Palm oil industry and investment development in Dumai City, Indonesia: A focus on local economy development and sustainability

Abstract This study focused on the impact of investment in the palm oil industry on promoting socio-economic development in Dumai City, Indonesia. Currently, sustainable investment practices, such as economic growth, environment, and people’s welfare, had not been widely implemented in the industry, and to address this issue, a qualitative methodology was employed with the support of NVivo 12 Plus software. Therefore, this study aimed to determine the impact of palm oil industry investment on sustainable economic development in Dumai. The obtained results showed that investment in the palm oil industry was still fluctuating, and this resulted in an unstable investment climate. The government had taken steps to increase investment in the industry by facilitating licensing and non-licensing services through the Online Single Submission (OSS) and additional fees. It was also found that social conflict arises between the local community and the private sector over land use in areas designated for the palm oil industry, thereby disrupting the urban forest area. Furthermore, this study revealed an important aspect that has been overlooked concerning this industry in the target area. This aspect is concernEd with the benefits of investment in palm oil for the community and the environment in Dumai City (i.e. the social term: Lucky Farmers in the Land of Oil Palm). This study contributed to the efforts of the local government to increase investment in Dumai, with a focus on socio-economic, ecological, and sustainable aspects.

investment in Dumai, with a focus on socio-economic, ecological, and sustainable aspects.

Introductions
Sustainable development is a concept that encompasses the harmonious integration of economic growth, environmental preservation, and social conditions (Abdillah et al., 2023;Halkos & Gkampoura, 2021;Silvestre & Ţîrcă, 2019;Vasylieva et al., 2019;Wahyunto & Widiastuti, 2014). Ethical investment is considered sustainable in both practical and academic circles (Watts & Scales, 2020). Accordingly, literature on this topic has not only led to increased institutional and social awareness but has also generated public demands for social responsibility (Carroll, 2021). In this context, the investment that is being referred to is specifically related to the palm oil industry (Harahap et al., 2019). Palm oil is one of the most valuable products in the world, and it is used in daily products, such as biofuel, agri-food, and personal care (Osorio et al., 2021). Palm oil plantations in Sumatra and Kalimantan have experienced rapid growth in the agricultural sector, with a significant increase in the production of palm oil, making it a leading commodity in Indonesia . Therefore, palm oil is a superior commodity cultivated by both the community and business entities (industries) in Dumai City (Syahza & Asmit, 2020).
Collaboration among communities, local governments, and the private sector is essential for local economic development, which aims to foster better economic conditions, job opportunities, and sustainable economic capacity at the local level, ultimately enhancing people's lives (Khan et al., 2020;Pavel & Moldovan, 2019;Schröder et al., 2020;Zahoor et al., 2022). Similar to sustainable investment, local economic development is a process that considers environmental, social, and sustainability aspects (Taliento et al., 2019). This encompasses the Environment, Social, and Governance (ESG) factors that contribute to the sustainability of the economy and life in various regions of the world (Alkaraan et al., 2022;Litvinenko et al., 2022;Romano et al., 2020). Accordingly, sustainable investment involves the selection of assets depicting ESG (Talan & Sharma, 2019), and it is an investment strategy that combines social and environmental benefits with financial returns, which link social, ecological, economic, and investor concerns (Pástor et al., 2021).
