ISSN 2810-0182 (Online)

ACITYA WISESA: Journal of Multidisciplinary Research

[Link]
Vol. 4, Issue 3 (2025)
[Link]/10.56943/jmr.v4i3.863

The Role of the Palm Oil Industry in Supporting Indonesia’s

Economic Resilience and Defense Logistics

Remond Tumpak Sumurung Hutagalung1*, Muliahadi Tumanggor2, Sri Iswati3

1
[Link]@[Link], 2muliahaditumanggor17@[Link], [Link]@[Link]
Department of Defence Economic, Universitas Pertahanan Indonesia

*Corresponding Author: Remond Tumpak Sumurung Hutagalung

E-mail: [Link]@[Link]

ABSTRACT

This study aims to examine the strategic contribution of the palm oil industry to Indonesia’s
economic resilience and defense logistics system. Employing a qualitative approach based
on literature review, the analysis draws upon academic sources, policy documents, and
institutional reports. As a leading sector in export and alternative energy supply, the palm
oil industry plays a vital role in supporting national fiscal stability through state revenue
generation and employment creation. Furthermore, the geographic distribution of palm oil
plantations across border regions and remote areas has the potential to strengthen defense
logistics infrastructure, particularly in resource mobilization and operational support. This
study also highlights the opportunity to utilize palm-based bioenergy as an alternative fuel
to sustain military operations. The findings indicate that synergy among industrial, fiscal,
and defense policies is essential to optimize the strategic role of palm oil in enhancing
national resilience. The study recommends reinforcing cross-sectoral regulations and
increasing investment in downstream palm oil development aligned with strategic national
interests.

Keywords: Bioenergy, Defense Logistic, Exonomic Resilience, Palm Oil, Strategic

Industry

INTRODUCTION

Defense studies is an interdisciplinary field that explores the strategic

management of national resources and capabilities across peacetime, wartime, and
post-conflict phases (Sarjito, 2024; Soares et al., 2024). It addresses the formulation
and implementation of policies aimed at countering both external and internal
threats -military and non-military- to the integrity of national territory, the
sovereignty of the state, and the safety of the population. By integrating elements
 The Role of the Palm Oil Industry in Supporting Indonesia’s Economic…

of security, governance, and strategic planning, Defense Studies contributes to the

realization of comprehensive national security and resilience (Supriyatno, 2014).
Defense budgeting serves as a vital instrument in safeguarding national sovereignty,
strengthening military posture, and ensuring national stability amid an increasingly
dynamic geopolitical landscape (Evantino et al., 2024). In Indonesia, defense
expenditure has witnessed a significant upward trend over the past two decades,
reflecting the government's commitment to modernizing principal weapon systems
(alutsista), enhancing personnel capacity, and reinforcing defense logistics and
technological infrastructure (Prasetiyo et al., 2024). Nonetheless, fiscal constraints,
reliance on imported strategic components, and the imperative of cross-sectoral
development demand greater efficiency and integration in defense budget
management.
Defense expenditure serves as a critical indicator of a nation's commitment to
national security, military modernization, and preparedness against
multidimensional threats. Each country possesses its own ideal framework for how
its defense industry should operate. Ideally, according to NATO’s Rules of Thumb,
every country should allocate 2% of its Gross Domestic Product (GDP) to defense
spending—a benchmark commonly observed among advanced economies with
substantial defense budgets. Of this allocation, approximately 20–30% is typically
directed toward the domestic defense industry (Karim, 2020).
In Indonesia, defense budget allocations have fluctuated over the years,
shaped by global economic dynamics, shifting fiscal priorities, and evolving
regional geopolitical conditions. Although a general upward trend in defense
spending has been observed over the past two decades, its proportion relative to
Gross Domestic Product (GDP) remains comparatively low by international
standards (Seftiana et al., 2024; Yulivan et al., 2024). Since the early 2000s, the
Indonesian government has directed defense expenditures toward supporting the
Minimum Essential Force (MEF) program—an initiative aimed at developing a
military force sufficient to safeguard territorial integrity and protect national
interests. However, the realization of defense budgets continues to face structural
challenges, including reliance on imported weapon systems (alutsista), limited
capacity within the domestic defense industry, and suboptimal integration between
military spending and the development of reserve components (Andalus &
Djuyandi, 2023).
Data from the Ministry of Finance indicates that Indonesia’s defense budget
has ranged between 0.7% and 0.9% of Gross Domestic Product (GDP) over the past
five years (Aulia Fitri, 2024). This figure remains well below the threshold set by
NATO, which recommends allocating 2% of GDP to defense spending. Such a gap
presents significant challenges in building a resilient military posture, particularly
amid the growing complexity of threats in the Indo-Pacific region. Consequently, a
systematic review of Indonesia’s defense budget trends over time is essential to
evaluate policy effectiveness, identify strategic gaps, and formulate

