Palm oil downstreaming, a concrete step for Kalimantan's economic diversification

Kalimantan is no longer known solely as a producer of crude palm oil (CPO) that is sent to other regions for further processing. An economic transformation is underway, with several areas successfully processing plantation yields into higher-value products, while preparations for more complex processing stages continue in a measured manner.

This step serves as a tangible manifestation of economic diversification, shifting the pattern of dependency on raw commodities towards an economic structure that is stronger, more diverse, and more resilient to market volatility. East Kalimantan province stands as a pioneer with industrial zones already in production, followed by other provinces that are gradually developing their processing chains.

East Kalimantan has become the primary hub for downstreaming that is already fully operational and mature. In East Kutai Regency (Kutim), specifically within the Maloy Batuta Trans Kalimantan Special Economic Zone (SEZ), integrated processing has been operating commercially for several years. Here, CPO is processed into refined cooking oil, biodiesel, palm kernel oil, as well as high-quality food and animal feed raw materials.

With a processing capacity of over 600,000 tonnes per year, this facility serves supplies from plantations in Sangatta, Bengalon, and surrounding areas, utilising deep-sea port access to distribute processed goods to both domestic and international markets. The existence of this zone proves that downstreaming does not only change the form of a product but also builds an integrated economic system.

“For a long time, East Kutai has been better known as an area producing coal and crude palm oil (CPO); therefore, with the success of this downstreaming, the commitment to economic diversification is beginning to show results,” said the Regent of East Kutai, Ardiansyah Sulaiman.

Adjacent to East Kutai is Bontang. In this small city, downstream industries are also operational, albeit still at a medium processing stage. Currently, CPO refineries, biodiesel production, packaged cooking oil, and the processing of palm kernels into kernel oil and palm kernel cake for animal feed are in operation.

Furthermore, plans for further development to produce fatty acids and advanced oleochemicals have been drafted, with investment values reaching IDR 3.77 trillion in the Bontang Economic Industrial Area (KIE). In Kutai Kartanegara Regency, specifically in the Tenggarong and Loa Janan areas, medium-scale processing units are actively operating and involving many local business actors. The products generated include locally branded cooking oil, palm kernel oil, and raw materials for the food and soap industries.