It threatens forests but builds livelihoods—the views of people in government, business and civic society on palm oil are polarised in the world’s largest producing country.
The farming and production of palm oil has formed the backbone of many communities in Indonesia, the world’s largest producer of the world’s most widely consumed edible oil. Palm oil accounts for 11 per cent of Southeast Asia’s largest economy’s export earnings.
But the commodity has come under scrutiny from consumers, activists, international media, and consumer goods companies that buy it. Environmentalists and the media have focused on biodiversity loss and climate change that has resulted from the clearance and burning of Indonesia’s forests to make way for palm oil plantations.
But what do Indonesians themselves feel about this controversial industry?
Syahrul Fitra is a researcher at non-governmental organisation Auriga Nusantara, which focuses on natural resource conservation. He believes that Indonesians, especially those in rural areas, understand that oil palm is an economic commodity and a source of livelihood for many people.
“Indonesians see palm oil as a source of basic needs. They identify oil palm with cooking oil, which is a fact, as 90 per cent of the market share of cooking oil in Indonesia comes from palm oil,” he tells Eco-Business.
Fitra has noticed a shift in this understanding, however, especially among young Indonesians. “Many young Indonesians are starting to worry about the existence of oil palm plantations. They have become environmentally literate and have started to speak out against oil palm plantations that do not preserve the environment,” he says.
Caroline Yuiliany is a young Indonesian working as an administrator in the capital, Jakarta. She believes the industry has both positive and negative aspects. “Environmentally, palm oil is very negative as it destroys forests and its flora and fauna. But for the economy it is extremely positive, as palm oil is one of the largest contributors to Indonesia’s GDP.”
Due to the vastness of the Indonesian archipelago, which is made up of thousands of islands, each with its own local traditions and dialects, views of the palm oil industry depend on where a person lives. According to William Pasang, operations executive for Sinar Mas Agro Resources & Technology, people in rural areas living close to plantations or mills can offer their views based on direct experiences, however their voices are often unheard.
“Only a handful of people within the industry actually have enough exposure to information that reveals what’s really happening on the ground,” Pasang says. “However, this information is rarely shared at a pace fast enough to keep up with today’s complex information-sharing systems. It is more of a race for the industry to steer the discourse on a positive or negative path, and to date it seems like the latter has won.”
Palm oil, friend of the economy
According to the Ministry of Environment and Forestry, 8.4 million people are employed in the palm oil industry in Indonesia, from farmers and mill workers to service goods suppliers. That number is likely to rise, with the industry projected to expand by 3 per cent over the next 10 years.
Bambang is the director general of plantations at the Ministry of Environment and Forestry. He shares how, in comparison with other types of farmers, oil palm growers in Indonesia receive a higher salary, and have a higher than average wage growth.
“Oil palm farmer incomes increased from IDR 14 million/hectare/year (US$966) in 2009 to IDR 31 million/hectare/year (US$2,140) in 2013, while those who produce rice and rubber have only increased from IDR 4.6 million/hectare/year to IDR 7.2 million over the same period,” he says.
According to Fitra, however, there are still many oil palm growers living in poverty, especially planters who own less than two hectares of land. “The gap in land tenure between companies and planters in this sector is very high,” he says.
Fitra believes that many Indonesian palm oil workers are being exploited. “Wages earned are not reflected by the high work risks, and many do not receive health insurance, work accident insurance, or pensions. But what worries us more is the use of women and children in the labour force.”
“If managed correctly according to sustainability standards, we support the existence of oil palm plantations as a solution to alleviate poverty in Indonesia,” says Fitra. “But the fact is that they don’t often alleviate poverty.”
Does palm oil give back to Indonesians?
Rubin Suardi is head of marketing at Sampoerna Schools System. He believes that oil palm is a commodity that Indonesians cannot live without.
“Palm oil is an important industry that provides growth for the Indonesian economy,” he tells Eco-Business. “Many businesses and people have flourished thanks to the growth of this industry.”
Although Suardi is very much in favour of the industry, he is aware of the negative aspects and wants to see technologies implemented to help manage sustainability. “Industry practitioners should put measures in place to replenish the environment which has been destroyed. With the massive funds the big companies have, surely there is technology that can be put in place to responsibly manage the growth of the palm oil industry,” he says.
Palm oil is an important industry that provides growth for the Indonesian economy. Many businesses and people have flourished thanks to the growth of this industry.
One group of people that has not often benefited from the palm oil trade is Indonesia’s indigenous peoples. Over 700 land conflicts are related to the oil palm industry. Large-scale conflicts with indigenous groups have occurred in Riau, Jambi, Kalimantan and Papua.
Patrick Anderson is policy advisor to the Forest Peoples Programme in Indonesia, an NGO that helps indigenous people who have been moved off their land by palm oil companies. “For most indigenous peoples and local communities, the oil palm industry has mainly negative effects,” he tells Eco-Business. Anderson explains that indigenous people are often misguided into believing they are being paid a lease payment, when in fact it is a purchase.
“Compensation is minimal, typically US$20 to US$50 a hectare, which indigenous peoples and farmers assume is a lease payment, but is actually a purchase, removing all their land rights forever,” says Anderson. “At the end of an oil palm lease, the land reverts to the government.”
Anderson says that he has only seen positive outcomes for indigenous people from companies that are compliant to the Roundtable on Sustainable Palm Oil (RSPO), or where companies are held accountable by NGOs and communities. Anderson wants to see all palm oil producers “follow the law and implement RSPO standards.”
Growing more with less
RSPO standards mean more efficient farming. According to RSPO standards, producers must maximise yield on existing concessions, with a targeted average output of 5.1 metric tonnes of oil per hectare. Plantations in Indonesia today yield an average of just 2.7 metric tonnes per hectare.
Indonesia’s palm oil growers are going to have to raise their game. In September last year, president Joko Widodo ordered a halt on the expansion of new palm oil plantations, and called on the industry to increase productivity, in a bid to protect Indonesia’s forests.
“Indonesia is currently working to improve the management of oil palm plantations, so that all are in accordance with the rules of the law,” says Bambang. “It is realised that at this time there are plantations that do not yet follow the regulations, which is what we are regulating through the Presidential Instruction of 2018.”
According to Bambang, the Ministry of Agriculture is accelerating the implementation of the Indonesian Sustainable Palm Oil criteria (Indonesia’s sustainable palm oil certification body, which launched in 2011) on palm oil plantations. “It has been targeted that by the year 2023, 100 per cent of palm oil plantations, both smallholder and large, will have obtained ISPO certification.”
However, there are still many cases of concessions obtained on protected land. Auriga have found 3.4 million hectares of oil palm plantations located on protected forest land. “The question is, how did they receive their permits?” Fitra asks.
Bambang believes that if managed correctly there would be no need to use more land to produce palm oil, which will help to safeguard the industry’s good name on home soil. “Palm is the most productive and efficient oil-producing plant when compared to other plants,” he says. “When fossil fuels run out, palm oil will be the main alternative for the renewable energy needs of the planet.”