Regional Production Networks of Palm Oil: The Roles of Malaysian Enterprises in Indonesian Palm Oil Industry

Mr Bonifasius Endo Gauh Perdana1

1Department of International Relations, Faculty of Social and Political Sciences, Gadjah Mada University, Indonesia

Indonesia’s palm oil industry is now shifting to more inward-looking approaches to focus on domestic and regional markets, particularly in China and India, where sustainability regimes are not their main concern. With the vanguard of technology, Indonesia’s palm oil industry is supposed to upgrade and leapfrog to create sustainable value chains with higher value-added products. On the other hand, the challenges remain as Indonesia suffers from structural problems that tend to hamper industrial development policy. Due to decentralized political systems, the dynamics of value chain governance is determined by the confluence of multiple stakeholders at many levels. This paper employs Global Production Network (GPN) theory formulated by Yeung and Coe in 2015 to explain how structural competitive dynamics and actors’ specific strategies determine industrial development trajectories. This paper, then, argues that regional value chain of palm oil emerges as Malaysian enterprises intrafirm strategies dominate development trajectories of the industry. GPN frameworks offer systematic review of multifaceted economic and political dimensions of actors in palm oil value chains. Although Indonesia is a major exporter of palm oil products, industrial gaps and imbalances exist compared to Malaysia in terms of governance and higher value-added palm oil products. Therefore, the Indonesian government needs to amplify the roles and capacities of institutions, firms, and communities in order to gain more leverages to cater for a sustainable value chain of palm oil.


Biography

B. Endo Gauh Perdana is a graduate student in International Relations at Gadjah Mada University. His research interests include political economy issues in the fields of trade, regional economy, and international development cooperation. He is currently writing a thesis on the global value chain of palm oil in Indonesia.

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