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The Role of Markets, Technology, and Policy in Generating Palm-Oil Demand in Indonesia

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  • Joanne C. Gaskell

Abstract

Indonesia produces more palm oil and consumes more palm oil per capita than any country in the world. This article examines the processes through which Indonesia has promoted palm-oil consumption and some of the consequences of that promotion. Partial equilibrium modelling shows that Indonesia's remarkable increase in palm-oil consumption since 1985 is not largely attributable to population and income growth. Instead, much of this consumption growth has resulted from substitution away from coconut oil, facilitated by government policies on technology, pricing, distribution, and trade. The switch from coconut oil to palm oil in Indonesia was associated with increased land conversions to agriculture and diminished smallholder competitiveness. Despite lower rates of cooking-oil substitution in the future, simulations suggest that Indonesia's total palm-oil consumption in 2035 will be at least double that of 2010.

Suggested Citation

  • Joanne C. Gaskell, 2015. "The Role of Markets, Technology, and Policy in Generating Palm-Oil Demand in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 51(1), pages 29-45, April.
  • Handle: RePEc:taf:bindes:v:51:y:2015:i:1:p:29-45
    DOI: 10.1080/00074918.2015.1016566
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    References listed on IDEAS

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    1. Colin Hunt, 2010. "The costs of reducing deforestation in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 46(2), pages 187-192.
    2. Stephen Marks & Donald Larson & Jacqueline Pomeroy, 1998. "Economic Effects of Taxes on Exports of Palm Oil Products," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 34(3), pages 37-58.
    3. Eko Ruddy Cahyadi, 2013. "Contract Farming and Risks for Smallholders in the Oil-Palm Industry in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 49(3), pages 381-382, December.
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    Cited by:

    1. Yudha Purbawa & I Gede Mahatma Yuda Bakti & Helena J. Purba & Nidya J. Astrini & Romeyn P. Putra & Sik Sumaedi, 2023. "Acceptable price of packaged palm cooking oil amid scarcity in Indonesia," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 22(6), pages 446-454, December.
    2. Walter P. Falcon & Rosamond L. Naylor & Nikhil D. Shankar, 2022. "Rethinking Global Food Demand for 2050," Population and Development Review, The Population Council, Inc., vol. 48(4), pages 921-957, December.
    3. Lin, J., 2018. "The role of institutions in international coconut trade: a gravity model approach," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277012, International Association of Agricultural Economists.

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