Currently, corporate sustainability is increasingly viewed as an important aspect of responsible business practices, with investors placing greater emphasis on its value. It is also well-established that corporate sustainability strategies have the potential to generate better risk-adjusted returns (Gangi et al., 2020). Accordingly, the goal of sustainable investment is to create positive impacts on economic feasibility, the environment, and social acceptance (Soltani et al., 2021). In the palm oil industry, sustainable investment implies a commitment to avoiding environmental damage, preventing social conflicts, and promoting economic growth (Hidayat et al., 2018). The link between the environmental, social, and economic dimensions of sustainable development can be seen in the current state of industrial investment in Dumai City (Yusliani et al., 2022). However, the industry has not shown a positive impact in terms of employment, and environmentally, it has not been established as an industrial area due to unresolved issues related to local government policies concerning the Regional Spatial Plan (RTRW) as well as the establishment of a palm oil industry area (Pemerintah Kota Dumai, 2021a). Social conflicts between the community and palm oil industry, such as unclear ownership of the Dumai Industrial Area (KID), further highlight the complexities of the situation. The investment realization in palm oil industry in Dumai City, Indonesia, is shown in Figure 1 below: Figure 1 shows the fluctuating nature of investment realization, indicating the need to increase both Foreign Investment (PMA) and Domestic Investment (PMDN) in Dumai City. Effective measures are required to mitigate the negative impact of fluctuating investment realization (Masitah et al., 2023). These measures should encompass various dimensions, such as the recruitment of workers and the resolution of conflicts between the community and industry in the KID. Furthermore, the sustainable investment in question encompasses several strategies, which should be carried out by the One Stop Investment and Services Agency (DPMPTSP) of Dumai, to strengthen and enhance investment, specifically in the palm oil industry. This industry is the largest investment in Dumai, contributing significantly to regional economic growth (Masitah et al., 2023). Sarzynski et al. (2020) revealed that the development of palm oil plantations in the Riau region of Indonesia has a two-fold impact on the regional economy, specifically in terms of job creation. This development has resulted in a trickle-down effect that enhances distribution power within the surrounding community (Hsieh et al., 2019). Accordingly, as the development expands, its impact on workers employed in the plantation sector and its derivatives become more significant (Hsieh et al., 2019). This impact is evidenced by the increase in the income earned by farmers, leading to higher purchasing power within the community for both primary and secondary needs (Barbier, 2020). Sustainable investment, according to Pástor et al. (2021), encompasses not only financial considerations but also ESG perspectives.
The literature review described in Figure 2 identifies and analyzes previous study problems regarding sustainable investment in the palm oil industry, using the keywords "Palm Oil Industry and Sustainable Development". This report serves as the foundation for this current study, which specifically examines investment in the sustainable palm oil industry in Dumai City. Figure 2 shows the thematic issues related to sustainable investment in the palm oil industry. However, an analysis of 108 study articles was conducted using VOSviewer software. This analysis revealed that studies on the development of the industry and investment in local economic development and sustainability are limited, particularly in the research centers of Dumai City. Despite this, it is evident from the mapping of previous articles related to this topic that issues regarding the industry and sustainable development are still actively studied. This underscores the need to address the topic "palm oil industry and sustainable economic development".
According to Jain et al. (2019), sustainable investment should focus on addressing social, ethical, ecological, economic, and market issues. Similarly, Tripathi and Kaur (2022) stated that sustainable investment not only varies based on economic and financial market conditions but also on the performance of employees as valuable assets to the industry. Diez-Cañamero et al. (2020) emphasized that sustainable investment is viewed as social responsibility and serves as a significant source of funding worldwide, thus, forming a global market (Chatzitheodorou et al., 2019;Townsend, 2020). Furthermore, this study focuses on examining the impact of investment in the palm oil industry on local, ecological, and sustainable economic development in Dumai City. Currently, investment in the industry does not incorporate sustainable investment practices that promote economic growth, environmental protection, and social welfare.
This study aims to determine the impact of investment in the palm oil industry on socioeconomic development in Dumai City, Indonesia, by defining sustainable investment as the theoretical framework to empirically investigate the impact of investment on the industry. To achieve this, the entire process was divided into three stages, namely the discussion of investment in the palm oil industry, outlining steps to enhance sustainable investment, and the analysis of the implications of investment in the industry for regional and sustainable economic development in Dumai City.  Source: processed by researchers 2023.

Study design
An exploratory qualitative approach with a literature review was employed in this study. This was selected to investigate detailed and in-depth insights into the unquantifiable aspects of the study topic (Creswell, 2021;Harsono et al., 2012;Hsieh et al., 2019;Ishtiaq, 2019;Moon et al., 2019). Furthermore, the NVivo 12 Plus software was used to obtain results from the qualitative data. This method was selected due to the prevalence of data that may be categorized as secondary, such as electronic documents, government websites, digital reports, investment data statistical study, and social media trends related to sustainable economic development in the palm oil industry. Accordingly, this study aims to determine the impact of investment in the palm oil industry on promoting socio-economic development in Dumai City, Indonesia. This study location was selected due to its significance as one of the busiest shipping lanes globally, with international trade routes connecting Indonesia-Malaysia-Thailand (IMT) and Indonesia-Malaysia-Singapore (IMS).