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recommendations that support the sustainable development of national defense

capabilities.

Figure 1 Percentage of Indonesia’s Defense Budget Relative to GDP

Source: Databooks, 2024

As an archipelagic nation with a vast and strategically situated territory,

Indonesia faces a complex array of multidimensional threats—ranging from border
disputes and violations of maritime and airspace sovereignty to non-traditional
challenges such as terrorism, natural disasters, and cyber disruptions. Accordingly,
the defense budget functions not merely as a military expenditure allocation, but as
a strategic instrument for developing an adaptive and sustainable defense system.
Strengthening logistical capacity, advancing the domestic defense industry, and
investing in military research and technology constitute integral components of an
effective budget utilization strategy (Kemhan, 2019).
Within the framework of national policy, Indonesia’s defense budget is
strategically directed to support the vision of the Minimum Essential Force (MEF),
which entails the development of a defense capability sufficient to safeguard
territorial integrity and protect national interests (Zahara & Rizky, 2020).
Moreover, synergy between defense spending and other strategic sectors—such as
energy, infrastructure, and education—is essential for cultivating a resilient and
self-reliant defense ecosystem.
Indonesia is known as an agrarian country that has abundant natural resources
and vast agricultural land. One of Indonesia's leading commodities is widely
recognized as an agrarian country endowed with abundant natural resources and
extensive agricultural land. Among its leading commodities, palm oil plays a
pivotal role in the national economy. This industry contributes not only to export
revenues and state income, but also serves as a source of alternative energy and
employment generation across various regions. With plantations spread across

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more than twenty provinces, palm oil has become the economic backbone of many
areas, including border zones and remote regions.
Table 1 Distribution of Palm Oil Plantations in Indonesia

Source: Ministry of Agriculture and Statistics Indonesia

Additional Notes (Kementrian Pertanian RI, 2023)

1. Smallholder Plantations (PR): Managed by small-scale farmers, often
organized through cooperatives or plasma schemes. Despite lower
productivity levels, PR contributes over 40% of national palm oil
production.
2. State-Owned Large Plantations (PBN): Operated by state-owned
enterprises such as PTPN III, IV, V, and VII. These plantations emphasize
operational efficiency and modernization.
3. Private Large Plantations (PBS): Managed by major corporations
including Wilmar, Astra Agro, and Sinar Mas. These entities benefit from
advanced technologies and direct access to export markets.

The palm oil industry serves as the backbone of Indonesia’s non-oil and gas
exports and plays a critical role in sustaining the national trade surplus. Between
2019 and 2023, palm oil exports contributed an average of over USD 28 billion
annually, accounting for up to 18% of total non-oil and gas exports. Key products
such as Crude Palm Oil (CPO), Refined Bleached Deodorized (RBD) palm olein,
and biodiesel not only generate substantial foreign exchange earnings but also
support energy import substitution through the national biodiesel program. In the
absence of palm oil’s contribution, Indonesia’s trade balance would be at risk of
deficit, particularly due to pressures from the oil and gas sector and capital goods
imports. The following section outlines palm oil’s fiscal contribution to Indonesia.

