The livelihood impacts of oil palm: smallholders in Indonesia

The livelihood impacts of oil palm: smallholders in Indonesia

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We agree with Omann and Spannenberg (2002) that the socioeconomic and political dimensions of sustainable development have often been neglected. In agricultural production especially, sustainability is often synonymous with increased efficiency of the production, which implies intensification of yield production with less consumption of land, water, and fertilizer (Tilman et al. 2011), rather than sustainability in the economic or social senses. Oil palm, although one of the most efficient oil bearing crops, has also seen the largest expansion in the last decade and is thus often regarded as unsustainable (Fitzherbert et al. 2008, Island 2015, Clough et al. 2016). We build the argument that taking the social and institutional dimensions of the commodity production into account is a necessary precondition for obtaining the desired environmental sustainable outcomes (Omann and Spannenberg 2002, Roche and Jakub 2014).

An estimated two-fifths of the world’s palm oil derives from plantations of fewer than 50 hectares (Balch 2013), which although comparatively large in terms of arable farming, classifies as a smallholding for oil palm. Smallholdings can range from 5-50 hectares. In Africa and Latin America, the majority of producers are smallholders but even in the main producing countries, Indonesia and Malaysia, that are characterized by a large private plantation sector, more than 40% of the area under oil palm cultivation is managed and owned by smallholders. Smallholders participate in the oil palm value chain in various ways: as independent smallholders, as outgrowers, as associated or schemed smallholders, as well as participants in profit sharing models, with various contractual arrangements, either through governmental agencies or private palm oil companies (Rahman et al. 2008).


International public standards like the SPS and TBT agreement or the directives of the European Union can have a direct influence on the palm oil industry. For example, the inclusion of sustainability criteria in the Renewables Directive on the promotion of the use of energy from renewable sources (Directive /EC) had severe effects on the use of palm oil in the European biofuel market. The long-disputed concerns about possible adverse health effects of processed palm oil on diets unleashed debates within the EU, leading to various reactions and commitments from both the industry itself as well as national governments (Lam et al. 2009). Environmental lobby groups like Friends of the Earth and Greenpeace have led successful campaigns to influence policy makers and final consumers alike. Western concerns over deforestation and the destruction of the habitat of popular animals, including the orangutan, were the initial focus of these campaigns, but eventually the scope broadened to the impacts on biodiversity, land use, and social conflicts related to palm oil production.

Smallholder farmers often give up land to plant oil palm, find the labor requirements onerous, especially in the first years after planting, and find the needs of the trees great in terms of fertilizer and management (M. N. Mohd Noor, personal observation). Farmers, who have transformed land to oil palm, find themselves trapped in a monoculture system with few opportunities to shift to other forms of agriculture and inadequate knowledge of how to maximize their income without simply looking for opportunities to expand their plantations further (Ismail et al. 2003, Rahman et al. 2008, McCarthy 2010). Fertilizer prices have already risen sharply since much smallholder oil palm was planted, and further price increases and continued volatility of the oil palm market could quickly make oil palm a much less attractive smallholder crop (Ghazoul 2015). There is a great need to help smallholders to meet the international and national standards for oil palm production and to develop capacities to diversify their options for livelihood.


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