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With its vast and abundant fertile soils Indonesia is a major global key producer of a wide variety of
agricultural tropical products, and although agriculture's share of the country's gross domestic product (GDP) has
declined markedly during the last five decades, it still provides income for the majority of Indonesian households
today. In 2012 this sector employed around 49 million Indonesian individuals, which represents 41 percent of the
total Indonesian Labor force. But although in absolute numbers the agricultural workforce keeps growing, its
relative share of the total Indonesian workforce has declined significantly from 55 percent in the 1980s to 45 percent
in the 1990s and currently to 41 percent. Only during the Asian Financial Crisis in the late 1990s this share grew
significantly because unemployment in both the industry and services sectors was absorbed by the agriculture sector
(mostly informally).
Indonesia's agriculture sector is forecast to continue growing, albeit at a lower pace compared to the
industry and services sectors. The agricultural sector of Indonesia comprises large plantations (both state-owned and
private) and smallholder production modes. The large plantations tend to focus on commodities which are important
export products (palm oil and rubber), while the small hold farmers focus on rice, soybeans, corn, fruits and
vegetables.
The most important agricultural products of Indonesia are: Palm oil, rubber, cocoa, coffee, tea, cassava,
rice, tropical spices, etc. Thus, in this paper I will shortly explain Indonesias Top 2 Agricultural Products: Palm oil
and Rubber.
Palm Oil
Palm oil is one of the world's most produced and consumed oils. This cheap, production-efficient and
highly stable oil is used in a wide variety of food, cosmetic and hygiene products, and can be used as source for bio-
fuel or biodiesel. Indonesian companies engaged in palm oil are planning large investments to expand palm oil
refining capacity. This is in line with the government's ambition to extract more revenue from Indonesian resources.
The country always mainly focused on the export of raw palm oil (and other raw commodities) but has shifted its
priority to refined products higher up in the value chain. To spur growth in the downstream industry, export tax on
INDONESIAS AGRICULTURAL PRODUCTS 3
refined palm oil products have been slashed in recent years. Meanwhile, the export tax for crude palm oil (CPO)
ranches between 0 and 22.5 percent depending on the international palm oil price. Indonesia has an automatic
mechanism that when the government benchmark CPO price (based on international and local CPO prices) drops
below USD $750 per metric ton, the export tax is cut to zero percent. As this benchmark price slipped below USD
$750 per ton in September 2014, Indonesia has seen a zero percent CPO export tax since October 2014.
Rubber
As the second-largest rubber producer, Indonesia supplies a substantial amount of rubber to the global
market. Since the 1980s, the Indonesian rubber industry has been experiencing steady production growth.
Government and private estates thus play a minor role in the domestic rubber industry. Around 85 percent of
Indonesia's rubber production is exported. Almost half of export is shipped to other Asian countries, followed by
North America and Europe. The top five Indonesian rubber importing countries are the USA, China, Japan,
INDONESIAS AGRICULTURAL PRODUCTS 4
Singapore and Brazil. Domestic rubber consumption is mostly absorbed by Indonesia's manufacturing industries (in
Compared to its rubber producing competitors, Indonesia contains a low level of productivity per hectare.
This is in large part due to the general older age of its rubber trees in combination with low investment capability of
the smallholder farmers, hence reducing yields. Whereas Thailand produces 1,800 kilogram (kg) of rubber per
hectare per year, Indonesia only manages to produce 1,080 kg/ha. Also Vietnam (1,720 kg/ha) and Malaysia (1,510
Bibliography
The World Bank. (2016, - -). The World Bank. Retrieved 4 8, 2017, from The World
Bank: http://data.worldbank.org
Indonesia-Investments: http://www.indonesia-investments.com/culture/economy/general-
economic-outline/agriculture/item378?