Indonesia has abundant palm oil feedstock, but the development of higher value downstream products still needs to accelerate. Malaysia has become a benchmark in terms of industrial efficiency and productivity

Indonesian Palm Oil News (IPO News), Jakarta — Deputy Minister of Industry Faisol Riza has expressed concern over the pace of Indonesia’s palm oil downstreaming development. Despite having the world’s largest palm oil plantation area, Indonesia has yet to fully capitalize on its raw material advantage through the development of higher value downstream industries.

Faisol made the remarks during the 2026 National Coordination Meeting (Rakornas) on Investment, Downstreaming, Energy and Environmental Affairs, organized by the Indonesian Chamber of Commerce and Industry (Kadin Indonesia) at The Langham, South Jakarta, on Tuesday, October 13, 2026. During the meeting, Faisol also indicated that he might seek input from Saleh Husin, Indonesia’s Minister of Industry from 2014 to 2016, on how to accelerate palm oil downstreaming.

“There is one issue that concerns me. Perhaps I need to seek assistance from Minister Saleh Husin, because palm oil downstreaming appears to have stalled somewhat,” Faisol said, as reported by detikFinance.

MALAYSIA’S PRODUCTIVITY BECOMES A BENCHMARK

Faisol highlighted the comparison between Indonesia’s and Malaysia’s palm oil industries. He pointed to Malaysia’s perceived advantages in industrial productivity and efficiency, despite Indonesia’s substantial advantage in raw material availability. The issue is significant because downstream development cannot rely solely on large palm oil production volumes. Indonesia also needs to strengthen its industrial processing capabilities to produce higher value goods and compete more effectively in international markets.

Faisol also referred to challenges affecting exports of fatty alcohol to the United States. Fatty alcohol is an important oleochemical product used as a raw material in various manufacturing industries. These challenges highlight the need for a comprehensive downstream industrial strategy that goes beyond raw material availability to include production efficiency, market access and the ability to compete with producers in other countries.

SIGNIFICANT POTENTIAL REMAINS IN DOWNSTREAM PRODUCTS

According to Faisol, Indonesia still has substantial opportunities to expand its range of palm oil derived products, particularly oleochemicals that serve as raw materials for other industries. Products highlighted include glycerin, surfactants and carotene. Each has distinct applications and can support the development of a broader industrial value chain.

Glycerin is used in cosmetics, pharmaceuticals and personal care products. Surfactants are widely applied in cleaning products, personal care formulations and various industrial applications. Carotene has economic value in food, nutrition and other specialized industrial applications.

Developing these products could help Indonesia strengthen its oleochemical industry, expand markets for palm oil derivatives and capture greater economic value from domestic processing. Palm oil downstreaming, therefore, offers opportunities far beyond the production of cooking oil, olein, stearin and biofuels.

DOWNSTREAMING MUST GO BEYOND B50

Faisol also highlighted the development of palm oil-based biofuels. After years of downstreaming initiatives, the B50 biodiesel program is one of the tangible developments now receiving significant attention. B50 refers to a fuel blend containing 50% palm oil based biodiesel and 50% conventional fossil-based diesel. However, the development of palm-based energy should go hand in hand with the expansion of other downstream products.

Diversification is important to ensure that Indonesia’s palm oil industry has multiple sources of growth rather than relying predominantly on demand for palm oil in the food and energy sectors. Oleochemical development, for example, could strengthen links between the palm oil industry and the chemical, cosmetics, pharmaceutical, cleaning products and broader manufacturing sectors.

The wider the range of products Indonesia can produce, the greater its opportunities to expand markets and strengthen its position in global industrial supply chains.

KADIN URGED TO MAKE DOWNSTREAMING A PRIORITY

Faisol expressed hope that palm oil downstreaming would become a priority on Kadin Indonesia’s agenda. Cooperation between the government and the business community is needed to accelerate the utilization of Indonesia’s domestic raw material resources. “If this can also become a priority agenda for Kadin, I believe we can work together to make this subsector one of the more optimized and successful downstream industries, because all the raw materials are actually available domestically,” he said.

His remarks underscore the importance of building a stronger downstream industry, from raw material processing to the production of higher-value chemical derivatives. For Indonesia’s palm oil industry, the next challenge is to translate abundant raw material availability into competitive production capacity, product innovation and broader domestic and export markets.

Indonesia has significant advantages to support this development. However, as the Deputy Minister of Industry pointed out, further acceleration is needed to ensure that the country’s position as a leading global palm oil producer delivers greater industrial value.

Sources: detikFinance, Bisnis.com, and statements by Deputy Minister of Industry Faisol Riza at the 2026 Kadin Indonesia National Coordination Meeting, October 13, 2026.

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Muslim M. Amin
Editor in Chief, IPO NEWS

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