The subject matter of this study included investment in the palm oil industry of Dumai City, Indonesia. The secondary data, which included various relevant studies, electronic documents, government websites, reports, investment statistical study, and social media trends were extensively reviewed (Leung et al., 2022).

Data collection techniques
The data utilized in this study was collected from field observations, literature studies (Fadli, 2021;Yusanto, 2020), and documentation studies. These sources were used to obtain more accurate and verifiable information or facts regarding sustainable economic development related to investment in the palm oil industry in Dumai City. The steps in the qualitative data collection are as follows in Based on the general procedures in the qualitative analysis tool, NVivo Plus 12, these concepts were divided into three, namely (1) Data Collection, which involved the process of collecting and analyzing as much observable and recorded information as possible. In this context, the data were non-numerical and obtained through field observation methods.
(2) Data observation was a method of collecting data through study and direct observation of situations or events in the field. (3) Documentation study was a method of gathering relevant information related to the study problem by studying previous documentations (Creswell et al., 2007).

Data analysis
Qualitative data were obtained and analyzed through interactive analysis techniques (Kiger & Varpio, 2020). The steps involved in carrying out this approach were explained by the verification and presentation of data, as well as in the drawing of conclusions (Linneberg & Korsgaard, 2019). This process was also assisted by NVivo 12 Plus. Furthermore, the data analysis conducted in this study was in accordance with previous study trends regarding investment in the palm oil industry with a focus on sustainable local economic development. This was identified and analyzed using NVivo 12 Plus, as shown in Figure 4 below.
The study analysis comprised the following steps (1) identification of investment realization and assessment of its impacts on palm oil industry in Dumai City, (2) Drawing of conclusions, in this stage, the results of data identification are drawn as simple conclusions to evaluate the investment of palm oil industry in sustainable economic development, and (3) Analysis, at this stage, the data are analyzed based on study objectives after the conclusions are drawn. The weakness in this research method is more on the weakness of qualitative research which is too subjective, qualitative research methods are very dependent on the character and subjectivity of the researcher. So to overcome this weakness, researchers triangulate data and methods, where the data used by researchers is checked again for validity and the methods used are checked again for suitability.

The investment of palm oil industry in Dumai City, Indonesia: study and exploration
Based on various findings in the field, this report presents phenomena related to investment in the palm oil industry, which has short-term and long-term value in promoting economic improvement and regional development. This investment takes the form of Foreign Investment (PMA) and Domestic Investment (PMDN) (Pemerintah Kota Dumai, 2021a). Despite the potential benefits, the realization of investment in the palm oil industry is still fluctuating and unable to positively impact the socio-economic community of Dumai City, Indonesia. This is in line with the report of the Indonesian Coordinating Ministry for Economic Affairs (Limanseto, 2021). Palm oil is a strategic commodity in the economic development of Indonesia. As the world's largest producer of this commodity, the palm oil industry in the country has a positive impact on its economy by providing employment for over 16 million workers, both directly and indirectly.
