Indonesia’s efforts to address millions of hectares of oil palm plantations located within state forest zones have exposed weaknesses in both gradual rehabilitation and stricter enforcement approaches, according to a policy analysis involving researchers from Hasanuddin University.

The study examines Indonesia’s transition from the Strategi Jangka Benah (SJB), or Rehabilitation Period Strategy, introduced in 2020–2021, toward a stronger enforcement approach under Presidential Regulation No. 5/2025.

Researchers argue that neither approach fully addresses the economic and governance factors behind oil palm cultivation in forest areas, particularly where smallholder livelihoods and uncertain land rights are involved.

The analysis, led by Professor Muhammad Alif K. Sahide of Hasanuddin University’s Faculty of Forestry, was published in Forest Policy and Economics in August 2026.

3.4 Million Hectares of Oil Palm Located in Forest Zones

Indonesia is the world’s largest producer of palm oil, making the crop an important source of income, employment and export revenue.

However, an estimated 3.4 million hectares of oil palm plantations are located within areas officially classified as state forest zones.

Managing these plantations presents a difficult policy question.

Restoring forest functions can require reducing or changing existing oil palm cultivation. At the same time, some plantations provide income for smallholder farmers and communities whose land tenure or legal status may be complicated.

The researchers argue that resolving this conflict requires more than choosing between allowing plantations to remain and removing them through enforcement.

Rehabilitation Strategy Offered Limited Incentive to Replace Oil Palm

Indonesia introduced the SJB approach in 2020–2021 as a transitional strategy.

Rather than requiring existing oil palm plantations to be removed immediately, the policy allowed cultivation to continue temporarily while farmers gradually introduced trees and food crops.

In principle, the approach offered a pathway toward restoring forest characteristics without abruptly eliminating farmers’ existing income.

The study, however, found an important economic limitation.

Farmers had few incentives to replace profitable oil palm plantations with alternative land uses.

When the financial returns from established oil palm remain attractive, rehabilitation measures that depend heavily on voluntary changes in farmer behavior may struggle to achieve their intended environmental outcomes.

This creates a wider challenge for restoration policy: ecological objectives may be difficult to implement unless the economic consequences for land users are addressed at the same time.

Indonesia Shifts Toward Stricter Forest Enforcement

The policy direction changed in early 2025 with Presidential Regulation No. 5/2025, which introduced a stronger enforcement approach toward activities within forest areas.

Measures include penalties and state reclamation.

While stricter enforcement can strengthen the government’s ability to address unauthorized land use, the researchers warn that it can also create additional uncertainty for smallholder farmers.

One concern identified in the analysis is what happens to reclaimed land and how affected communities participate in subsequent restoration or management.

Without clear arrangements, stronger state intervention could marginalize smallholders rather than resolve the underlying governance problems associated with forest-zone cultivation.

Researchers Call for Clearer Land Rights

The researchers based their analysis on policy and legal documents as well as field engagement in Central Kalimantan and West Sulawesi.

Their findings point toward land tenure as a central part of the issue.

They call for clearer land rights, stronger community participation in restoration and secure social forestry arrangements.

These measures could help establish who has legitimate rights to use and manage land while creating clearer responsibilities for forest rehabilitation.

Community involvement is particularly relevant where restoration policies directly affect household income and existing agricultural production.

Without credible alternatives or secure rights, enforcement alone may shift the immediate use of land without addressing the conditions that encouraged forest conversion.

Agriculture, Forestry and Energy Policies Need Better Coordination

The analysis also identifies coordination between government policy areas as an important requirement.

Oil palm sits at the intersection of agriculture, forestry and energy policy, while also being connected to rural development, exports and land-use regulation.

Policies encouraging agricultural production or particular energy feedstocks can conflict with forest conservation objectives if land-use implications are not considered across government agencies.

The researchers therefore argue for more integrated governance rather than relying on isolated forestry regulations.

This means considering environmental restoration alongside agricultural economics, land tenure, community livelihoods and institutional responsibilities.

Forest Restoration Is Also a Governance Question

Indonesia’s experience demonstrates the difficulty of restoring forest areas after commercially valuable agricultural production has already become established.

Gradual rehabilitation can face weak participation when alternative land uses cannot compete economically with oil palm.

Stricter enforcement can provide stronger legal intervention but may create social and tenure problems if smallholder rights and future land management are unclear.

The Hasanuddin University analysis suggests that the policy challenge is therefore not simply whether Indonesia should prioritize forest protection or oil palm production.

The more fundamental issue is establishing a governance framework capable of addressing ecological restoration while recognizing economic incentives, community livelihoods and land rights.

With an estimated 3.4 million hectares of oil palm located within state forest zones, how Indonesia resolves these competing interests could have significant implications for its future forest management and restoration policies.

Source: Hasanuddin University; research published in Forest Policy and Economics in August 2026.

Last Updated on 31/08/2026 by Jota Machinery