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Table 2 Contribution of Palm Oil to Indonesia’s Trade Balance (2019–2023)

Source: Ministry of Agriculture and Statistics Indonesia (BPS) (BPS Indonesia,

2024)(Pertanian, 2024)(PASPI, 2024b)

In the context of national resilience, Indonesia’s palm oil industry holds

untapped strategic potential. The geographic distribution of palm oil plantations can
support defense logistics systems, particularly in the areas of fuel distribution, food
supply, and resource mobilization. Furthermore, palm oil derivatives such as
biodiesel and bioenergy offer viable alternative fuels that can sustain military
operations while reducing dependence on fossil energy sources (Kusumayuda,
2021). This initiative aligns with national policies aimed at strengthening resource-
based industries, skilled labor-intensive sectors, technology-driven enterprises, and
export-oriented production. Specifically within labor-intensive industries,
smallholder-managed community plantations contribute over 40% of national
production. This underscores the imperative for government policies to prioritize
the welfare and economic empowerment of small-scale farmers.
Farmers' welfare has an impact on: Food Security: When farmers feel safe
and secure in their lives, they will have the motivation and ability to produce enough
food. This will contribute positively to a country's food security. Economic Growth:
If farmers have access to fair markets and get fair prices for their crops, they can
increase their income and reinvest it into the agricultural system. This will drive
economic growth in the agricultural sector and surrounding areas. Food
Sovereignty: By increasing the welfare of farmers, they can be more independent
in meeting their own food needs and contribute to increasing the country's food
sovereignty (Sholihah, 2025). Palm oil plays a significant role in supporting
national food security, notably through the Palm Oil–Cattle Integration System
(SISKA). This model enables synergy between palm oil plantations and cattle
farming, resulting in enhanced productivity, increased farmer income, and
improved environmental sustainability (Ilham et al., 2021). In addition, palm oil has
emerged as a primary source of renewable energy through the development of

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biodiesel. The mandatory biodiesel policy, which reached the B35 blend level in
2023, is set to be further strengthened, with a target of B40 implementation by 2025.
Concurrently, the development of bioethanol is being pursued to reduce dependence
on imported fossil fuels (Kementerian PPN/Bappenas, 2025).

Table 3 Fossil Fuel Consumption (2019-2023)

Source: Ministry of Energy and Mineral Resources Republic of Indonesia (2024)

As illustrated in the preceding table, Indonesia’s dependence on fossil fuels

presents a strategic challenge to maintaining national energy security. Imports of
diesel and global oil price fluctuations exert pressure on the trade balance and
heighten fiscal risks. Amid the urgency of energy transition, the Indonesian
government launched the mandatory B30 biodiesel policy—a progressive step
integrating palm oil–based renewable energy into the national fuel system.
Biodiesel B30, a blend of 30% vegetable oil (FAME) and 70% diesel, has proven
effective not only in reducing fossil fuel consumption but also in enhancing the
value-added of the plantation sector and downstream palm oil industries. This
policy has had a positive impact on Indonesia’s real GDP, stimulating economic
growth, household income, and the competitiveness of the oleochemical industry
(Sahara et al., 2022).
Over the past five years, Indonesia has recorded a substantial increase in
foreign exchange savings from reduced fossil diesel imports, driven by the
progressive rise in palm oil–based biodiesel blending rates (see Figure 5).
According to data from the Palm Oil Plantation Fund Management Agency
(BPDPKS, 2024b), savings from diesel import substitution rose from
approximately IDR 3.7 trillion in 2015 to IDR 26.7 trillion in 2018, and continued
to surge to IDR 121.5 trillion by 2023. (PASPI, 2024a).

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Figure 2 Fiscal Impact of Biodiesel Policy: Savings from Reduced Fossil Diesel Imports
Source: PASPI (2024a)(Ministry of Energy and Mineral Resources Republic of
Indonesia, 2024)

Despite its strategic relevance, academic research that integrates the palm oil
industry with dimensions of economic resilience and defense logistics remains
limited. Existing literature predominantly focuses on economic and environmental
aspects, without explicitly linking them to national defense strategies. This study
aims to address this gap by examining the role of the palm oil industry in supporting
Indonesia’s economic resilience and defense logistics through a qualitative,
literature-based approach.
The findings are expected to contribute to the development of cross-sectoral
policies that integrate strategic industries with national defense agendas. By
strengthening synergies among the agricultural, energy, and defense sectors,
Indonesia can build a more robust and sustainable national resilience framework.

