Reflections from a south-south exchange: what works in sustainable and equitable oil palm development for food and biofuels?

BOGOR, Indonesia (15 December, 2011)_Last September, CIFOR Research Domain 5 on “Managing the impacts of globalized trade and investment on forests and forest communities” organized a sharing and learning workshop as part of a European Commission-funded research project lead by CIFOR, entitled ‘Bioenergy, sustainability and tradeoffs: Can we avoid deforestation while promoting bioenergy?’

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Photo by Ryan Woo/CIFOR

BOGOR, Indonesia (15 December, 2011)_Last September, CIFOR Research Domain 5 on “Managing the impacts of globalized trade and investment on forests and forest communities” organized a sharing and learning workshop as part of a European Commission-funded research project lead by CIFOR, entitled ‘Bioenergy, sustainability and tradeoffs: Can we avoid deforestation while promoting bioenergy?’

This South–South exchange initiative aimed to promote the sharing of experiences and knowledge amongst key policy decision makers, industry representatives and researchers from countries in Southeast Asia, Sub-Saharan Africa and Latin America (i.e. Brazil, Cameroon, Colombia, Ghana, Indonesia and Malaysia). Topics included sustainable and equitable options for oil palm development, and recommended policy shifts in these countries to support the transitions towards more equitable and sustainable models. The rapid conversion of large areas to oil palm plantations has a direct impact on local people’s access to land, induces the displacement of food crop production, and causes direct or indirect deforestation.

Oil palm was brought from West Africa to Indonesia (to the botanical garden in Bogor) and to Malaysia (Selangor) as an ornamental plant at the end of the XIXth century. Production of palm oil for commercialization purposes began in 1911 in Indonesia, in Sumatra Island, and in 1917 in Malaysia, with the establishment of the first plantations. Colonial authorities or individual landholders owned these plantations. After independences, most of the plantations were appropriated by the national governments.

In the 1970s, a joint venture scheme between companies and smallholders called Nucleus Estates and Smallholders (NES) scheme was tested in Malaysia. It was also introduced in Indonesia under the translated name ‘Perkebunan Inti Rakyat’ (PIR, nucleus plantation and community) by the transmigration program, a public program which aimed at moving volunteers from the over populated islands of Java, Madura and Bali to the less populated islands of Sumatra, Kalimantan and Sulawesi.

The first PIR in the late 1970s were based on rubber plantations, followed by oil palm schemes in the 1980s. The usual NES scheme relies on a contract signed between a company, smallholders grouped in cooperatives, and banks, under the supervision of the government. Usually, the deal includes the handing over, from the village to the company, of a percentage of the total land to be developed. This land taken over by the company constitutes the nucleus of the plantation, in opposition to the plasma made up by all the smallholdings participating in the venture. Farmers entrust their plasma plantation to the company, which plants, manages and harvests the crops.

The landowners are paid a percentage of the harvest revenue after deduction of plantation establishment and management costs. Local governments participate in the process through facilitation of discussions between the partners and land titling. Banks keep land titles as collateral, and the company is responsible for collecting the repayments from the farmers. Charges are made for these services, and they all add to the farmers’ debts.

Thanks to oil palm development, national and regional revenues considerably increased. Malaysia and Indonesia are currently leading the palm oil market, with about 4.85 Mha planted in Malaysia with a production of 17 Mt CPO and 2 Mt KPO in 2010, and about 8 Mha planted in Indonesia for a production of 19.7 t CPO in 2010.

The huge and rapid expansion of plantations raised concerns among NGOs and the civil society. Relations of social conflicts are abundant in Indonesia, either between local communities and private companies, or between local communities and transmigrants, or even between local population and local government. However, the reasons behind these conflicts are seldom linked to a rejection of the crop but rather to promises not kept or unfair benefit sharing. It is not oil palm development per se that generates conflicts, but the tenure arrangements that often favoured big companies, and discriminated against local groups and villagers.