Accordingly, investment in the industry is believed to have contributed to economic development. The trend of the Gross Regional Domestic Product (GRDP) in various sectors has experienced an increasing contribution, with the palm oil processing industry being one of the major contributors in 2020 by 61%. This is due to the presence of numerous industrial estates in Dumai City, specifically large-scale multinational industries, that are engaged in both oil and gas as well as non-oil and gas processing, such as Palm Oil Derivatives (CPO) (Limanseto, 2021;Pemerintah Kota Dumai, 2021a). It is also important to note that Dumai is one of the main export centers of CPO and the largest exporter of its derivatives in Sumatra. A clearer understanding of the sectoral contribution to GRDP is shown in Figure 5 below. Figure 5 shows that the processing industry has the largest contribution to GRDP in the economic sector. This is primarily due to the wide range of derivatives produced by the palm oil industry, such as CPO, biodiesel, margarine, soap, and detergent, which collectively increase the contribution of the processing industry. This increase in GRDP is expected to have a positive impact on sustainable development in Dumai City, as it strengthens sustainable investment based on economic, social, and environmental factors (Limanseto, 2021;Pebriana et al., 2021;Pemerintah Kota Dumai, 2021a). Consequently, the Municipal Government of Dumai has implemented effective measures to promote investment in the palm oil industry. It is noteworthy that the unstable investment climate in the target area can have a significant effect on the regional economic growth of the government, the private sector, and the local residents. One of the key factors influencing the investment climate is the regional policy of the city, where there are still unresolved issues over the designated palm oil industry areas. Furthermore, the forested area designated for palm oil industry is larger than the land acquired, as over 75% of industrial areas are located in forested regions, and only 25% have been acquired on plain land. This condition poses a challenge for the government (Limanseto, 2021;Pebriana et al., 2021;Pemerintah Kota Dumai, 2021a). Figure 6 shows the production of plantation crops.
The analysis conducted, as depicted in Figure 6, shows that the area dedicated to palm oil plantations is larger than that of other plantations. This can be attributed to the wide range of derivatives obtained from palm oil, such as CPO, soap, margarine, biodiesel, and detergents, among others (Purnomo et al., 2020). Therefore, it is imperative to put efforts in place to create a conducive investment climate and greater business opportunities through cooperative principles  (competition to achieve common goals) (Aminuddin Ilmar, 2010;Rahman, 2018). Despite being a highly sought-after investment, the palm oil industry has not had a positive impact on the economy of the people of Dumai City, Indonesia (Andari & Saryadi, 2020;Nur, 2019). Furthermore, the downstream agro-industry program in Indonesia received a positive response from various investors who invested. This has had an impact on increasing the regional economy of the city but not on local communities where farming and conventional palm oil farmers are needed (Andari & Saryadi, 2020;Nur, 2019;Sahdan & Setiyawati, 2019).

Government steps in increasing investment in palm oil industry in Dumai City, Indonesia
This study explains the strategies employed by the government to increase investment in the palm oil industry. One of such potential strategies put in place to facilitate investment opportunities is through the provision of easy licensing and non-licensing services in the form of Online Single Submission (OSS) (Ainita, 2021;Robby & Tarwini, 2019). Another approach involves fostering the synergy between the government and investors. Local governments implementing this strategy usually formulate the use of local resources in the development of palm oil industry and its derivative products . It is expected that the increased realization of investment in the industry would lead to improved welfare for the local residents (Nurfatriani et al., 2019). However, it is different in reality, as the investment has not resulted in a positive impact on the economic welfare of the community, employment opportunities, business opportunities, or regional development. The labor absorption data in Dumai City is shown in Table 1 below.
From Table 1, it can be seen that the percentage of the population engaged in social activities and the ratio of workers in Dumai City fluctuates, indicating positive trends in development. Admittedly, the number of industries alone does not determine the high number of workers in the city, as some large industries may absorb a significant amount of labor, while small industries may only employ a few.
It is crucial to promote increased investment realization in the palm oil industry, particularly in the production of derivatives. This strategy can potentially contribute to the creation of new jobs and boost the regional economy (Munasinghe et al., 2019), specifically in terms of employment and business opportunities for the community. Figure 7 shows the employment model for the palm oil industry in Dumai City, Indonesia. Figure 7 shows that labor recruitment in Dumai City is conducted online and is open to the general public. Private industries, such as Wilmar Group, PT Pelindo, and PT Biomass already have their recruitment standards, and the government cannot intervene in this pattern. While these industries are expected to provide employment for the community, specifically for the residents of Dumai City, they have no positive impact on the community in reality. This is because the recruitment pattern is not solely carried out by the industry. Accordingly, this presents a challenge for the people in terms of job securement, as the industry has prepared its workforce through independent selection without community involvement or government oversight.
