Page last updated at 05:02 GMT, Monday, 1 March 2010

Can palm oil help Indonesia's poor?

By Bill Law
Food Fights, BBC Radio 4

Palm tree saplings on recently cleared rainforest, with edge of rainforest in background
Are these palm oil saplings on cleared rainforest a sign of hope or of doom?

Panorama last week reported on the disturbing destruction of orangutan habitats in Indonesia for palm oil plantations. But are there benefits from these plantations for local people?

Environmentalists have long decried the destruction of Indonesia's rainforests, first for timber and more recently for palm oil.

The logging was a one-time deal that mostly benefitted the country's corrupt elite and foreign corporations.

But does palm oil have the potential to generate new wealth for this nation of 250 million people?

There is one key fact that is often overlooked in the debate.

Rural middle class

Of the more than 7 million hectares (17.2 million acres) in palm oil cultivation, nearly half is in the hands of smallholders, ordinary folk trying to better themselves and look after their families.

Toddler standing on balcony of house in Jangkang

"We are seeing the emergence of a rural middle class," says John McCarthy of the Australian National University.

He is an economist and expert on the Indonesian palm oil industry.

"I was doing research in a town in Sumatra and I went to a local school and nine of the 13 teachers had oil palm plantations," he said.

Intrigued, Mr McCarthy carried out a survey in several villages in the region. What he found startled him.

Villagers with four hectares (10 acres) or more were earning on average $12,000 (£7,775) a year. A second group with 2 hectares were earning much less -$2,000 (£1,300) a year - but were still enough to provide financial security for themselves and their families.

Villagers without palm oil all fell below the poverty line.

The growth of this new middle class has profound implications for both prosperity and the prospects of furthering democracy in Indonesia.


There are huge abuses. Plantations continue to be opened up that flout the laws. Corruption flourishes. Local communities are being marginalised, habitats terribly degraded. So what is the way forward?

In the often polarised debate about palm oil, it is rare to find converging views between activists and owners.

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Sawit Watch is an Indonesian NGO that has campaigned for several years on the palm oil front.

Achmad Surambo is the executive director of Sawit Watch.

When I meet him he is happy to make one point clear to me: palm oil in itself is not a bad thing for Indonesia. But the system needs to change.

Laws have to be enforced, people and the environment need to be protected, the land rights of local communities must be respected.

"We have to make the system more fair, accommodate the interests of farmers, communities and labourers," he says.

"The system right now is tilted toward the big companies and that has to change."

Increase productivity

Lyman Agro is a small plantation company managing 60,000 hectares in West Kalimantan (Borneo).

Steaven Halim of Lyman Agro points to the roads, schools and health clinics that have been built as proof of the company's commitment to its social responsibility.

Steaven Halim
Steaven Halim is sure that productivity can be increased instead of acreage

"We have also helped (smallholders) build up cooperatives so they can handle their own business," he says.

The government and the industry until recently talked about doubling the land area in production.

Sensitive to negative press about deforestation, they are now talking instead about doubling the output in 10 years from 20 million to 40 million tonnes to help meet world demand.

When I ask Mr Halim whether this can be achieved with existing plantations he nods vigorously.

"Yes, indeed. Indeed it can," he says.

The key for him is increasing productivity for smallholders.

"If we can get them to 35 tonnes a hectare per year [it now is about 20 tonnes] we can do it."

That is not far off what Sawit Watch wants. It has called for a moratorium on expansion, as well as more support and better treatment of farmers and labourers.

Steaven Halim acknowledges there are "some bad guys, no doubt" in the industry, but that the time is now to talk.

"Let's sit down together and try to find the way out. People have to be fed."

Bill Law presents Food Fights on BBC Radio 4 on Monday 1 March at 2000. You can also get it on the iPlayer .

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