Oil Palm Industry Takes Land, Promises Livelihood

oil palm farmThis is the second feature in a weekly, three-part series on palm oil development in Indonesia. Click here to read the full series.

Dispersed among Indonesia's massive oil palm plantations, small farmers are contributing increasingly to the country's booming palm oil industry.

The government has provided substantial subsidies for these farmers - known as smallholders - while mandating that large commercial operations work alongside the small producers. This policy has helped some 1.5 million Indonesians develop nearly half of the country's oil palm farmland.

But surveys of smallholder communities have found that the farmers often struggle to repay the loans issued regularly by large commercial operations. Buried under debt, the smallholders have essentially worked as indentured servants, according to reports.

In addition, local governments have been accused of dishonestly obtaining the land from indigenous peoples. Lacking official land titles, local communities are frequently left with no option but to embrace oil palm farming.

As the value of palm oil increases with growing global demand, the situation for smallholders is likely to undergo significant change. The global palm oil market creates an opportunity to bring many communities out of poverty. But human rights activists are concerned that the spread of plantations into Indonesia's few remaining untouched forests will leave more populations displaced.

"The government has a policy, by hook or by crook, to manufacture a major expansion of indigenous subsistence farmers into the oil palm production industry," said Michael Shean, a global crop analyst with the U.S. Department of Agriculture (USDA).

The rise in oil palm smallholders is largely a result of Indonesia's controversial "transmigration program." This effort, started by Dutch colonists and expanded during General Suharto's three-decade presidency, paid millions of landless farmers to move to the country's less populated islands, such as Sumatra. When they arrived, bloodshed frequently erupted between migrant and indigenous communities. Yet the oil palm farmers remained.

Beginning in the 1980s, land reforms required local residents to surrender roughly half of their land to commercial oil palm developers. In return, smallholders received about 40 percent of the land in formal 2-3 hectare (5-8 acre) allotments.

The plantations generally provide government-subsidized loans to smallholders to cover seedlings, fertilizer, and other supplies. Oil palm trees take about seven years to bear fruit, so in the meantime smallholders are often employed as day laborers.

Environmental historian Lesley Potter has studied smallholder communities in West Kalimantan since the mid-1990s. During her early visits, she noticed that many small farmers were presented with "propaganda" to influence them to make deals with the oil palm plantations.

"They don't get the full story of the amount they will have to pay out to repay their credit," said Potter, currently a visiting fellow at the Australian National University in Canberra. "They were more or less forced to give up their land."

But high prices for oil palm products in a growing global market may finally allow landholders to escape from their debt. The price of palm oil, used in everything from processed foods to lipsticks, rose above $1,000 a ton last spring and has since settled at around $555 a ton as of last month. "The villages I visited in 2007, they seemed to be quite prosperous," Potter said.

The USDA's Shean surveyed oil palm production sites in Sumatra last year. "The government tells us that 95-98 percent of smallholders who participated in the last 10 years have paid off all of their loans," Shean said. "If I take the government at their word... the government is actually investing in the long-term viability of the smallholder."

Yet greater income may not necessarily result in greater wealth. Potter observed oil palm estates with gambling operations on the plantations, which were "tempting smallholders to start gambling their money right away." In addition, more communities are noticing an increase in alcohol consumption with the rise in palm oil profits, she said.

"This is not good for the social situation," Potter said. "People start losing their land quite quickly."

Fueled by the growing demand for palm oil for cooking, cosmetics, and biofuel, especially in China, India, and the Middle East, government and industry leaders are seeking to expand production to an additional 1.4 million hectares of new plantations by 2010.

Human rights groups are concerned that the increase in palm oil demand will lead to the accelerated seizure of indigenous peoples' land, further dismantling local communities and cultures.

Potter said government-arranged committees have appointed prominent village leaders to work with the palm oil industry to divide the land. In past land-acquisition deals, local leaders have been accused of accepting industry bribes and turning their back on the community.

"There is a lot of pressure on village heads to make sure everybody gets on board to give up the land. The district authority puts pressure on people, too," Potter said. "There were a lot of handouts given to people like village heads. That apparently is still going on."

Norman Jiwan, a researcher with the Indonesian human rights group Sawit Watch, said that as government committees carve out the oil palm deals, many communities are descending into conflict. "By doing this, they install a divide-and-rule tactic within the communities," Jiwan said. "Divide and conquer: it's just colonial practice.... There is no informed consent. There is no informed participation. There is no informed consultation."

In response to the land disputes, ongoing pollution concerns, and a history of "broken promises," Jiwan said the number of communities across Indonesia involved in conflicts with oil palm estates has risen from nearly 200 in 2004 to 514 in 2007.

The situation is gaining global attention. A committee of the United Nations Office of the High Commissioner for Human Rights mentioned the rising number of conflicts last month in a letter to the Indonesian ambassador to the United Nations.

"It has recently been brought to the attention of the Committee that oil palm plantations continue to be developed on indigenous peoples' lands," the committee wrote [PDF]. The letter recommended that Indonesia "secure the possession and ownership rights of local communities before proceeding further," specifically referencing oil palm developments in Kalimantan.

The committee noted that Indonesia has not responded to previous concerns raised by the United Nations. Yet the government has recognized that indigenous people are in fact losing their land. Agus Purnomo, an official in the environment ministry, told the BBC in 2007 that the responsibility rests with the palm oil industry to settle such disputes.

"Solving the conflicts requires money, such as hiring lawyers," said Purnomo, who now directs Indonesia's National Council on Climate Change. "So we have to tell the companies they can make money but they also have to pay to settle the conflicts."

Rather than cooperating with local communities, Jiwan said some companies are attempting to silence those individuals who raise discontent. "There are so many cases of tortured people," he said. "They are being intimidated."

Ben Block is a staff writer with the Worldwatch Institute. He can be reached at bblock@worldwatch.org.

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