Most conflicts in Indonesia are linked to land grabbing by companies taking advantage of unclear or contradictory legislation on tenure, and lack of recognition of local tenure rights. Oil palm smallholdings profitability is not to be questioned. Nonetheless, a high profitability is not enough to secure livelihoods over time, and the loss of access to land is a relevant issue for communities since it strongly threatens local livelihoods and increases poverty. Nowadays, there is no more land available to expand plantations in Malaysia. The moratorium on forest concessions signed by Indonesia and Norway prevents new planting in Indonesia. Thus Southeast Asian investors are more actively looking for available land in other regions.

Oil palm can be met in natural palm groves in Cameroon or Ghana, and has been exploited to produce edible oil and palm wine since ages. An artisanal sector of transformation in various products has developed, and women get significant job opportunities and thus income streams related to oil palm marketing and processing, which they lead. Large-scale plantations are present but smallholdings dominate both the production and the transformation of oil palm.

For example, in Cameroon, smallholders cultivate about 100 000 ha (56% of the country’s plantations) compared to 70 000 ha of industrial plantations. In turn, in Ghana 40 000 ha of former English colonial plantations are under a NES scheme whereas 110 000 ha have been planted by independent smallholders and about 155 000 ha of wild groves are exploited by local communities.

Oil palm development in Latin America is more recent, even though a first plantation was established in Colombia in the 1950s, and a large-scale plantation in the state of Para in Brazil in the 1980s. Development plans have been put in place for supporting oil palm expansion linked to the food and biodiesel markets, sponsored by public policies and incentives in both Colombia and Brazil. In 2010, 402 000 ha was planted in Colombia (among which 250 000 ha are in production), and 79 000 ha in Brazil, but plans are to expand to 545 000 ha by 2019 in Colombia (and 1.6 Mha in 2032), and 10 Mha by 2020 in Brazil.

The production sector is dominated by the industry, smallholders represent only 19% of the planted area in Colombia, and less than 20% in Brazil. Yet, there is a growing interest in Colombia to expand alliances between cooperatives and companies, and the biodiesel development in Brazil is actively targeting smallholders through specific incentive programmes. It is noteworthy that in these countries, research and development programs for oil palm are being established in partnerships between public institutions and the private sector.

The expansion of oil palm in Latin America has fuelled some land conflicts due to insecure land tenure, but has also expanded on lands with consolidated tenure rights. Furthermore, it has not led to important forest conversion such as in Malaysia or Indonesia where plantations directly affected primary forests, since Latin America tends to develop in lands already converted to either agriculture or cattle ranching. Yet, nothing prevents that a more active oil palm development might place additional pressures on forests.  

Given the interest of some governments in Africa for expanding oil palm plantations and the growing interests from Asian-based companies to invest in new regions, an exportation of the Asian model of oil palm development to Africa is most likely to happen in the next decade. Asian companies require large-scale plantations in one stand to be economically viable. The problem is, in Central Africa, extensive lands tracts with no local tenure claims might only be available under natural forests cover.

Smallholders have control over all the likely available lands under customary tenure system. It may not be clear in the statutory tenure frameworks nor from the sight of foreigners, but local customary authorities constitute vigorous and legitimate systems for managing local tenure rights. Thus local authorities are an important actor in the negotiations about land allocation and use, along with mechanisms for benefits sharing.

Land grabs related to the expansion of other commodity crops is already unfolding in several African countries. Oil palm development can only fuel this process.

An exportation of the Asian model of oil palm development to Latin America is less likely to happen due to already existing commitments on reducing forest conversion and including more extensively smallholders in the business models. Yet, undoubtedly, the likely arrival of investors along with expected market expansion will stimulate land concentration and result in additional pressures on forests.

In contrast, when technically and ecologically feasible, it may also imply an opportunity to place degraded lands back into cultivation, and increase the income streams for landholders looking for additional income opportunities in already consolidated agricultural frontiers. The question of fairness share of land among smallholders and large-scale plantations will, however, constitute a major debate given existing skewed land distribution and exclusion of smallholders from the benefits of agricultural modernization in Latin America.

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