{"id":277,"date":"2026-03-20T13:57:20","date_gmt":"2026-03-20T04:57:20","guid":{"rendered":"https:\/\/vietnam-agri.com\/?p=277"},"modified":"2026-06-10T00:30:33","modified_gmt":"2026-06-09T15:30:33","slug":"indonesia-palm-oil","status":"publish","type":"post","link":"https:\/\/vietnam-agri.com\/en\/southeast-asia\/indonesia-palm-oil\/","title":{"rendered":"What is Indonesia's palm-oil production? Seven challenges and prospects of the world's largest producer"},"content":{"rendered":"

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The State of Southeast Asian Agriculture: Challenges Facing One of the World's Leading Agricultural Regions<\/h2>\n

Backed by a tropical monsoon climate and fertile delta regions, Southeast Asia is one of the world's leading agricultural regions, having nurtured a farming civilization spanning thousands of years.<\/p>\n

Vietnam in particular, with a population of about 100 million, is agricultural power<\/a> of about 100 million people, with agriculture accounting for about 12% of GDP and more than 40% of the labor force. Annual rice output is about 43.5 million tonnes, with export volume ranking second in the world; coffee output ranks second in the world after Brazil, and for Robusta<\/a> it is the world's largest, for Cashew nuts<\/a> and black pepper<\/a> ranks first in the world.<\/p>\n

Thailand is an agricultural and food export powerhouse known as the \"kitchen of the world,\" with natural rubber production and exports among the largest globally. Indonesia has ASEAN's largest population, about 280 million, and the largest land area; it is the world's largest producer of palm oil, and together with Malaysia it accounts for more than 85% of global production.<\/p>\n

However, these agricultural powerhouses face serious structural challenges, including environmental destruction, loss of biodiversity, labor problems, and climate change.<\/p>\n

This article explains the realities of Southeast Asian agriculture in detail and explores the 7 main challenges each country faces, along with the outlook for a sustainable future.<\/p>\n

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The Scale and Characteristics of Agricultural Production in Southeast Asian Countries<\/h2>\n

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Vietnam: An Agricultural Powerhouse Supported by the Mekong Delta<\/h3>\n

Vietnamese agriculture is supported by the Red River Delta in the north and the Mekong Delta in the south, and the Mekong Delta is one of the world's leading production areas, responsible for more than half of the country's rice output.<\/p>\n

In 2023, total exports from agriculture, forestry, and fisheries reached about US$53 billion, accounting for more than 15% of the country's total exports. The Central Highlands is a major production area for plantation crops such as coffee, tea, cacao, and pepper, and the region's contribution is behind Vietnam's rise as a coffee powerhouse.<\/p>\n

The 1986 Doi Moi policy<\/a> Once this reform granted land-use rights to individual farmers and introduced a market economy, agricultural production expanded dramatically. In 1989, the country became a net rice exporter for the first time, and today it boasts the world's second-largest export volume.<\/p>\n

However, the average cultivated area per farm is about 0.44 hectares, among the smallest in ASEAN, and the sector faces the structural challenge that 97% of all agricultural workers are small and medium-scale farmers.<\/p>\n

Agriculture in Thailand, Indonesia, and Other ASEAN Countries<\/h3>\n

In Thailand, agriculture accounts for about 8 to 9% of GDP, and roughly 30% of the population is engaged in agriculture-related work.<\/p>\n

The average farmland area per household is about 3 hectares, and jasmine rice has earned a high reputation in international markets. processed chicken<\/a> The country has also established a world-class position in the export of these products.<\/p>\n

Indonesia boasts ASEAN's largest agricultural output and holds an overwhelming position in palm oil production. The Philippines is one of the world's leading banana exporters, but with nearly 20 typhoons approaching or making landfall each year on average, it faces a high risk of severe damage to crops, and as ASEAN's only net rice importer it carries vulnerabilities in food security.<\/p>\n

In Cambodia, Myanmar, and Laos, agriculture still accounts for a high share of GDP and employment, making agriculture's importance to economic development stand out.<\/p>\n

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7 Serious Challenges Facing Southeast Asian Agriculture<\/h2>\n

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Challenge 1: Low Smallholder Productivity and Aging<\/h3>\n

