Kalimantan’s palm oil industry in need of makeover to save environment

BALI, Indonesia: Over the past three decades, 50 per cent of the 544,150 square kilometres that comprise Kalimantan, the Indonesian portion of the island of Borneo, has been taken over by the palm oil industry.

“It will expand until it pushes us all into the ocean,” prophesies Mina Setra, deputy secretarygeneral of the Indigenous Peoples’ Alliance of the Archipelago (AMAN), who has fought for years to preserve an ancient way of life from being bulldozed to make way for monocrop plantations.

“The people who have lived off the land for generations become criminals because they want to preserve their way of life.” — Mina Setra, deputy secretary-general of the Indigenous Peoples’ Alliance of the Archipelago (AMAN)

For her, the business of producing the oil, a favourite of consumers around the world, needs to fall in line with the principles of sustainability. On its current growth spurt, the industry threatens to undermine local economies, indigenous communities and Indonesia’s delicate network of biodiversity.

Consumption of palm oil has risen steadily at seven per cent per annum over the last 20 years, according to new data from a report published by the Dublinbased consultancy Research and Markets.

Globally, more people consume palm oil than soybean oil, and Indonesia is the largest producer of the stuff, churning out 31 million tonnes of palm oil in 2014. Malaysia and Indonesia together account for 85 per cent of palm oil produced globally each year.

While output is predicted to be lower in 2015, the industry continues to expand rapidly, swallowing up millions of hectares of forestland to make space for palm plantations.

Indonesian government officials and industrialists insist that the sector boosts employment, and benefits local communities, but people like Setra disagree, arguing instead that the highly unsustainable business model is wreaking havoc on the environment and indigenous people, who number between 50 and 70 million in a country with a population of 249 million.

Busting the myth of equality and employment

A recent study by the Washington-based Rights and Resources Initiative (RRI) found that the main benefactors of the palm oil industry are the big investors and companies that control 80 per cent of the global palm oil trade.

The report found, “(The) palm oil sector has added little real value to the Indonesian economy.

The average contribution of estate crops, including oil palm and rubber, to GDP (gross domestic product) was only 2.2 per cent per year.”

On the other hand, “food production is the main source of rural employment and income, engaging two-thirds of the rural workforce, or some 61 million people.

Oil palm production only occupies the eighth rank in rural employment, engaging some 1.4 million people.”

About half of those engaged in palm oil production are smallholders, earning higher wages than their counterparts employed by palm oil companies (about US$75 a month compared with US$57 a month).

The industry witnessed a 15per cent drop in profits last year, but this year profits are expected to rise, with prices settling between 500 and 600 dollars per tonne.

Still, many producers in Indonesia and Malaysia openly advocate lower wages to keep profit levels high.

Experts also believe the sector does a poor job of redirecting profits into the communities because of a model that relies on eating up land and falling back on a system of patronage.

“This patronage system serves as the basic structure for the production, marketing, and distribution of palm oil. It connects significant actors in order to facilitate their businesses through legitimate mechanisms such as palm oil consortia, which usually consist of local strongmen, senior bureaucrats, and influential businessmen with close links to top national leaders,” the RRI report concluded.

Grassroots activists like Setra say that industrialists are also skilled at manipulating legal loopholes to continue expanding their plantations. — IPS