Indonesia Legalizes Palm Oil Plantation Seizures

Prabowo’s Danantara-run SOE snaps up hundreds of companies

By: Ainur Rohmah

The Indonesian government is seizing up to 2 million hectares of seized illegal oil palm forest, some of it possibly from Malaysia’s biggest oil palm companies which for years have expanded across the Strait of Malacca, and handing them over to a state-owned enterprise which specializes in palm oil management.

That has transformed the newly-created state-owned PT Agrinas Palma Nusantara, formed from another state-run entity, PT Indra Karya, into a major player in the palm oil industry despite having operated for only a few months. Agrinas operates under Danantara, the controversial state-owned sovereign wealth fund overseeing hundreds of SOEs which was created in February by President Prabowo Subianto.

Although the Malaysian companies aren’t named, SD Guthrie Bhd, Kuala Lumpur Kepong Bhd, IOI Corp Bhd, and Genting Plantations Bhd all have extensive oil palm plantations in Indonesia. The Malaysia-based CIMB Securities said in a research note that Malaysian plantation companies are grappling with mounting regulatory risks after the government began seizing oil palm estates found to lack proper forestry permits or to be in breach of land-use laws.

Acting as the government’s operational arm for assets worth trillions of rupiah, Agrinas has been presented as a strategic national instrument with two primary missions: to recover state losses and to advance the government’s vision of renewable energy self-sufficiency through palm oil–based biofuel.

Upon taking office in late 2024, Prabowo affirmed his commitment to overhauling illegal practices in the palm oil sector, particularly those within forest areas. A presidential regulation issued in late January established the Forest Area Reorganization Task Force (Satgas PKH), chaired by Defense Minister Sjafrie Sjamsoeddin. By March, the task force had begun identifying and verifying forest areas targeted for reclamation. According to Satgas PKH data, 1.17 million hectares of illegal plantations within forest zones are slated for state takeover with 1.001 million already brought under state control spanning nine provinces and 64 districts, and involving 369 companies.

Palm oil plantations are one of Indonesia’s flagship economic sectors. The country is the world’s largest producer of palm oil, with over 16 million hectares under cultivation and an annual output of 50 million tonnes.

Zulkifli Hasan, the Coordinating Minister for Food Affairs, said that as of mid-2025, Agrinas Palma had been tasked, in several phases, with managing confiscated palm oil plantations totaling hundreds of thousands of hectares. This includes a significant asset previously controlled by the Duta Palma Group — 221,000 hectares spread across strategic regions such as Riau and West Kalimantan. The figure forms part of the government’s target for Agrinas Palma to eventually develop oil palm plantations across a million hectares.

Reuters reported that Indonesia has transferred 394,547 hectares of confiscated oil palm plantations to Agrinas Palma Nusantara, giving the state-owned enterprise more than 833,000 hectares under management. The seized land, once run by 232 private operators that the government did not name, largely consists of plantations established in forest zones without the required permits or in violation of land-use regulations.

According to its official website, Agrinas Palma has pledged to achieve self-sufficiency in food, energy, and water within the next four years. But Agrinas is not merely a plantation operator. Its main goal is to serve the government’s broader agenda for green energy independence. From its palm oil plantations, the company will produce biofuel and biodiesel — clean, renewable sources of energy aimed at reducing Indonesia’s reliance on fossil fuels while paving the way for a sustainable energy future.

On paper, the policy appears promising. But it has drawn criticism. Achmad Surambo, executive director of Sawit Watch, argued that transferring illegal plantations within forest areas to Agrinas lacks a clear scenario, transparency, and could set a dangerous precedent for the industry.

“The whitening and handover of illegal palm oil plantations to Agrinas is not the right solution,” Achmad said. “We have opposed this policy from the start, including the legalization of illegal plantations. Governance reform should be the priority, not legalizing illegality.”

If the government is serious about addressing illegal palm oil within forest zones, he said, it should pursue strict law enforcement through the courts, ensuring a transparent resolution that the public can monitor.

Febrie Adriansyah, head of the Satgas PKH and chief of the Attorney General’s Special Crimes Division, acknowledged that reclaiming illegal palm oil land does not always proceed smoothly, largely due to unresolved legal issues. In some cases, seized assets still carry outstanding bank liens. Such conditions, he said, pose inherent risks, “but we are working to resolve them through coordination with the Ministry of State-Owned Enterprises (BUMN).”

Febrie explained that the reorganization of illegal palm oil plantations was initially based on the Omnibus Law on Job Creation. When many companies failed to comply, the regulation was issued to stipulate that forest areas occupied without permits will revert to the state and be managed in line with government policy.

The handover process from Satgas PKH to Agrinas Palma follows a specific sequence: first, the task force – a cross-agency team – seizes plantations proven to be operating illegally within state forest zones. Second, these confiscated assets, now classified as state property, are transferred by the Attorney General’s Office to the Ministry of State-Owned Enterprises. Third, the ministry directly appoints PT Agrinas Palma Nusantara to manage the land professionally. This direct appointment is permitted under state asset management rules, which allow the minister to assign state assets seized through criminal proceedings to a government agency for specific duties without going through an auction process.

Febrie maintained that transferring the land to a state company reflects a government commitment to restoring state rights over unlawfully occupied land while safeguarding public welfare and environmental preservation. “This policy is not nationalization, but the return of state assets that were held without authorization,” he said.

“Every step is carried out transparently, through a clear legal process, and with consideration for the social and economic impacts on local communities,” he added.

But concerns over uncertainty and investment climate have surfaced within the palm oil business community. Hilman Firmansyah, deputy chairman of the Indonesian Oil Palm Smallholders Association (APPKSI), said the seizures could have a significant impact on the Indonesian economy, particularly in the palm oil sector. “The impact could be positive if the reorganization is implemented properly and fairly, but it could be negative if it generates uncertainty and conflicts that worsen the investment climate,” he warned.

The Malaysian securities firm CIMB warned that the crackdown could invite deeper scrutiny from investors focused on environmental, social, and governance (ESG) issues, from the legality of land holdings to deforestation concerns and compliance with sustainability certifications. It could also prompt fears of future regulatory shifts and higher risk premiums for firms heavily exposed to Indonesian operations.

For now, CIMB said its discussions with covered Malaysian plantation firms suggest the financial fallout may be limited, based on early assessments. But the research house noted that many companies remain in the dark over the full implications, underscoring that regulatory uncertainty persists.