On the Outer Islands of Indonesia the plantation sector, especially the oil palm plantation sector, has expanded dramatically in the past 40 years. One of the main factors affecting the industrial organization of the plantation sector is the government’s policy and institutional framework. Among the laws and regulations determining plantation development and activities, the regulations on plantation business permits have functioned as the policy instrument to directly govern the activities of the plantation business and shape the direction of the sector’s industrial organization. Between 1996 and 2013, five regulations on plantation business permits were enacted. This paper discusses the changing nature of the regulations from the viewpoint of policy intervention in the organization of the plantation sector.
Ministerial Decree of Agriculture No. 786/1996, which was enacted in the last years of Suharto’s regime, focused on creating an institutional environment conducive to the development of estates by plantation companies. Ministerial Decree of Forestry and Plantation No. 107/1999 and the succeeding Ministerial Decree of Agriculture No. 357/2002, which were enacted in the early period of the reform era, in a sudden reversal of policy emphasized the interests of the masses and promoted cooperatives as new operating bodies of the plantation business. However, such cooperatives did not really come into being as intended by the policies. Ministerial Regulation of Agriculture No. 26/2007 and the succeeding Ministerial Regulation of Agriculture No. 98/2013 encouraged the involvement of plantation companies as the main operating bodies of the plantation business, under the condition that they fully considered the interests of local people, including facilitating the development of smallholdings.