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View all search resultsThe agrarian reform law and investment prospects of palm oil
Rushed through the House, Indonesia’s new agrarian reform law will either secure the future of the nation’s multi-billion-dollar palm oil sector or paralyze it with unprecedented legal uncertainty.
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Protesters hold posters and banners that read '481,000 hectares is not just number, but our lives!' (left) and 'Customary land is not empty land' (right) during a rally in front of the Agrarian and Spatial Planning Ministry in Jakarta on Oct. 7, 2025, to protest deforestation that threatens indigenous land in South Papua. (Antara/Fakhri Hermansyah)
T
he House of Representatives’ passage of the agrarian reform bill into law on Sept. 22 signals an era of close alignment between the executive and legislative powers, a convergence made evident by the swift enactment of this strategic legislation.
However, such expedited lawmaking inevitably raises concerns regarding the thoroughness of the legislative process. In particular, questions persist over meaningful public participation and the accommodation of affected stakeholders, both of which are critical to preventing substantive legal deficiencies. A national agrarian policy governing millions of hectares of land and trillions of rupiah in investments should not be the product of haste. The ramifications of this decision will ripple directly through the palm oil sector, the backbone of the national economy, which generates tens of billions of dollars in foreign exchange annually and supports millions of livelihoods.
An industry of this scale remains acutely vulnerable when left without clear spatial and land-use certainty. Its trajectory hinges on the government’s resolve to restructure land governance into a framework that is equitable, predictable and conducive to long-term investment. While legislative deliberations offered initial promise in resolving existing ambiguities, critical gaps remain.
From a governance and budgetary efficiency standpoint, lawmakers made a defensible choice in dropping the proposed Agrarian Reform Implementing Agency (LPRA), initially National Agrarian Reform Agency (BRAN), and its supervisory board, avoiding further institutional bloat. Yet delegating the establishment of the LPRA to a Presidential Regulation (Perpres) creates distinct legal vulnerabilities.
An agency instituted via Perpres possesses far less institutional legitimacy, executive authority and budgetary security than one established by statute. This arrangement leaves agrarian governance susceptible to the whims of shifting political cycles rather than anchoring it within a permanent, statutory body equipped to arbitrate inter-ministerial conflicts.
More positively, the mechanism for determining priority areas for agrarian reform has shifted toward a more proactive posture. The burden of verification no longer rests solely on local communities; the state is now obligated to systematically identify and verify land data. This transition is essential for safeguarding smallholder farmers who, despite managing the majority of the country’s oil palm acreage, are frequently locked out of formal supply chains due to administrative discrepancies or unilateral state forest demarcations.
Even so, the new law carries significant potential for regulatory friction due to incomplete harmonization with preexisting legal frameworks, notably the 1960 Basic Agrarian Law, the Forestry Law, the Plantation Law and the land provisions of the Job Creation Law. Without clear jurisdictional boundaries between technical ministries and newly minted regulatory instruments, the law risks prolonging land disputes on the ground rather than resolving them.
