Economists urge Indonesia to move palm oil exports downstream to cut risk
Economists told state news agency ANTARA that Indonesia's heavy reliance on raw crude palm oil exports is a growing competitiveness risk and called for a shift toward higher-value derivatives. Palm oil and its products generated a trade surplus of about US$43.23 billion in 2025.
Economists warn Indonesia against reliance on raw CPO
Indonesia should shift its palm oil exports toward higher-value downstream products to reduce its exposure to commodity price swings and tightening trade standards, economists told the state news agency ANTARA. The suara.com portal framed the country's heavy dependence on crude palm oil (CPO) as a significant risk to competitiveness.
Isnawati Hidayah, a researcher at the Center of Economic and Law Studies (Celios), said Indonesia cannot rely on its status as the world's largest palm oil producer alone. Future export competitiveness, she told ANTARA, will increasingly be decided by the ability to meet sustainability, traceability and low-emission standards. "Indonesia needs to move from exporting intermediate products toward downstream products that have higher added value and technology content, so that it does not keep depending on the fluctuation of primary commodity prices," she said.
The case for derivatives
Esther Sri Astuti, executive director of the Institute for Development of Economics and Finance (Indef), said product differentiation is central to competitiveness so that Indonesia does not only export crude palm oil. She listed higher-value products including biodiesel, soap, detergent, lubricants, cosmetics and oleochemicals. Exporters must also ensure goods meet international quality standards and the regulations of each destination market. According to Esther, markets such as Europe impose stricter sustainability requirements, while Pakistan and India remain potential markets for Indonesian palm products.
The government is extending Indonesian Sustainable Palm Oil (ISPO) certification to the downstream sector as part of efforts to strengthen competitiveness. Esther also urged wider use of business-to-business platforms and participation in international trade fairs to find new buyers.
Trade surplus and the numbers
The Ministry of Industry recorded palm oil and derivative exports of about US$44.65 billion in 2025, against imports of roughly US$1.42 billion, producing a trade surplus of around US$43.23 billion, or about Rp782.46 trillion. The industry remains one of the nation's largest sources of export earnings. Separately, the Lampung quarantine authority cleared an export of 14,000 tonnes of palm kernel expeller (PKE) to New Zealand worth about Rp20 billion after the shipment met sanitary and phytosanitary requirements.
Domestic risks to the surplus
Eliza Mardian, a researcher at the Center of Reform on Economics (CORE) Indonesia, said stronger competitiveness also requires a more efficient trade system. In the short term, she said, the government should strengthen export facilitation and offer incentives for processing palm by-products; in the long term, it needs investment in a national digital traceability system and in research and development for high value-added derivatives. "Downstreaming must not only produce a larger volume of processed goods, but also raise Indonesia's added value and export margins," she said.
Eliza pointed to persistent challenges: low productivity on smallholder plantations, the high cost of certification and traceability, and rising domestic consumption for the biodiesel program, which could reduce the export surplus. She said strengthening quarantine, certification and traceability is key to international market confidence, adding that sustainability certification can also serve as a trade-diplomacy instrument.