To ensure a positive impact on sustainable investment, the government has implemented a strategy to increase investment in the palm oil industry by allocating sufficient funds (Anadu et al., 2020;Morrison, 2019). This is attributed to the fact that, without adequate funding, this strategy may not yield favorable results, as every government organization requires operational and promotional costs, both at home and abroad (Ayompe et al., 2021;Tan & Lim, 2019). To have a positive impact on investment in the palm oil industry, there must be partnerships from both the government and the private sector, but what must be considered are environmental issues and the use of technology, this can be seen from the Roundtable on Sustainable Palm Oil (RSPO) and Indonesian Sustainable Palm Oil (ISPO) (Afrino et al., 2023;Hariyanti & SyahzaA, 2022;Widiati et al., 2020). Then the necessary thing costs as one of the strategies in the success of Palm Oil industry investment in Dumai City, Indonesia (Aiginger & Rodrik, 2020; Albukhitan, 2020). Based on the preceding discussions, the strategies that have been put in place by the government to boost investment in palm oil industry will have a positive impact on the people of Dumai City, specifically in terms of employment and economic improvement (Aminuddin Ilmar, 2010;Andari & Saryadi, 2020;Nur, 2019;Rahman, 2018). However, in reality, the intended impact on labor absorption has not been fully realized. One of such strategy is to increase investment in the palm oil industry to promote it, both at home and abroad (Sahdan & Setiyawati, 2019). Funds are, therefore, needed to increase industrial investment in Dumai City (Pemerintah Kota Dumai, 2021a).

Implications of palm oil industry investment in local economic development, and sustainability in Dumai City, Indonesia
The Dumai government is actively exploring the potential and investment opportunities available in the city. One of the key attractions for domestic and foreign investors is the strategic position of the city, which provides ample investment opportunities, particularly in the palm oil industry. Accordingly, the creation of a free trade area between countries in Dumai City presents another promising opportunity. In the same vein maximizing investment potential could have adverse effects on overall investment, and this could impact the government and the community at large. Therefore, the goal of the government is to promote the welfare of society through economic, social, and sustainable development. Source: processed through NVivo 12 Plus, 2023.
Accordingly, one of the strategies implemented by the government to boost investment in the palm oil industry is to incur additional costs, with the expectation to increase investment. This measure was introduced based on an analysis that the investment has been hindered by inadequate cost realization. Below is a pictorial presentation of seven costs of investment promotion activities: Figure 8 shows that the promotional investment costs are significant since every promotional activity requires funding. For example, priority costs are determined by the government based on the Integrated Investment and Service Agency (DPMPTSP) activities from 2016 to 2021, using funds sourced from the Dumai City Revenue and Expenditure Budget (APBD) in Indonesia. This approach is aimed at enhancing local economic development through a good management strategy (Hoang et al., 2022;Ren et al., 2022;Yu et al., 2022). Therefore, this study confirms that management is a crucial strategy for achieving successful investment realization (Pemerintah Kota Dumai, 2021a, 2021b. Following this, commodity realities provide new investment space for several palm oil commodities (Grabs & Carodenuto, 2021). Palm oil industry contributes the most to the increase in GRDP of Dumai City. The investment potential of this industry in the target area is in great demand by investors both from within and abroad. It is important to note that palm oil has many derivatives apart from cooking oil (CPO), they include cosmetics, margarine, butter, soap, shampoo, biodiesel, and detergent, among others. Therefore, it can be seen that the potential for palm oil investment opportunities in Dumai City is very promising, as the commodity can be directly processed by companies from raw to finished materials (Mizik & Gyarmati, 2021;Pemerintah Kota Dumai, 2021a).
GRDP is one of the indicators used to explore the accelerated economic development in each region (Hakim et al., 2021). This indicator involves the final product of goods and services produced in a region that is supported by the region at constant prices. GRDP of Dumai City, Indonesia can be used to monitor the level of economic activities in the community both due to the increase in prices of goods and services, or the amount of production.
The following graph of the contribution of the plantation sector to GRDP of Riau Province, Indonesia, can be seen in Figure 9 below: From Figure 9 above, it can be seen that the contribution of the palm oil industry sector to GRDP every year is very significant. Regarding the sustainability of this industry, there are three essential aspects to consider namely economic, social, and environmental aspects. From the environmental standpoint, it can be stated that the industry is beneficial and can contribute to the economy of Riau Province, Indonesia (Syahza & Irianti, 2021).
