FROM GROWTH TO SUSTAINABILITY: PUBLIC POLICY LESSONS FROM INDONESIA’S PALM OIL SECTOR

Abstract

This study examines how Indonesia’s palm oil sector is transitioning from a growth-oriented development model to a sustainability-oriented
one, and the public policy lessons that emerge from this shift. Using a qualitative research design based on an extensive literature review, policy
and regulatory document analysis, and secondary datasets, the article synthesizes evidence on the economic, environmental, and social
dimensions of palm oil expansion in Indonesia. The findings show that palm oil has significantly contributed to national income, export
earnings, employment, and rural development, particularly through the rising role of smallholders. At the same time, rapid expansion has driven
deforestation, peatland degradation, biodiversity loss, land conflicts, and persistent welfare gaps between large companies and smallholders.
The study highlights how national instruments such as ISPO, moratoria on new forest and peatland concessions, and replanting and smallholder
support schemes interact with international standards like RSPO and the European Union Deforestation Regulation (EUDR). Case studies of
jurisdictional initiatives and social innovations demonstrate that policy mixes combining regulation, incentives, traceability, and multistakeholder collaboration can accelerate sustainability transitions, but governance fragmentation, capacity gaps, and data limitations constrain their
effectiveness. The article concludes that adaptive, integrative, and evidence-based policy design anchored in institutional strengthening, digital traceability, and
inclusive smallholder support is crucial for building a more sustainable and globally competitive palm oil sector in Indonesia.