Cooperatives Minister: LPDB Ready to Support Cooperatives in Building CPO Mills

The large share of smallholder plantations presents an opportunity to strengthen the role of cooperatives in the palm oil industry chain, including through the construction of CPO processing facilities. Minister of Cooperatives Ferry Juliantono stated that the Revolving Fund Management Agency (LPDB) for Cooperatives is ready to support financing for cooperatives developing palm oil processing businesses, including the construction of crude palm oil (CPO) mills. Speaking during a National Seminar on ‘Optimisation and Downstreaming of Palm Oil Based on Cooperatives’ in Musi Banyuasin Regency, South Sumatra, on Tuesday, Ferry said financing support is necessary to encourage cooperatives not only to operate in the plantation sector but also to take a role in palm oil downstreaming. The Ministry of Cooperatives records that there are 222,462 cooperatives in Indonesia, including 30,817 producer cooperatives and 2,587 plantation cooperatives. Meanwhile, the composition of national oil palm plantations consists of 54 percent large companies, 43 percent smallholder plantations, and 3 percent state plantations. According to Ferry, the large proportion of smallholder plantations is an opportunity to strengthen the role of cooperatives in the palm oil industry chain, including through the construction of CPO processing facilities. Ferry said such support has already been provided by the LPDB to cooperatives developing palm oil processing industries. One example is the Mandiri Makmur Cooperative, which received financing for the construction of a CPO mill. ‘One example is the Mandiri Makmur Cooperative, which has also been given financing by the LPDB to produce CPO, and its construction is currently 45 percent complete,’ he said. Ferry stated that the development of CPO mills by cooperatives can strengthen the position of farmers in the palm oil business chain while increasing the added value enjoyed by local communities. He said cooperatives need to be encouraged to develop from plantation management towards processing their harvests, so they do not only sell fresh fruit bunches (FFB) but also benefit from the downstream process. Ferry assessed that strengthening financing is one of the important instruments to realise this model. With capital support, cooperatives are expected to develop processing capacity and expand business activities to produce derivative palm oil products. The government, Ferry said, is encouraging cooperative-based palm oil downstreaming as part of efforts to improve farmers’ welfare while strengthening the role of cooperatives as business entities in the national economy.