Based on the preceding discussion, the increase in investment was examined in this study, where cost plays a crucial role in the success of the observed strategy. The existence of these costs is expected to improve the investment climate (Laurensius et al., 2021;Maysara & Asari, 2021;Putra, 2019). This argument is based on an analysis that the government's strategy for increasing investment has not been adequately realized in terms of costs. In addition, the impact of investment realization is still fluctuating (Berawi et al., 2021;Purwanto et al., 2020), and this has resulted in an unstable investment climate for the industry. It is important to note that the government has made efforts to boost investment and improve the regional economy by facilitating licensing and non-licensing services through OSS (Arief, 2022;Taufiq, 2021). OSS is a business licensing system service that is accessed through an integrated electronic system (Arief, 2022). This service makes it easier for investors to invest in the city. With an influx of investors, investment realization is expected to increase, and consequently impact employment. The number of workers required will also influence the social and economic growth of society (Arief, 2022;Laurensius et al., 2021;Maysara & Asari, 2021;Putra, 2019).
Currently, the investment trend of the palm oil industry in Dumai City does not have a positive impact on a sustainable economy and does not make a significant contribution to labor recruitment (Hendrarto, 2020;Sahdan & Setiyawati, 2019). Although several large industries employ a substantial workforce, small industries only provide limited employment opportunities. There are social conflicts between local communities and investors (palm oil industry), due to land allocation for the palm oil industry (Limanseto, 2021). These conflicts often arise from incomplete government policies regarding the allotment of Industrial area land (Regional Spatial Planning (RTRW), which has remained unsolved until now (Pemerintah Kota Dumai, 2022;Triwibowo, 2022). As a result, the government has prioritized economic growth and addressed socio-ecological issues, such as environmental preservation, job creation, and community empowerment (Malik, i. et al., 2021;Pemerintah Kota Dumai, 2021a).

Conclusion
In conclusion, the obtained results from this study show that the palm oil industry has a significant impact on sustainable economic development. This is evidenced by the significant contribution of the processing sector to GRDP, accounting for 61.06%. Furthermore, the palm oil industry, with its derivatives, such as CPO, biodiesel, margarine, soap, and detergent makes the largest contribution to GRDP. The increase in GRDP is expected to have a positive impact on the sustainable economy in Dumai City, Indonesia. However, the government needs to prioritize economic growth while addressing socioecological issues such as environmental preservation, job creation, and the empowerment of local communities. It is also important to note that despite the increased investment in the palm oil industry, fluctuations still occur. This can be attributed to the incomplete local government policies, resulting in social conflicts between local communities and investors over the land allotment and environmental issues, such as encroachment on urban forest areas. Moreover, it was found that the synergy between the government of Dumai City, PT Wilmar Group, PT Pelindo, and PT Biomass has not yielded positive impacts on the surrounding community, particularly in terms of economic benefits and employment opportunities. This indicates that the number of workers in the palm oil industry does not necessarily correlate with the number of industries present. These challenges contribute to an unfavorable investment climate for the industry. Accordingly, these findings are useful for the government of Dumai City, the private sector, and the community, as they can help promote increased investment. The government has also initiated efforts to increase investment by providing convenient licensing and non-licensing services, such as OSS. OSS is a business licensing system service issued through an integrated electronic system. This strategy is expected to increase and accelerate economic independence for the welfare of the people, attract investors, and enhance competitiveness both nationally and internationally. Importantly, it was found that there was a social conflict between the local community and the private sector over land use in areas designated for palm oil industry, thereby disrupting the urban forest area. This study also revealed a previously overlooked benefit of investment in palm oil for the community and the environment in Dumai City, which is referred to as the "Lucky Farmers in the Land of Oil Palm".
It is noteworthy that this study is subject to certain limitations such as incomplete collection of data on the realization of investment in the palm oil industry of the target area. However, investigators are committed to acquiring additional relevant and closely related data to support this study, ensuring that the results remain objective and potentially uncover new insights in the field. It was suggested that comprehensive data and arguments regarding investment in the sustainability of palm oil industry should be thoroughly collected.