Indonesia’s Palm Oil Crackdown Is Failing Its Forests — and Its Farmers, Landmark Study Warns

Indonesia produces more palm oil than any other country on Earth, and nowhere are the tensions created by that dominance more visible than inside the nation’s official forest zones. An estimated 3.4 million hectares of oil palm now stand on land that the Indonesian state formally classifies as forest estate — a sweeping administrative gray zone where one of the world’s most profitable commodities collides head-on with national forest protection. For years, the government managed this collision with patience, allowing farmers to keep harvesting while gradually nudging their plantations toward more sustainable systems. In early 2025, patience gave way to enforcement, as new rules introduced administrative penalties, the threat of criminal prosecution, and state reclamation of forest land. Now a policy analysis from Hasanuddin University argues that neither approach actually works — and that the crackdown may be manufacturing fresh insecurity for the smallholder farmers whose decisions will ultimately determine the fate of Indonesia’s forests.

The study was led by Professor Muhammad Alif K. Sahide, who heads the Forest and Society Research Group at Hasanuddin University’s Faculty of Forestry, working with researchers at other Indonesian institutes, and was published in the journal Forest Policy and Economics. It dissects two consecutive national experiments: Strategi Jangka Benah, or SJB — the “Rehabilitation Period Strategy” rolled out in 2020–2021 — and Presidential Regulation No. 5/2025, the enforcement-first framework that succeeded it. Critically, the team did not limit itself to reading policy documents. By engaging directly with stakeholders in Central Kalimantan and West Sulawesi, two regions where SJB was actually implemented, the researchers observed how these instruments behave on real landscapes and among real farming communities rather than in ministerial offices. Their diagnosis is stark: Indonesia has oscillated between two competing logics — incorporating oil palm growers into a legal framework, and reappropriating the land through state control — and neither logic confronts the underlying drivers of forest conversion. That blind spot, they conclude, is precisely where the problem lives.

The technical roots of the dilemma run deep into Indonesian land law. Vast territories are formally designated as kawasan hutan — the state forest zone — a status based on administrative classification rather than on what is actually happening on the ground. Cultivating oil palm inside these zones without formal forest-area approval is, on paper, encroachment, even when farming families have worked the land for years. That is how millions of hectares of productive, established plantations ended up in legal limbo: agronomically rooted, economically indispensable, and formally unauthorized. The economics explain why the overlap persists. Oil palm is among the most remunerative crops a smallholder can grow; it fruits year-round, generates harvest income on a near-monthly cycle through the sale of fresh fruit bunches to processing mills, and outcompetes most alternative land uses in financial return. As international pressure for sustainably sourced palm oil intensified, the overlap between commodity expansion and state forest land became politically untenable, pushing Jakarta to attempt what no policy has yet achieved: protecting the forest estate without dismantling the rural livelihoods built on palm. For the state, the forest zone is fundamentally a question of legality; for the farmers inside it, it is a question of survival — and the two have rarely been reconciled.

The first serious attempt to untangle the knot was SJB, introduced across 2020–2021. Its name translates roughly as a “buffering period strategy” — a deliberate pause designed to let reality on the ground catch up with the law. Instead of evicting farmers or clearing plantations, the strategy allowed existing oil palm cultivation to continue through a transitional period while farmers were expected to progressively convert their monocultures into mixed agroforestry systems. In principle, this is elegant landscape engineering. Agroforestry interlaces cash crops with timber species, fruit trees, and food crops, rebuilding a more complex canopy structure that can improve soil cover, reduce erosion, diversify household income, and soften the ecological footprint of industrial monoculture. SJB explicitly prioritized gradual rehabilitation and social inclusion, betting that a defined buffer period would let farmers adjust without livelihood shock. The state, in effect, traded immediate enforcement for a promise of transformation: keep farming for now, but begin replacing a single-crop system with a layered, more forest-like one.

The fieldwork in Central Kalimantan and West Sulawesi exposed why that wager largely failed. Converting a productive oil palm stand into agroforestry is not a cost-neutral ecological upgrade; it is a major economic sacrifice. Timber and many food crops mature slowly, while palm oil pays continuously. Yet SJB offered farmers few economic incentives to make the transition — no meaningful subsidies, no guaranteed markets for alternative crops, no bridge financing for the lean years. With palm oil remaining profitable and alternative livelihoods limited, replacing productive plantations with slower-growing timber or food crops was, for most smallholders, economically irrational. In stakeholder engagements across the two provinces, the same calculation surfaced repeatedly: diversification made ecological sense, but without compensation, credit, or markets for alternatives, it meant an income loss that small families could not absorb. Oil palm was not merely a crop in these landscapes; it was the backbone of household cash flow, and a policy that asked farmers to uproot their most reliable income without replacing it asked them to personally underwrite forest restoration.

