A Survey of Business Models for Agricultural Investment in Indonesia

The document examines agricultural investment in Indonesia, focusing on two primary business models: contract farming and land concessions. It notes that while agriculture remains a critical source of employment, its relative contribution to GDP has declined. The paper details various contract farming arrangements, such as the plasma-nucleus partnership, and land concession types, including cultivation rights (HGU). It finds that these models have produced mixed results, often hampered by poor governance, land disputes, and a lack of transparency. The author recommends enhancing farmer capacity, reforming land ownership regulations, and implementing a geographical information system to manage land use.

• The agricultural sector's share of Indonesia's national GDP has generally declined over the last few decades, dropping from 18 per cent in 1993 to stabilize slightly below 15 per cent by 2011.
• Foreign direct investment (FDI) in agriculture is significantly lower than in the industrial sector; in 2010, there were 200 FDI projects in agriculture compared to 1,000 in industry.
• Palm oil plantations producing crude palm oil (CPO) are highly attractive to foreign investors, with Malaysia serving as the lead investor in this subsector.
• The plasma-nucleus partnership (PIR) is the most popular contract farming model in Indonesia, often linked to the Nucleus Estate Smallholders (NES) scheme in the palm oil industry.
• Contract farming models have shown mixed outcomes; some provided farmers with better market access and credit, while others failed due to core firms' inability to provide promised market access or capital.
• Land concessions, particularly the Rights to Exploit (HPH), have seen a decline in both the number of licenses and total forest coverage from 1993 to 2011.
• Industrial Forest Plantations (HTI) have provided a competitive advantage to Indonesian pulp producers through the use of fast-growing species like acacia mangium, achieving yields of 150–190 cubic metres/hectare by the mid-1990s.
• Cultivation Rights (HGU) have frequently led to land conflicts and disputes due to overlapping claims from the colonial era and the misuse of land by recipients.
• The author recommends the creation of a geographical information system to provide transparent data on land use and ownership to prevent disputes and collusion between local governments and the private sector.

APA

Tambunan, T. T. H. (2013). A Survey of Business Models for Agricultural Investment in Indonesia. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/survey_business_models_ag_indonesia.pdf

Chicago

Tambunan, Tulus T. H. A Survey of Business Models for Agricultural Investment in Indonesia. International Institute for Sustainable Development, 2013. https://www.iisd.org/system/files/publications/survey_business_models_ag_indonesia.pdf.

Wikipedia

{{cite report |last1=Tambunan |first1=Tulus T. H. |title=A Survey of Business Models for Agricultural Investment in Indonesia |publisher=International Institute for Sustainable Development |date=2013 |url=https://www.iisd.org/system/files/publications/survey_business_models_ag_indonesia.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{tambunan2013survey, author = {Tambunan, Tulus T. H.}, title = {{A Survey of Business Models for Agricultural Investment in Indonesia}}, institution = {International Institute for Sustainable Development}, year = {2013}, url = {https://www.iisd.org/system/files/publications/survey_business_models_ag_indonesia.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }