Palm Oil Investment Overshadowed by Legal Uncertainty
Over the next one to two years, the business climate for palm oil is expected to become increasingly challenging. Higher entry barriers, complex legality demands, and global market pressures make this business no longer as welcoming as in the 1980s and 1990s.
That view was expressed by academic and business law and investment expert, Dr. Rio Kristiawan, in the Sawit Indonesia Podcast on Friday (23 January 2026). The man born in Kediri, East Java, now actively teaches corporate finance, corporate law, environmental law, and business ethics. He has also written more than 20 books before entering the ecosystem restoration business as Co-Founder and CEO of Pagatan Usaha Makmur (PUM).
Rio compares the current situation to the past. “It used to be friendly, with few demands. Now it’s bloody tough. There are more players, but legality requirements and market demands have also increased,” he said.
According to him, palm oil mills (PKS) that are not integrated with core plantations face issues with fresh fruit bunch (TBS) supply. Reliance on external parties makes it difficult to control raw material prices and squeezes business margins. He cited the situation in Rangkasbitung, where TBS prices were low because several PKS did not have their own plantations.
“Fertiliser costs, labour, and indirect costs are quite substantial. Plus, meeting sustainability requirements is not easy,” he said.
The heaviest pressure, Rio continued, is felt by medium-scale business players. Large corporations enjoy economies of scale that reduce costs per hectare, while small businesses receive certain regulatory exemptions. In between, medium-sized companies must bear high costs with the same legal obligations.
“If you’re big, the cost per hectare is lighter. But the ones that suffer are those that are neither small nor big—this is the bloodiest. Especially if they don’t have their own mill or CPO facilities,” he explained.
He sees the industry trend moving towards consolidation. “If you want to enter, go big. If you’re in between, better to be UMKM because there are certain regulatory exemptions,” he said.