Borneo
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The Impact of Oil Palm in Borneo

By Rhett A. Butler

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Why palm oil expanded, and what keeps it growing
(03/26/2015) Today, oil palm is Indonesia’s most important cash crop. In 2014, Indonesia produced 33.5 million tons of palm oil, generating $18.9 billion in export revenue. This makes palm oil Indonesia’s third most valuable export, behind only coal and petroleum gas. However, the rise of Indonesian palm oil is only a relatively recent phenomenon. The chart below shows the remarkable growth that the industry has displayed over the past 30 years.


Riau misses deadline on 'village forest' project as zoning deadlock continues
(03/19/2015) A pair of local communities' five-year slog to establish village forest management areas in Riau is the latest victim of a deadlock over the Indonesian province's proposed zoning plan, whose long delay has been further exacerbated by the governor's arrest in a bribery case.


Who's funding palm oil?
(03/19/2015) Palm oil may be the single most important crop that you never heard of. A vegetable fat that resembles reddish butter at room temperature, palm oil is derived from the fruit of the oil palm tree. Both nutritious and highly versatile, palm oil is now an important component of products ranging from biofuels and food to soaps and cosmetics. Estimates indicate that as much as 50 percent of the products used by the average Western consumer every day contain palm oil or its derivatives.


Can voluntary sustainability standards survive in emerging markets?
(03/17/2015) Last month, Price Waterhouse Coopers (PwC) published a new edition of its The World in 2050 report. Confirming the findings of previous studies, the report describes a shift in economic power from the global north to the south. PwC projects that the US' and EU's share of world GDP will face a steady decline from around 33 percent in 2014 to about 25 percent by 2050. At the same time, emerging markets like China, India, Brazil, Russia, Indonesia, Mexico, and Turkey (the so-called E7 countries) are gaining in importance as both producers and consumers in the global economy.


Declining palm oil prices: Good news and bad news for smallholders
(03/16/2015) Declining crop prices usually spell bad news for farmers, and poor smallholders in particular. The drop in the price of palm oil from a recent high of US$860 per metric ton in March 2014 to below US$640 in March 2015 (and far below 2010-2012 prices which exceeded US$1000) heralds a shift in perceptions of oil palm from an economic boon to poverty-stricken smallholders, to a liability that ties small-scale farmers to a less profitable commodity.


Local land rights may be in danger from push for palm oil in Liberia
(03/12/2015) The rights of local and indigenous peoples aren’t being adequately protected in the drive for economic development, according to a report published in February by the Rights and Resources Initiative (RRI), a coalition of forest-oriented organizations. For a place like Liberia, reeling from both decades of persistent poverty and the recent Ebola epidemic, economic development seems critical at just about any cost.


Palm oil giant buys PNG firm noted for environmental practices
(03/10/2015) Malaysian palm oil giant Sime Darby Plantation Bhd has completed its acquisition New Britain Palm Oil Ltd, a Papua New Guinea-based grower lauded by environmentalists for its green policies.


East Kalimantan reaffirms moratorium on new mining, logging concessions
(03/06/2015) The governor of East Kalimantan, Indonesia, has reaffirmed his commitment to a 2013 moratorium on mining, logging, and plantation permits. The policy, which was originally outlined in a letter to the province's regents and mayors will be elevated to a higher status, he said.


Palm oil certification body purges membership
(03/05/2015) The Roundtable on Sustainable Palm Oil (RSPO) has purged membership of a number of companies and organizations that have failed to comply with reporting requirements. The move could be a sign that the certification body is getting more serious about enforcing its standards, says WWF, one of the founders of the initiative.


Weak sustainability policy presents financial risk for Malaysian palm oil giant, says report
(02/27/2015) Malaysian palm oil producer Kuala Lumpur Kepong's failure to adopt a robust zero deforestation policy puts its financial performance at risk, asserts a new analysis published by Chain Reaction Research, a project involving several environmental consultancies.


THE SOCIAL IMPACT OF OIL PALM IN BORNEO

For most of its history Borneo was scarcely populated by humans. The unforgiving climate and dense rainforest kept populations small and scattered. In the past half century this has all changed. The influx of more than half a million transmigrants into Borneo over the past thirty years has doubled the island's population and created tremendous demand for jobs. Initially the rubber and logging industries provided employment, but when this collapsed in the mid- (Malaysia) to late-1990s (Kalimantan), work opportunities dried up for most of the local population. Despite this, hundreds of new arrivals continued to show up in Borneo on a weekly basis.

