Downstreaming Policy and Supply Chain Optimization in Indonesia’s Palm Oil Industry

Abstract

Indonesia, as the world’s largest palm oil producer, faces challenges in enhancing export competitiveness due to the dominance of crude palm oil (CPO). This study examines the impact of downstreaming policies on supply chain restructuring, operational efficiency, and value-added exports in Indonesia’s palm oil industry during 2010–2025. Using trend analysis of secondary data from Statistics Indonesia (BPS), the Indonesian Palm Oil Association (GAPKI), and the Ministry of Industry, the findings reveal that downstreaming policies reduced the share of crude CPO exports from 57% (2010) to around 9% (2025), while processed product exports rose to more than 70%. Export value increased from USD 16.3 billion (2010) to USD 22.9 billion (2020), supported by biodiesel programs B30–B40, which also generated foreign exchange savings exceeding IDR 130 trillion. Furthermore, the palm oil sector absorbed approximately 5.2 million workers and contributed 3.5% to national GDP. These results highlight downstreaming as an effective operations management strategy aligned with Industry 4.0 initiatives, fostering supply chain efficiency, digital integration, and sustainable value creation for Indonesia’s economy.