In Vietnam, about 57% of agricultural workers are unskilled, and those aged 50 and over account for about 43%.<\/p>\n

The average cultivated area per farm is about 0.44 hectares, among the smallest in ASEAN, a structure in which economies of scale are hard to achieve. Because 97% of all agricultural workers are small and medium-scale farmers, mechanization and the adoption of technology are slow to progress, forming a major barrier to improving productivity.<\/p>\n

Aging and a shortage of successors are also serious, with young people increasingly migrating to cities. Low farm incomes are accelerating young people's move away from agriculture, making it an urgent issue to secure the people who will carry on sustainable agriculture.<\/p>\n

Challenge 2: Low Added Value and Underdeveloped Value Chains<\/h3>\n

Southeast Asian agriculture depends on exports of primary commodities, and the creation of added value at the processing and distribution stages is insufficient.<\/p>\n

In Vietnam, the underdevelopment of the cold chain is serious, post-harvest losses are large, and quality control is difficult. Because much of the produce is traded through intermediaries, farmers' take-home income is kept low.<\/p>\n

branding<\/a> Processing and higher value-addition efforts remain limited to a portion of output, leaving the sector far from strengthening its competitiveness in international markets. Improving the efficiency and modernization of the entire agricultural value chain is needed.<\/p>\n

Challenge 3: Food Safety and Environmental Problems<\/h3>\n

Soil and water pollution from the overuse of pesticides and chemical fertilizers is worsening.<\/p>\n

The development and observance of food safety standards is insufficient, and securing reliability in international markets is a challenge. The building of traceability systems lags, and the mechanisms for guaranteeing food safety are fragile.<\/p>\n

If environmentally burdensome farming practices continue, a long-term decline in productivity will be unavoidable. A shift to sustainable agriculture is urgently needed.<\/p>\n

Challenge 4: Vulnerability to Climate Change<\/h3>\n

Southeast Asia is one of the regions most susceptible to the effects of climate change.<\/p>\n

In the Mekong Delta, salt damage from rising sea levels is worsening, having a major impact on rice production. The frequency and intensity of droughts and floods are increasing, heightening the instability of agricultural production.<\/p>\n

In the Philippines, typhoons cause crop damage every year, and the economic losses to farmers are immeasurable. Efforts on both adaptation and mitigation of climate change are essential.<\/p>\n

Challenge 5: The Farm-Industry Gap and Outflow of Labor<\/h3>\n

The gap between agricultural incomes and urban incomes in industry and services is widening.<\/p>\n

The outflow of young people to cities is accelerating, and in rural areas labor shortages<\/a> is becoming increasingly serious. Without improving the appeal of farming and raising incomes<\/a>, it will be difficult to secure the people who will carry on sustainable agriculture.<\/p>\n

Developing rural infrastructure, enhancing education and healthcare services, and raising incomes through the modernization of agriculture are the keys to correcting the gap.<\/p>\n

Challenge 6: Deforestation and Loss of Biodiversity (Focusing on Indonesian Palm Oil)<\/h3>\n

In Indonesia, the development of oil palm plantations is the largest cause of deforestation.<\/p>\n

The largest producing region is Riau Province, where plantation area reaches 3.49 million hectares, accounting for 21% of Indonesia's total oil palm plantation area. Forest areas covered by tropical rainforest have been greatly transformed by oil palm plantation development.<\/p>\n

On the island of Borneo, the elephant population is around 1,500 to 2,000, and 80% of the orangutan's habitat has already been lost. On Sumatra as well, elephants have fallen to a few thousand or fewer, orangutans to around 15,000, and tigers to 400 or fewer.<\/p>\n

Land disputes caused by oil palm plantation development are also serious, with 550 disputes occurring in Indonesia.<\/p>\n

Challenge 7: Lagging Technological Innovation and Digitalization<\/h3>\n

The adoption of smart agriculture is limited to a few advanced farmers, and its spread is not progressing.<\/p>\n

Precision farming using advanced technologies such as IoT, AI, and drones is adopted in few cases even among large-scale farmers. For smallholders, the cost of adopting technology and a lack of knowledge are major barriers.<\/p>\n

Mechanisms are needed to spread the benefits of technological innovation widely, such as providing market information using digital technology, improving access to finance, and securing traceability.<\/p>\n

