Oil Palm Economic Benefit Distribution to Regions for Environmental Sustainability: Indonesia’s Revenue-Sharing Scheme

Fitri Nurfatriani (), Ramawati, Galih Kartika Sari, Wiko Saputra and Heru Komarudin
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Fitri Nurfatriani: Directorate of Environment, Maritime, Natural Resources and Nuclear Policy, National Research and Innovation Agency (BRIN), Jakarta 10340, Indonesia
Ramawati: Research Center for Ecology and Ethnobiology, National Research and Innovation Agency (BRIN), Cibinong, Bogor 16911, Indonesia
Galih Kartika Sari: Center for Disaster Resilience and Climate Change Instrument Standardization of the Instrument Standardization Agency, the Indonesian Ministry of Environment and Forestry, Bogor 16118, Indonesia
Wiko Saputra: Kuala Institute, Depok 16158, Indonesia
Heru Komarudin: Center for International Forestry Research (CIFOR)-World Agroforestry (ICRAF) Indonesia Program, Bogor 16680, Indonesia

Land, 2022, vol. 11, issue 9, 1-24

Abstract: Palm oil is considered a key commodity in supporting the Indonesian economy, generating both domestic revenue and foreign exchange. Such revenue needs to be distributed equally for the benefit of the government and society. This paper discusses the opportunities and challenges of the proposed revenue-sharing scheme, DBH Sawit, sourcing from palm oil, particularly between central and local governments. It examines how the proposed scheme can be implemented and what strategies can reward regions for moving toward environmental sustainability practices. Research methods used in this paper include a literature study, stakeholder interviews, the SWOT method and analytical hierarchy processes. Results indicate that DBH Sawit is one of several fiscal instruments that could potentially incentivize sustainability. It has both strengths and anticipated opportunities, such as increased CPO production and global demand for palm oil. It faces, however, serious weaknesses, such as unauthorized oil palm plantations and the absence of traceability systems. It is also threatened by unfair market and global policies. This paper recommends diverse strategies to increase palm oil productivity, accelerate sustainability certification and develop a tracing system. To accelerate the adoption of environmental sustainability, the paper advocates an ecological-based fiscal transfer system.

Keywords: palm oil; sustainability; intergovernmental fiscal transfer; balanced fund (search for similar items in EconPapers)
JEL-codes: Q15 Q2 Q24 Q28 Q5 R14 R52 (search for similar items in EconPapers)
Date: 2022
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