Rising unemployment was a serious concern in Borneo in the late 1990s and early 2000s and ethnic conflict raged in parts of Kalimantan during this time. The sudden rise of the oil palm in the late 1990s and early 2000s was seen as a welcome opportunity for many residents and local governments. Observers are only now seeing the full-cost of rapid growth in the sector.

Environmental Impacts

Beyond the obvious deforestation that results from clearing lowland rainforest for plantations (86 percent of deforestation in Malaysia from 1995-2000 was for oil palm plantations), there are other environmental impacts of oil palm cultivation. Several studies have found a significant reduction (on the order of 80 percent for plants and 80-90 percent for mammals, birds, and reptiles) in biological diversity following forest conversion to oil palm plantation. Further, many animals will not move through plantations while others, like orangutans, become crop pests putting them at risk of defensive poaching by plantation managers. The use of herbicides and pesticides can also impact species composition and pollute local waterways. Drainage systems required for plantations (oil palm plantations in Borneo are often established in swamp forest) may lower water tables, affecting neighboring forest areas. Further, destruction of peat lands increases the risk of flooding and fire. Land-clearing fires set by large oil palm plantation owners were the single largest cause of the massive 1997-1998 fires in Borneo.

For more see Why is oil palm replacing tropical rainforests?

Social Impacts

The social impacts of oil palm plantations are just beginning to be understood, in a large part thanks to the work of Dr. Lisa Curran. While there is no doubt that oil palm plantations provide much needed employment opportunities in Borneo there are questions on the fairness of the existing system which appears to sometimes lock small plantation owners into conditions akin to slavery.

Given the scarcity of timber in parts of Borneo, much of its population has few economic options at present. Oil palm seems to be the best alternative for communities that are just eking a living off rubber cultivation, subsistence rice farming, and fruit gardens. When a large agricultural firm enters an area, some community members are often eager to become part of an oil palm plantation. Lacking legal title to their land, deals are often structured so that members of the community acquire 2-3 hectares (508 acres) of land for oil palm cultivation. They typically borrow some $3,000-6,000 (at 30 percent interest per year) from the parent firm for the seedlings, fertilizers, and other supplies. Because oil palm takes 3-4 years to bear fruit, they work as day laborers at $2.50 per day on mature plantations. In the meantime their plot generates no income but requires fertilizers and pesticides, which are purchased from the oil palm company. Once their plantation becomes productive, the average income for a 2 hectare allotment is $682-900 per month. In the past, rubber and wood generated $350-1000 month, according to Curran. The low level of income combined with large start-up costs and relatively high interest payments virtually ensures that small holders will be perpetually indebted to the oil palm company.

Curran said this debt, combined with almost total dependence on entities they barely trust, has a psychological impact on communities. Because there are no ways to contest actions by the company, conflicts invariably arise within communities, especially when a large part of the community (Dayaks often oppose oil palm schemes) has opposed the plantation. At times under-the-table means are used to sway a community. For example, a gift of a motorbike can win over influential community leaders. Once the oil palm firm gets the approval, it may negotiate on a one-on-one basis with each household, eliminating any sort of bargaining power of the greater community.

Surveys by Curran suggest that communities in West Kalimantan are deeply concerned about flooding after the establishment of oil palm plantations. They also worry about loss of forest resources and culture -- older community members don't always like the idea of women and children working on plantations. Oil palm cultivation also makes local people more dependent on agricultural firms since they no longer grow their own food. Finally, some communities have expressed dissatisfaction for working for Malaysians. They would rather be working independently, according to Curran. While they have a litany of complaints, few see other alternatives.

Meanwhile oil palm firms are making a fortune. By Curran's calculations, some firms in West Kalimantan are seeing a 26 percent annual internal rate of return over a 25-year period, an astounding number. Because of booming demand for biofuels, they have little downside risk.

"Firms are making a lot of money without a lot of accountability," said Curran, speaking at Stanford University in January 2007.

For more see Oil Palm




PICTURES OF OIL PALM IN BORNEO  






REFERENCES  


  • Lisa Curran, personal communication
  • WWF Germany, Borneo: Treasure Island at Risk, June 2005 [pdf, 773 KB]
  • mongabay.com


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    Copyright Rhett Butler 2013