Prima Gandhi

Agribusiness Management, College of Vocational Studies, IPB University, Indonesia;

Department of Agricultural Economics,

Graduate School of International Food and Agricultural Studies,

Tokyo University of Agriculture, Japan

13623001@nodai.ac.jp

ORCID 0000-0001-7581-9641

The development of an integrated and sustainable palm oil downstream industry: Evidence from Indonesia

Fumie Takanashi

Department of Food Environment Economics,

Faculty of International Agriculture and Food Studies,

Tokyo University of Agriculture, Japan

ft207429@nodai.ac.jp

ORCID 0009-0000-8330-8710

Abstract. The oil palm is a crop that accounts for approximately 40% of all vegetable oil stored globally. The trend has a significant positive impact on the GDP of developing countries producing palm oil, such as Indonesia. However, the plantations and the industry have often been criticized for their unsustainable production practices. This has motivated the Indonesian government to innovate by developing an integrated and sustainable palm oil downstream industry with reliable traceability. The aim is to counter the negative perceptions surrounding unsustainable palm oil production. The strategy is achieved through the establishment of the special economic zones (SEZs) Policy and Sei Mangkei SEZ serves as the pioneering initiative to position palm oil as a primary industrial commodity. Therefore, this study aimed to examine the impact of SEZs policy on the palm oil value chain in Sei Mangkei through the application of the triangulation method. The results confirmed that the palm oil value chain was positively impacted by the implementation of the SEZs policy. This effect was driven by both internal and external factors such as the Unilever Global (PT UOI) implementing USPOSP and sustainability or environmental certification regulations which integrated Sei Mangkei into the palm oil global value chains (GVCs). The sustainable palm oil downstream processing facilities produced were established on the principles of traceability, geographic integration, and export orientation.

Received: July, 2024

1st Revision: April, 2025

Accepted: May, 2025

DOI: 10.14254/2071-8330.2025/18-2/11

JEL Classification: F68, Q17, L23

Keywords: palm oil industry, sustainable, traceability, upgrading, value chain