RESEARCH METHODOLOGY

This study employs a qualitative approach using library research methods to

examine the strategic contribution of the palm oil industry to Indonesia’s economic
resilience and defense logistics (Creswell & Creswell, 2023). This approach was
selected as it enables the researcher to systematically review a wide range of
relevant information sources without conducting primary field data collection
(Sugiyono, 2022).
The data utilized in this research are drawn from credible secondary sources,
including nationally and internationally indexed academic journals, government
policy reports, research institute publications, and strategic documents from key
institutions such as Statistics Indonesia (BPS), the Ministry of Finance, the Ministry
of Defense, the Ministry of Agriculture, and the Palm Oil Plantation Fund
Management Agency (BPDPKS). Source selection was conducted purposively,
based on relevance, currency, and content validity in relation to the research focus.
Data analysis was carried out using content analysis techniques, involving the
identification of key themes, categorization of information into substantive
domains, and interpretation of conceptual relationships emerging from the

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literature. The study focuses on three core dimensions: (1) the economic
contribution of the palm oil industry to national fiscal stability, (2) the logistical
potential of palm oil in supporting defense operations, and (3) the prospects for
utilizing palm-based bioenergy as an alternative military fuel.
To ensure academic objectivity and analytical integrity, the process was
conducted iteratively, with source triangulation applied to validate the consistency
of findings. The results are presented in the form of a scholarly narrative that
integrates theoretical perspectives, empirical data, and policy reflections, thereby
offering a comprehensive understanding of the strategic role of the palm oil industry
in strengthening Indonesia’s national resilience.

RESULT AND DISCUSSION

Contribution to Food and Energy Security

The concept of strategic industries refers to economic sectors that play a vital
role in supporting national stability and security. A country’s competitive advantage
can be strengthened through the development of industries with high value-added
potential and strong alignment with national interests (Porter, 1998). Indonesia’s
palm oil industry has demonstrably played a critical role in supporting national food
and energy security. In 2023, Indonesia’s total palm oil production reached 54.8
million metric tons, comprising 50 million tons of crude palm oil (CPO) and 4.8
million tons of palm kernel oil (PKO) (BPS Indonesia, 2023). Downstream palm
oil products such as cooking oil, margarine, and shortening have reached nearly the
entire Indonesian population, ensuring year-round food availability and
affordability.
On the energy front, the mandatory B30 biodiesel program demonstrates that
palm-based biofuel can effectively reduce dependence on imported fossil fuels
while supporting the transition to clean energy. This aligns with the emerging
paradigm of national resilience, which places energy self-sufficiency as a central
pillar, as stipulated in presidential regulations (Presidential Regulation No. 12 of
2025 concerning the National Medium-Term Development Plan). In the Indonesian
context, strategic industries encompass the energy, food, and defense sectors,
within which palm oil serves as a multifunctional commodity that intersects all
three domains.

Geographical Distribution and Defense Logistics Support

Palm oil plantations are distributed across 26 provinces and more than 250
regencies in Indonesia, including border and remote areas. This spatial distribution
presents strategic potential as logistical nodes for defense operations, supporting
the supply of fuel, food, and resource mobilization. However, further research is
needed to assess land suitability, particularly in areas prone to environmental
hazards. For instance, the southwestern slopes of Mount Lawu in Karanganyar
Regency are highly susceptible to landslides and are therefore not recommended

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for palm cultivation (Priyono et al., 2023). A study by PASPI (Palm Oil
Agribusiness Strategic Policy Institute) emphasizes that palm oil plantation
infrastructure can be integrated with defense logistics systems to strengthen
regional resilience (PASPI, 2024). A study by Elisabeth et al. (2019), underscores
the importance of integrating agricultural infrastructure with defense systems to
enhance regional resilience.

