fuelled control vehicle for performance and emissions.
It is another step in advancing the potential of palm oil to produce clean fuel. “For me it’s really good progress,” Dr Suroso aid.
Indonesia is also still a net importer of fuel, both crude and refined, leaving it exposed to more commodity uncertainty. If improved biodiesel technology can be progressively rolled out, it will help address those economic and environmental headaches simultaneously.
This project Toyota is running smoothly using only B50 bio-diesel. (Photo: Jack Board)
‘THEY ARE SPLIT’
The rural vote is an integral one to any party or president looking to win an election in Indonesia.
North Sumatra was a comfortable victory for Jokowi in the 2014 election with 55 per cent of the vote. This time around the national opposition is squaring up to pick the fruit of discontent among voters outside the urban core. Prabowo Subianto, Jokowi’s rival for the presidency, has led a campaign arguing that the president has neglected the nation’s farmers.
“Prabowo’s higher popularity in Sumatra’s palm oil producing regions is explained by the disillusion smallholders are having with the government. It’s not the fault of the government but perceived locally as such,” Bhimanto said.
Rural development has been a key priority for the Jokowi administration, with mixed outcomes. (Photo: Jack Board)
“They are split,” said Timbas Ginting, the secretary-general of GAPKI in North Sumatra. “Certainly many people support Jokowi but there are some who don’t due to the plummeting price, which they think is caused by current government.”
This is a diverse part of the country where it is forecast that the rise of identity politics will produce a divided vote along religious lines. That aside, local political analyst, Dr Muryanto Amin from the University of North Sumatra, believes local economic and infrastructure issues are the most important for voters.
The current national administration holds great pride in what is effectively a generous stimulus program for villages. Since 2014, it has tipped in billions of dollars, and each year the figure has grown significantly. Jokowi has promised to spend a further US$28 billion over the next term if elected again.
It is a policy that does not pull the big headlines like his massive infrastructure projects do, but quietly attempts to address the living needs of the 264 million population.
A cow plods down a badly maintained road in Northern Sumatra. (Photo: Jack Board)
Jokowi has also handed out certificates for millions of hectares of land, finally giving ownership to people who have occupied land without legal status. It has prompted Prabowo to raise the bar even higher with his proposed rural development spending.
More money does not always equal more progress in North Sumatra, however, with its reputation as being one of the country’s most corrupt provinces. Dr Muryanto argues that graft is significantly holding back development, regardless of the national government’s good intentions.
“We have some problems with village funds that never reach the people. People in the villages don’t have enough ability to use the funds to build infrastructure,” he said.
It is a situation that means roads are still rocky and unpaved, construction is incomplete and proposed solar panels are never installed. While villagers are frustrated, they don’t necessarily blame the president for long standing local problems.
“Pak Jokowi is good enough,” says Jony Sitep, a member of Langkat Regency legislative council, which oversees an area including the lush plantation belonging Rian Cipta Ginting.
“Even though the central government initiates something good to improve the region, if the local administration does not want to do the same, then it is not going to work,” he said.
A local worker tends to a large palm tree in Northern Sumatra. (Photo: Jack Board)
More social security packages could be forthcoming if the current government is returned. For small palm oil producers, that could initially include financial assistance for replanting.
But Dr Suroso says the more austere reality of market prices may force a much needed change in mindset, and see producers follow the president’s advice.
“Sometimes they just grow palms everywhere and they do not care if the land is suitable. Since the price for oil palm was good, they just grew that. They should know there are other crops that are better,” he said.
Durian lovers across the country might be silently wishing that more production may drop the price and increase the range of their favourite indulgence.
Regardless, palm oil remains entrenched in Indonesia’s future.