The Importance of Palm Oil for the Indonesian Economy – Plantations Sizes, Production and Trade
The agricultural sector plays an important economic role for Indonesia as this sector generates jobs (thus incomes) for dozens of millions of Indonesians, delivers much-needed staple food crops (that are part of Indonesians’ daily diets and crucial input materials for domestic food processing), while generating tax income and lucrative foreign exchange earnings through export activities.
In 2024, the agriculture, forestry and fisheries sector contributed 12.61 percent to Indonesia’s gross domestic product (or GDP). This makes it the third-biggest sector in the Indonesian economy after the manufacturing sector (which contributed 18.98 percent to GDP in 2024), and the wholesale/retail trade sector (which contributed 13.07 percent to Indonesian GDP last year).
If we delve a bit deeper into the statistics released by Indonesia’s Statistical Agency (Badan Pusat Statistik, or BPS), we find that the plantations sub-sector is the biggest sub-sector in the agriculture, forestry and fisheries sector. Plantations contributed 4.17 percent to Indonesian GDP in 2024.
Why Is Palm Oil So Popular Around the World?
Within the plantations sub-sector, it are oil palm plantations that play a crucial role as they generate a vegetable oil that is in high demand in the (domestic and foreign) industry sector. Its oxidation-resistant properties at high pressure and its ability to dissolve chemicals (that are insoluble by other solvents), as well as its high coating power means that palm oil can be used for various purposes.
This makes palm oil very popular around the world. Palm oil is widely used in the food industry (like cooking oil, margarine, snacks, baked goods and confectionary), cosmetics and personal care products (such as soaps, detergents, shampoos, lipstick, conditioners and lotions), and industrial uses (such as biofuel and lubricants).
Besides its versatility, another reason why palm oil enjoys significant popularity is that it is a high yielding crop (as the oil palm trees produce significantly more oil per hectare compared to other oilseed crops). This high yield makes palm oil a very cost-effective option. In turn, palm oil is often cheaper than other vegetable oils, thereby making it an attractive choice for both consumers and manufacturers.
[...]
This is part of the article. The full article (22 pages) is available in our March 2025 report. This report (an electronic report, PDF, in English) can be ordered by contacting us through email and/or WhatsApp:
- info@indonesia-investments.com
- +62(0)882.9875.1125
Price of this report:
Rp 150,000 (or equivalent in other currencies)
Take a glance inside the report here!
