Jakarta, February 18, 2025 – As the world's largest palm oil producer, Indonesia plays a strategic role in the global supply chain. The palm oil industry has significantly contributed to the national economy for approximately 3.5% of the national GDP and provides livelihoods for over 18 million people. However, this industry frequently encounters challenges related to sustainability, particularly in meeting export demands as global standards continue to evolve. One notable example is the European Union Deforestation Regulation (EUDR), which is set to take effect in 2026.

Under the EUDR, compliance with traceability requirements, the development of new deforestation-free plantations, and adherence to due diligence obligations have become mandatory. Initially scheduled for implementation in 2025, the regulation has been postponed to 2026. However, this delay should not lead the Indonesian palm oil industry to slow its efforts to align with global standards, particularly in empowering smallholders. Smallholders manage 40% of Indonesia's palm oil plantations, making them integral to future production growth through improved productivity. At the same time, they are also the most vulnerable to the impacts of the EUDR. Therefore, a concerted effort from all stakeholders is essential to equip smallholders for these challenges, including through enhanced governance policies, regulatory frameworks, technological advancements, data management, and financial support.

In retrospect, palm oil is not the cause of deforestation; in fact, deforestation occurred decades before the palm oil "boom" occurred in Indonesia and the international market. Deforestation occurred due to forest concession policies in the 1970s and also other inappropriate policies such as the clearing of forests in the past. On the contrary, the palm oil industry has contributed greatly to saving degraded land that has experienced forestry practices that are not following standards by making it productive land.

Therefore, the implementation of the EUDR must not be unfair to palm oil-producing countries (including Indonesia) let alone have nuances of "regulatory imperialism". In other words, a shared understanding and a more balanced and cooperative policy approach - both within the European Commission and in Indonesia - are essential to ensure that Indonesian palm oil products remain competitive in the global market, including within the European Union. This is important for the long-term sustainability of the Indonesian palm oil industry.

Based on the exploration of ideas and strategies discussed in this dialogue, we believe that Indonesia holds significant potential to lead the sustainable palm oil industry. This can be achieved by aligning the industry's role with national economic interests while ensuring environmental sustainability. By doing so, Indonesia can maintain its position as a competitive and responsible leader in the global palm oil sector. These key discussions were part of the Collaborative Dialogue, organized in partnership with the Global Alliance for a Sustainable Planet (GASP), the Indonesian Business Council (IBC), and the Indonesia Palm Oil Strategic Studies (IPOSS).