As part of Indonesian President Prabowo Subianto’s push towards 8 per cent economic growth, Indonesia is aiming to expand its agricultural commodities industries. Can this be done alongside ecosystem conservation and restoration efforts? On 26 February 2025, the SIIA held a talk on “Towards 8% Growth: Can Indonesia Balance Productivity and Sustainability?” as part of our SIIA Sustainability Series.
The talk featured insights from Ms Dewi Sari, Nature-based Solutions Manager, WRI Indonesia and Mr Sebastian Wijaya, Chief Operating Officer, Agridence, and was moderated by Ms Cheryl Chen, Council Member, SIIA and President, S&P Global Foundation. The SIIA also launched a new special report at the event, on “Sustainable Value Chains: Tech and Finance for ASEAN’s Smallholders”, which is now available for download, focusing on avenues for businesses and investors to help improve productivity among farmers.
Deforestation versus Restoration
President Prabowo’s remarks about strengthening Indonesia’s commodity industries have mostly focused on palm oil. Mr Prabowo is hoping to grow palm oil exports and is also implementing policies that will increase Indonesia’s domestic consumption.
Mr Wijaya said that an estimated 20 million hectares of new plantations and farms are needed to meet Indonesia’s plans to use more palm oil-based biodiesel in its diesel fuel mix and the Prabowo administration’s food security goals. This amounts to an area around 266 times the size of Singapore, and Indonesia’s Ministry of Forestry has already marked out this total land area for potential conversion.
Between 2019 and 2020, Indonesia’s deforestation rate dropped by a record 75 per cent, but NGOs are now concerned that this trend could be reversed if more forests are indeed converted into agricultural area.
Ms Dewi noted that a key part of Indonesia’s nationally determined contribution (NDC) under the Paris Agreement is a target to turn the Forestry and Other Land Use (FOLU) sector into a net carbon sink by 2030. While the target was set by the Jokowi administration, the Prabowo administration has committed to continuing these efforts.
Intensifying Production and Increasing Yields
If Indonesia is to meet its economic goals while also maintaining its ecosystem restoration and carbon sink commitments, it is important to intensify production on existing farmland, so that more forests can be kept intact. Initiatives to boost yields must include smallholder farmers. Smallholder farmers account for 40 per cent of palm oil production in Indonesia, and over 80 per cent of production for rubber, cocoa, and coffee. But small farmers typically have lower yields compared to large corporate plantations.
“I spend a lot of time back in my home country, in Indonesia… travelling on the road, visiting farmers, talking to them, showcasing what technologies we have and teaching them how to use it,” Mr Wijaya said.
Agridence is a Singapore-based tech company whose clients include the world’s biggest tire makers and the Roundtable on Sustainable Palm Oil (RSPO). Although it is based in Singapore, Agridence works in Indonesia and across the region, demonstrating how Singapore’s businesses can contribute to the region’s agricultural sector.
Digital platforms like Agridence’s give farmers access to useful information and services like digital training modules for agricultural skills, while also letting buyers and traders get valuable data directly from the farmers. This allows businesses to meet their traceability and due diligence requirements. Mr Wijaya added that it is crucial for engagement programmes to get better agricultural inputs into the hands of farmers, giving them access to higher-quality fertilisers and seeds.
Carbon Credits: Monetising Conservation
If forest conservation in itself can contribute to Indonesia’s economic development, this will alleviate pressure to convert forest areas into farms and plantations. Ms Dewi noted that Indonesia has received international financing from Norway and others for forest programmes, but revenue-generating efforts need to be taken further, to make conservation a viable investment that also creates income and jobs for communities.
“The most popular [type of monetisation] right now is carbon, because conservation and restoration generate carbon sequestration,” Ms Dewi said. She listed other monetisable outcomes beyond carbon sequestration such as biodiversity, soil health, and disaster risk mitigation. But she acknowledged that these ecosystem services are more difficult to monetise compared to growing crops on a plot of land and selling them.
In order to monetise ecosystem services, Ms Dewi said Indonesia needs to make clearer policies, including clarifying Indonesia’s stance on international carbon trading and the feasibility of carbon projects for investors. Indonesia and Japan signed a Mutual Recognition Agreement (MRA) for bilateral carbon trading in October 2024, recognising each other’s carbon credits for use in their national emissions trading systems. Ms Dewi said more international cooperation like the Indonesia-Japan MRA is needed, involving Singapore and other countries like South Korea and Switzerland that are working on carbon market mechanisms.
The subject of commodities, international trade, and sustainability is one that the SIIA will be returning at the 12th edition of our Singapore Dialogue on Sustainable World Resources in May 2025, with speakers discussing the role of ASEAN and Singapore-based businesses in this changing landscape.
