A Survey of Business Models for Agricultural Investment in Indonesia

This research paper surveys foreign investment trends and business models in Indonesia's agricultural sector. It identifies contract farming and land concessions as the primary investment structures, analyzing their impacts on productivity and rural livelihoods. The author argues that while these models offer potential benefits, they are often undermined by an unfavorable business environment, lack of transparency in land use, and regulatory inconsistencies, leading to policy recommendations for land reform and enhanced farmer capacity.

• The Indonesian agricultural sector's contribution to the national GDP has declined over time, dropping from 18 per cent in 1993 to 15 per cent in 1997, and stabilizing slightly below 15 per cent in the following decade.
• Foreign Direct Investment (FDI) in agriculture is significantly lower than in the industrial sector; for example, 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.
• Contract farming is the most popular investment approach in Indonesia, consisting of four main types: plasma–nucleus partnership (PIR), subcontracting, harvest and pay (ijon), and operational cooperation (KSO).
• The plasma–nucleus partnership (PIR), particularly the Nucleus Estate Smallholders (NES) scheme in palm oil, requires firms to develop plots for individual farmers in a 'plasma area' and provide technical support, with land ownership transferred to farmers after 3 to 5 years following the first harvest.
• Land concessions are granted through various legal rights: Cultivation Rights (HGU) for commercial use (up to 25 years, extendable), Rights to Build (HGB) for 30 years (extendable), and Rights to Use (Hak Pakai) for non-commercial purposes.
• The use of Industrial Forest Plantations (HTI) for pulpwood, specifically the acacia mangium species, provided Indonesian producers a competitive advantage over North American and Scandinavian counterparts due to high harvest yields of 150–190 cubic metres/hectare every 7-8 years.
• Land concessions have frequently led to disputes and tensions due to overlapping claims from the Dutch colonial period and the post-independence nationalization process, as well as the misuse of HGU certificates by recipients.
• The author recommends the implementation of a geographical information system to provide public and investor transparency on land use, mitigating disputes and potential collusion between private investors and provincial governments.

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} }