Indonesia has imposed a three-year moratorium on new palm oil plantations and ordered a review of existing ones in an effort to address sustainability and environmental concerns.
Prabianto Mukti Wibowo, deputy minister at the Coordinating Ministry for Economic Affairs, said the moratorium was needed as many planned plantations were inside natural forests and also to clarify the legal rights of smallholders, wrote Business Insider UK on 20 September.
The move was aimed at improving the environmental sustainability of palm oil production, improve productivity and help clarify land ownership rights for smallholders and to slow down fresh fruit bunch production amidst a global glut of palm oil.
However, the moratorium could hinder the activities of later entrants into the Indonesian palm oil industry.
Indonesian Public Investment Band Bhd told New Straits Times that the policy could negatively affect plantation players who were new or those with significant plantable landbanks in Indonesia.
But the bank said it did not expect any major impact on affected companies as most had already almost fully used their available lands.
The firm added that the temporary ban could help support palm oil prices and ease future oversupply concerns.
“Indonesia, which accounts for 51.7% of global palm oil production, is expected to see an output rise of 5.5% year-on-year to 38.5M tonnes this year,” said PublicInvest.
The moratorium was not the first of its kind, as Indonesia enacted a similar policy in 2010 after a US$1bn deal with Norway and in 2015 in the aftermath of massive wildfires.