CIPS: Improving Independent Smallholders' Productivity Could Prevent Rp70 Trillion GDP Loss

The Center for Indonesian Policy Studies (CIPS) has assessed that improving the productivity of independent oil palm smallholders is crucial to preventing a potential loss of Rp70.3 trillion to the gross domestic product (GDP) through strengthened replanting, legality, and financing. CIPS Chief Executive Officer Anton Rizki stated that the productivity issue among independent smallholders is an urgent matter requiring immediate attention. Currently, around 41% of oil palm farmers in Indonesia are independent or self-managed, and they still have significant room to improve their productivity. “If this is not addressed, our study estimates a potential loss of more than Rp70 trillion in terms of Indonesia’s GDP revenue. So, the potential loss is quite substantial,” Anton said in Jakarta on Tuesday. He presented the findings during an Exclusive Media Luncheon Discussion titled ‘Increasing the Productivity of Independent Smallholders: The Key to Boosting the Competitiveness of Indonesian Palm Oil’, which was attended by several palm oil farmer associations. He further emphasised that farmers still face structural obstacles. Therefore, CIPS recommends increasing investment in farmers, not only in the form of funding but also through policy attention and collaborative efforts to drive sustainable productivity improvements. At the same event, CIPS Senior Researcher and Policy Analyst Rahmad Supriyanto revealed that the organisation’s latest study shows that without addressing the constraints faced by independent smallholders, Indonesia risks losing an additional 4.73 million tonnes of crude palm oil (CPO) production, missing out on export increases worth up to 718.5 million US dollars, and forfeiting an additional Rp70.3 trillion in GDP. Rahmad stressed that these findings are significant, considering data from the Ministry of Agriculture (2026) records that independent smallholders manage around 41% of national oil palm land and contribute 35-40% of Indonesia’s fresh fruit bunch (FFB) production. “However, their current productivity only reaches about 26.5% of the maximum potential that can be achieved,” he said. He explained that the low productivity of independent smallholders reflects various obstacles they still face. These issues not only impact farmers’ incomes but also limit the potential contribution of the palm oil sector to the national economy. “As long as challenges such as replanting, financing, land legality, and institutional strengthening remain unresolved, Indonesia will continue to miss opportunities for greater economic growth in the palm oil sector,” Rahmad stated. Behind the significant economic potential, he noted, the productivity of independent smallholders is held back by interconnected obstacles, making their contribution to national palm oil production growth less than optimal. The CIPS study (2026) recorded that around 2.4 million farmers currently manage oil palm plants that are over 25 years old and no longer productive. Meanwhile, the government’s People’s Palm Oil Replanting (PSR) programme has not yet yielded optimal results. The study also found that farmers still face limitations in good agricultural practices (GAP) capacity, access to superior seeds, affordable financing, and adequate technical assistance. Additionally, most independent farmers are constrained by land legality issues, which hinder their access to support programmes and sustainable certification. Certification could serve as an instrument to encourage the adoption of better cultivation practices, strengthen farmer institutions, enhance capacity, and broaden access to assistance and markets. CIPS urges prioritising a replanting programme with a scheme that is more attractive to independent smallholders, resolving land legality issues, and simplifying the Cultivation Registration Certificate (STDB) process. This is crucial so that independent smallholders can more easily access various government support programmes, including replanting, financing, and sustainable certification. CIPS also believes that a jurisdictional approach at the regional level needs to be strengthened through collaboration between local governments, the private sector, civil society organisations, and farmers to ensure that services such as training and technical assistance can reach more farmers inclusively. “One of the main challenges in the palm oil sector is ensuring that independent smallholders have access to the crucial factors that determine their productivity,” he added. He stressed that as long as these obstacles remain unresolved, Indonesia will continue to lose economic opportunities that could actually be achieved optimally. Responding to the findings, Guntur Cahyo Prabowo, Head of Smallholders at the Roundtable on Sustainable Palm Oil (RSPO), asserted that certification should not be viewed merely as a market requirement but as part of a broader ecosystem to strengthen the capacity, productivity, and long-term competitiveness of independent smallholders. He explained that many independent smallholders are left behind not because they lack commitment or willingness to develop. On the contrary, he said, they are often trapped in what is termed ‘passive exclusion’, a condition where systems, policies, markets, and institutions unconsciously favour farmers who are already prepared rather than helping more farmers become ready. He noted that as global market expectations continue to evolve, Indonesia has the opportunity to reduce passive exclusion by helping more independent smallholders become ready, not just to meet standards but also to compete, while proving that future growth can be achieved without relying on land expansion.