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A Path to Sustainable Southeast Asian Agriculture: International Cooperation and Technical Support<\/h2>\n

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The Role of the Japan-ASEAN Green Cooperation Plan<\/h3>\n

The \"Japan-ASEAN Midori (Green) Cooperation Plan,\" adopted at the Japan-ASEAN Agriculture and Forestry Ministers' Meeting in May 2023, is a comprehensive cooperation framework for building sustainable agriculture and food systems in the Asian monsoon region.<\/p>\n

This cooperation plan promotes cooperation in many areas, including adaptation to climate change, the transfer of environmental-impact-reduction technologies, support for smallholders, and the building of traceability systems.<\/p>\n

Through cooperation that draws on Japan's technology and experience, improvement in the sustainability of Southeast Asian agriculture is anticipated.<\/p>\n

Vietnam's Adoption of Smart Agriculture and National Strategy<\/h3>\n

The Vietnamese government has set out its \"Strategy for Sustainable Agriculture and Rural Development to 2030, with a Vision to 2050,\" positioning the adoption of smart agriculture as a national priority.<\/p>\n

The introduction of advanced technologies is advancing, including the collection of soil and weather data via IoT sensors, AI-based pest and disease prediction, and precision spraying by drones. In rice production, the aim is to balance higher yields with lower environmental impact through optimized water management.<\/p>\n

In coffee production, the use of digital technology to improve quality and secure traceability is advancing.<\/p>\n

Certification Systems and Sustainable Value Chains<\/h3>\n

Certification systems are an important mechanism for achieving sustainable agricultural production.<\/p>\n

For palm oil there are RSPO (the Roundtable on Sustainable Palm Oil) and ISPO (Indonesian Sustainable Palm Oil), but the cost of obtaining certification, complex procedures, and insufficient technical support for smallholders are barriers to their spread.<\/p>\n

Similar certification systems are being introduced for other agricultural products such as coffee, cacao, and natural rubber, and the building of sustainable value chains is advancing.<\/p>\n

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The Future Outlook for Southeast Asian Agriculture<\/h2>\n

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Balancing Rising Demand with Sustainability<\/h3>\n

Global food demand will continue to rise in the years ahead, driven by population growth and the economic growth of emerging economies.<\/p>\n

Southeast Asia plays an important role in the world's food supply, and expectations for expanded production are rising. However, if production continues to expand under the current methods, environmental destruction will grow even more serious.<\/p>\n

Balancing rising demand with environmental protection is the greatest challenge facing Southeast Asian agriculture. A multifaceted approach is needed, including a shift to sustainable production systems, improved productivity, and greater efficiency on existing farmland.<\/p>\n

Including Smallholders and Technological Innovation<\/h3>\n

In Southeast Asian agriculture, the role of smallholders is extremely important.<\/p>\n

Including these farmers in sustainable value chains is the key to improving the sustainability of the entire industry. This requires comprehensive support, including technical support, improved access to funding, help in obtaining certification, and securing access to markets.<\/p>\n

The advance of science and technology\u2014such as the adoption of precision farming technology, variety improvement for higher yields, and the development of low-impact cultivation methods\u2014supports sustainable production. Building traceability systems using digital technology will also contribute to realizing highly transparent supply chains.<\/p>\n

Japan's Role and the Importance of International Cooperation<\/h3>\n

Japan plays an important role in improving the sustainability of Southeast Asian agriculture.<\/p>\n

Contributions in many areas are anticipated, including technical cooperation, funding support, and human-resource development through the Japan-ASEAN Green Cooperation Plan. Through cooperation that draws on Japan's experience in agricultural technology, food safety management, and environmental conservation, the modernization and improved sustainability of Southeast Asian agriculture can be realized.<\/p>\n

It is also important for companies to establish and carry out sustainable sourcing policies for agricultural products, and to provide information and raise awareness among consumers. Each of us choosing certified products that consider sustainability, and valuing and supporting companies' efforts, helps protect Southeast Asia's agriculture and environment.<\/p>\n

Southeast Asian agriculture is an important area where the world's food system and environmental problems intersect. The shift to a sustainable future is not easy, but through international cooperation, technological innovation, and a change in consumer awareness, the way forward will open up.<\/p>\n

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