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East Kalimantan Environmentally Sustainable Development Strategy

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39<br />

Including financial transfers for REDD, GDP from palm oil could increase to<br />

IDR 2.8 trillion by 2030<br />

<strong>East</strong> <strong>Kalimantan</strong>’s real GDP forecast<br />

IDR Trillions<br />

3.0<br />

2.5<br />

2.0<br />

1.5<br />

1.0<br />

0.5<br />

0<br />

2005<br />

SOURCE: team analysis<br />

10<br />

15<br />

1 Including REDD payments for reduced land conversion<br />

20<br />

25<br />

2030<br />

<strong>Environmentally</strong><br />

<strong>Sustainable</strong><br />

<strong>Development</strong><br />

<strong>Strategy</strong> 1<br />

Business<br />

as usual<br />

CAGR<br />

location. Raising yields in <strong>East</strong> <strong>Kalimantan</strong> up to Indonesia’s average would result in 9 percent<br />

higher production from a given hectare of oil palm plantation, which would represent a significant<br />

additional contribution to GDP.Yield improvements might also be seen as a way to decrease the<br />

demand for converting land into oil palm plantations, which could result in lower emissions from<br />

the conversion process. However, yield improvements will not result in additional employment , as<br />

the number of employees needed within the labor-intensive palm oil sector is more directly related<br />

to area planted than output.<br />

DRAFT<br />

Box 1 discusses a 10-step approach to palm oil productivity improvements in Harapan Sawit<br />

Lestari Estate in West <strong>Kalimantan</strong>.<br />

Several opportunities exist for investing in the downstream manufacturing of CPOderived<br />

products, which range from food oils and biofuels to oleochemicals. 12 Our<br />

conversations with potential investors have largely ruled out downstream manufacturing in food<br />

oils as companies prefer to process these near their consumer markets. We have focused on<br />

increasing the production of oleochemicals but, according to investors, a number of regulatory and<br />

fiscal obstacles discourage new investments in this area. Whereas Malaysia uses differing export<br />

duties to promote refined palm oil products over crude palm oil, Indonesia does not. In addition,<br />

good transportation is important for downstream processing. The lack of seaports with refined<br />

palm oil handling capacities and sufficient roads to enable fast transportation to centrally located<br />

refineries, also act as a disincentive to downstream manufacturing (EXHIBIT 19). We have identified<br />

improved infrastructure as a requirement to attract further investments in downstream refining.<br />

10%<br />

8%<br />

Exhibit 18<br />

Biofuels might be a sizeable opportunity as demand is rising fast, especially in Europe. The<br />

European Union has recently released new criteria that oil palm plantations have to meet if they<br />

12 Oleochemicals are used in soap products such as detergent, toothpaste, shampoo, and face soap

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