Then the pendulum swung. In early 2025, the government issued Presidential Regulation No. 5/2025, reframing the problem as one of law enforcement and territorial control. The regulation introduced administrative penalties, opened the door to potential criminal enforcement against violations, and empowered the state to reclaim forest land. Where SJB asked how to bring farmers along, Perpres 5/2025 asks how to take the land back. The Hasanuddin team warns that this shift leaves the implications for smallholder livelihoods dangerously undefined. The regulation frames reclamation primarily through enforcement and territorial control — who is penalized, who is removed — while saying little about what happens to the people who cultivated the land, or who will control it afterward. The researchers find that this enforcement-oriented approach could create further uncertainty over land and livelihoods, precisely the conditions under which long-term stewardship of land tends to collapse. For smallholders already living with legal ambiguity, the new regime can convert a stable, if informal, livelihood into a precarious one almost overnight.

That gap matters because of who is best positioned to absorb reclaimed land. The researchers caution that forest land recovered through reclamation could become concentrated among state-owned companies or other actors with greater political, bureaucratic, or financial influence — a dynamic that would marginalize smallholders even further while leaving the underlying economics of oil palm untouched. Enforcement without tenure clarification, in other words, does not eliminate the incentives driving conversion; it merely changes who can safely act on them. The team characterizes the two policies as fragments of a fragmented governance architecture: SJB prioritized gradual rehabilitation and social inclusion, while Perpres 5/2025 places far greater emphasis on law enforcement and state control. What neither confronts is the structural engine of conversion — profitable global demand, insecure land rights, and the scarcity of viable rural alternatives — which means the forest frontier keeps advancing no matter which enforcement mood prevails.

The researchers’ alternative begins where both policies have so far refused to go: land rights. Before penalties are imposed, they argue, the state must clarify who holds legal rights to the land, so that enforcement does not criminalize farmers for administrative ambiguities the state itself created. Social forestry programs — community-based tenure and management schemes — should be used to give smallholders secure, legally recognized rights over the land they farm, converting today’s gray zone into a governed one. This is not merely a matter of fairness; it is a question of investment logic. Farmers will not plant slow-growing timber trees or diversify into food crops if they believe the plot could be reclaimed next year, because agroforestry only pays across time horizons that insecure tenure cannot guarantee.

The blueprint also reaches upward and outward. Local communities, the study argues, should be involved directly in planning forest restoration, and must share in the benefits of restored land, so that conservation competes with palm oil on economic terms rather than moral ones. Coordination must also span the whole of government: the agriculture, forestry, and energy ministries need aligned policies on farming, palm oil, biodiesel, and forest protection, so that the state is not simultaneously stimulating palm demand through energy policy while policing its expansion through forestry law. Without that alignment, every field-level intervention fights incentives created upstream, and the cycle of conversion, amnesty, and crackdown simply repeats itself with sharper edges each time.

The study’s deepest message is that forest restoration cannot be separated from the livelihoods and land rights of the communities who live inside these landscapes. Without addressing land rights and economic needs, the researchers conclude, new regulations risk producing uncertainty without resolving the underlying challenge. “The challenge, then, is not merely to design better policies, but to build governance architectures that can navigate the inherent trade-offs between economic, social, and ecological goals in a transparent, accountable, and equitable manner,” says Professor Alif. The analysis was made available online on June 13, 2026, and published in Volume 189 of Forest Policy and Economics on August 1, 2026, arriving just as Perpres 5/2025 begins to reshape practice across the Indonesian archipelago. With roughly 3.4 million hectares of oil palm at stake, and global scrutiny of palm oil supply chains intensifying, the question is no longer whether Indonesia will act on its forest zones, but whether it will act in a way that keeps both forests and forest communities standing.

Subject of Research: Governance of oil palm cultivation within Indonesia’s state forest zones, evaluating the shift from gradual rehabilitation (Strategi Jangka Benah) to strict enforcement (Presidential Regulation No. 5/2025) and its implications for forest restoration, land rights, and smallholder livelihoods

Subject of Research: Agriculture

Article Title: Policy forum: Between incorporation and reappropriation – The unresolved dilemma of oil palm in Indonesia’s forest zones

Article References: Sahide, M. A. K., Faturachmat, F., Abdullah, A., Ichwan Kadir, M., Yunus, A., & Maryudi, A. (2026). Policy forum: Between incorporation and reappropriation – The unresolved dilemma of oil palm in Indonesia’s forest zones. Forest Policy and Economics, 189, Article 103835. https://doi.org/10.1016/j.forpol.2026.103835

Image Credits: AI Generated

DOI: 10.1016/j.forpol.2026.103835

Keywords: oil palm, Indonesia, state forest zones, forest governance, smallholder farmers, land rights, agroforestry, social forestry, forest restoration, palm oil policy, Perpres 5/2025, forest conversion

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Alan Morgan. (August 29, 2026). Stricter laws alone cannot resolve Indonesia’s forest oil palm dilemma, study finds. Scienmag. https://scienmag.com/stricter-laws-alone-cannot-resolve-indonesias-forest-oil-palm-dilemma-study-finds/

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