For the past 30 years, timber provided Indonesia with much of its non-oil export earnings. Now timber resources are beginning to become exhausted and policy makers and companies are looking for other profitable uses for deforested and logged-over lands. The two most important alternatives they have found so far are oil palm estates and clear cutting of natural forest for pulp production.

Indonesia currently has 2.4 million hectares of oil palm and in the next few years this could reach as high as 5.5 million hectares. Crude palm oil production rose from 400,000 tons in 1975 to six million tons last year. Most new planting occurs in locations that had recently been in forest. Private companies control most of the recently planted area, and of this four large conglomerates have about two thirds. Labor and land are substantially cheaper than in Malaysia, Indonesia’s major competitor on the world market, and the recent economic crisis only served to increase those disparities.

’Tree Planting in Indonesia: Trends, Impacts, and Directions’ by Leslie Potter and Justin Lee from the University of Adelaide in Australia looks in detail at the expansion of oil palm and industrial timber and pulp plantations in the Indonesian provinces of West Kalimantan, Jambi, and Southeast Sulawesi, as well as issues related to smallholder tree crop production.

In addition to contributing to forest conversion, the authors note that oil palm and timber plantations may have more negative consequences for local communities than previous logging operations. To some extent, communities had managed to co-exist with logging operations but the plantations consume vast areas of land and may displace their traditional activities entirely.

The government and the companies have attempted to involve some smallholders in oil palm production, but with only mixed results. Recent efforts have apparently been less favorable for local villagers than previous small holder palm oil initiatives supported by the World Bank. Under current arrangements, some villagers may succeed in improving their incomes but they lose a large portion of their land and become indebted in the process and the long-term outlook remains uncertain.

Much of the stimulus for oil palm production comes from regional governments interested in promoting local economic development and building their tax base. These governments have become more powerful over time, at the expense of the national ministries, such as the Ministry of Forestry.