UI researcher: Legal certainty of HGU to underpin sustainable palm oil investment

Jakarta — University of Indonesia (UI) researcher Eugenia Mardanugraha says land tenure certainty through the Hak Guna Usaha (HGU) is the main foundation for the long-term sustainability of investment and stability of Indonesia’s palm oil production.

During remarks in Jakarta on Friday, she said that certainty over the extension and issuance of HGU is important to support the success of the government’s mandatory biodiesel B50 programme starting in the second half of 2026.

“If HGU uncertainty continues, the B50 programme, the sustainability of the palm oil industry, and the sector’s contribution to the national economy face significant risks,” she said.

She explained that the HGU issue is directly linked to the national palm oil replanting programme, which is currently urgent.

She noted that many palm oil plantations, especially those owned by smallholders, have seen productivity decline due to ageing trees and past use of suboptimal planting material.

Without accelerating replanting, she continued, national palm oil production risks stagnation amid rising demand for palm oil for energy, food, downstream industries, and exports.

“Indonesia going forward will need palm oil not only for biodiesel, but also for food, oleochemicals, cosmetics, pharmaceuticals, and even sustainable aviation fuel. Land productivity is the key,” she said.

Moreover, she stressed that the national palm oil strategy no longer rests on expanding new land, but on increasing the productivity of existing land.

She assessed that uncertainty over HGU status leads business actors to delay long-term investments, including replanting, because the investment risk becomes too high.

“Replanting requires substantial investment with a production lag of several years before the trees bear economically again. Without legal certainty, investment decisions become difficult,” she said.

In addition to legal factors, she said that business players also consider prospects for global palm oil trade and the stability of government policy in determining long-term investment directions.

“Land tenure certainty and policy direction stability for the industry are the key factors in accelerating replanting,” she added.