Cross-Sectoral Policy Synergy

According to Dunn (2018), effective policy must be capable of integrating
economic, social, and security interests. The findings highlight the necessity of
synergy among the Ministry of Agriculture, the Ministry of Energy and Mineral
Resources, and the Ministry of Defense to optimize the strategic role of the palm
oil industry. Downstream industrialization policies, bioenergy incentives, and
infrastructure development in strategic regions must be designed in an integrated
manner. The Prabowonomics paradigm, which emphasizes food and energy self-
sufficiency as core components of national resilience, serves as a critical foundation
for this policy direction.

Challenges and Recommendations

To advance the national biodiesel program, several strategic challenges must
be addressed. The current dependence on imported catalysts and machinery
presents a significant bottleneck for the technology's sovereignty, while suboptimal
data integration between the agricultural and defense sectors hinders coordinated
planning. Furthermore, social resistance to plantation expansion in certain regions
poses a critical socio-environmental hurdle. In response, a multi-faceted approach
is recommended. This includes strengthening domestic research and development
in bioenergy technologies to reduce import reliance, enhancing inter-ministerial
coordination through an integrated policy platform to ensure data-driven decision-
making, and rigorously applying sustainability principles to guide the expansion of
the palm oil industry and mitigate social conflict.
The findings of this study generally support and expand upon prior research
discussed in the introduction, particularly regarding the role of strategic industries
in strengthening national resilience. As articulated by Supriyatno (2014), the
multidisciplinary approach in defense studies underscores the importance of
integrating economic and security sectors to achieve comprehensive national
resilience. This study extends that framework by demonstrating that the palm oil
industry, as a leading agribusiness sector, contributes not only to fiscal stability and
energy security but also possesses logistical potential that can be mobilized to
support defense operations in border and remote regions.
Furthermore, the findings reinforce the analysis by Andalus and Djuyandi
(2023) concerning structural limitations in Indonesia’s defense budget, which
remains dependent on imported components and lacks full integration with the

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development of national reserve forces. By proposing the utilization of palm-based

bioenergy as an alternative military fuel, this study offers a domestically sourced
solution that can reduce energy dependence and enhance strategic autonomy. This
aligns with the perspective of Prasetiyo et al. (2024), who emphasize the importance
of modernizing weapon systems and strengthening the domestic defense industry
as part of the Minimum Essential Force (MEF) program.
In addition, the study broadens Dunn (2018) policy integration framework by
highlighting the necessity of cross-sectoral coordination among the Ministry of
Agriculture, the Ministry of Energy and Mineral Resources, and the Ministry of
Defense to optimize the strategic role of the palm oil industry. This approach
supports the “Prabowonomics” paradigm, which positions food and energy self-
sufficiency as foundational pillars of national resilience. Thus, the study not only
affirms existing literature but also expands the analytical scope by integrating
defense logistics and bioenergy dimensions into the broader discourse on economic
and security resilience.

CONCLUSION

This study demonstrates that Indonesia’s palm oil industry plays a strategic
role in strengthening national resilience, particularly in the domains of economic
stability, energy security, and defense logistics. As a flagship commodity, palm oil
contributes not only to state revenue and employment generation, but also provides
an alternative energy source through biodiesel, supporting the transition toward
energy self-sufficiency.
The geographical distribution of palm oil plantations in border and remote
regions presents opportunities for integration with defense logistics systems,
positioning plantation infrastructure as strategic distribution nodes for military
operations and civil support. Furthermore, cross-sectoral policy synergy among
agriculture, energy, and defense institutions is essential to fully optimize the
strategic potential of the palm oil industry within the national resilience agenda.
To this end, regulatory strengthening, investment in bioenergy downstream
development, and enhanced inter-ministerial coordination are required to ensure
that the palm oil industry serves not only as an economic pillar, but also as a
strategic instrument for safeguarding national sovereignty and stability.

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