Palm oil smallholders - nuances, context and other issues

I'm glad that young Indonesians and Malaysians are interested in the issue of sustainability for oil palm smallholders / farmers. In the last few years, I have spoken to more than a handful including those writing their masters thesis; and I also spoke to a PhD researcher on Malaysia rubber and its smallholders. I thought I'd summarise some thoughts and issues here.

I was recently on a panel that presupposed a very positive view for Malaysia UN SDGs on social issues (this should cover labour and farmer) for palm oil. I cautioned that a nuanced view should take note of the 80-90% reliance of Malaysia palm oil on migrant workers in both estates and farm zones. These face heavy questions from the US and other destinations on labour rights; and pressure is also surging from labour supply countries Indonesia, Bangladesh and others. Also, rising rural population density can make socio-economic advances more difficult if incomes beyond palm oil are not on the rise.

I researched sub-national data on Indonesia smallholder several years ago (presented at a conference) and came up with a preliminary finding of what I described as a potential 'boomerang effect' where high level socio-economic indicators improved with palm oil dominance in the district/area but worsened at some point. Of course the data was hard to parse as this was mixed up with non-palm oil income but I tried to focus on interior areas. Further study is warranted and this might align with the literature for oil palm smallholder schemes in PNG; which are cautionary and even point to a drop in education attainment. This would be due to the rise in population density. Indeed, some Indonesian companies are also now pushing for smallholders to do more market gardening to enhance their incomes. I also advocate that Indonesian conglomerates employ the children of oil palm smallholders in their non palm oil businesses.

Once rural population density rises and the frontier for expansion is shut (as policy focused on agribusiness expansion for decades, and now we have non-deforestation efforts), oil palm incomes may not be enough for the rising aspirations of rural families. Incomes fluctuate with commodity prices and this has been very good since the painful consolidation of prices in the late 2010s; as CPO prices went sky high in 2022 (but Indonesian farmer suffered from FFB prices in 2022 and had issues selling their product - a story for another day). But are smallholders/farmers getting a look-in on the value-add of palm oil in their FFB pricing? A fair share of the value-add from RSPO premia, a fair share from mill waste products and PK?

At the earlier stage the poverty alleviation role of this crop was and is amazing. It is even part of "palm oil for peace" economic rehabilitation efforts in post conflict zones in the Philippines and Colombia.

The success of Malaysia's FELDA smallholders in socio-economic mobility was in large part due to the massive urban-industrial migration boom (which PNG notably lacked), but now some second and third generation of FELDA settlers are finding difficulty in affording new homes and politicians are looking for ways to support them.

So, when looking at the positive story of smallholders and palm oil, look at timeframes, context and aspirations. Smallholders/farmers are sometimes used as a 'shield' to fend off criticisms about palm oil. They have their hopes and aspirations too and the voice of Indonesian (and other) cooperatives and smallholder associations are becoming more vocal. These are worth checking out as they point to rising tussles within the palm oil community and hark to the issue of distribution and fairness. Also consider what is NOT there e.g., those who missed out on being an oil palm smallholder for one reason or the other.

Best wishes to those researching smallholders, socio-economic issues and UN SDGs and more.

Yu Leng, 16 Sep 2022

Ps. for rubber smallholders, I think the economic impetus is quite different - think of the rubberwood as a savings mechanism.

My publications which cover oil palm smallholder issues include the following; with most links here https://www.dhirubhai.net/in/yu-leng-khor-%E8%A8%B1%E5%B9%BC%E7%8E%B2-163b321/details/publications/:

• Upcoming: (i) WWF on the business case for sustainable palm oil, that covers sustainability premia and has a focus on the issue of financial incentives for smallholders; (ii) Report with Proforest for European Forestry Institute/EFI that is part of the KAMI Project, on data sources and jurisdictional approach for implementing the EU's non-deforestation rule for the Malaysia palm oil supply chain , which also covers smallholder issues.
• ESG in Practice: A Closer Look at Sustainability in ASEAN’s Palm Oil and Pulpwood Sectors," Singapore Institute of International Affairs · Nov 2, 2020
• Study on the environmental impact of palm oil consumption and on existing sustainability standards, EU publications · Mar 19, 2018
• Haze Control and the Oil Palm Farmer - a Review of Policy Options, International Peat Congress · Aug 1, 2016
• Haze Control through the Sustenance of Indonesian Oil Palm Smallholders, The Habibie Center · Dec 1, 2015
• Consulting Study 12: The Felda case study, High Carbon Stock (HCS) Science Study · Jan 1, 2015

There are also two academic pieces on the political economy of palm oil - the voting issues and preferences in Malaysian oil palm smallholder zones - in the last two General Elections.