Palm Oil Plantation: Small Holders vs.

Big Company
Thifali Adzani, San San Htay, Tungga Dewi H.P.

Part 1 :
Current Global Condition Towards Palm Oil

Forestry nowadays is facing deforestation problem. Deforestation changes forest land use into another
form, mostly for plantation. In developing countries, one-third of the total plantation estate was primarily
grown for wood fuel in 1995 - although it should be noted that planted trees on farmland, in villages and
homesteads and along roads and waterways contribute significantly to fuelwood supplies, enabling the
demand to be met in most instances.

Forest converted into another forest plantation and agriculture plantation. In FRA 2000 "forest
plantations" are defined as those forest stands established by planting or/and seeding in the process of
afforestation or reforestation. They are either introduced or indigenous species that meet a minimum area
requirement of 0.5 ha; tree crown cover of at least 10 percent of the land cover; and the total height of
adult trees above 5 m (FAO, 2000).

Figure 1 shows the expansion of tropical forest into crop plantation. Most tropical countries experienced
deforestation because of the plantation. This was based on the result of research conducted in 2014. From
2000-2012, 90% of the deforestation in Brazil was illegal, because of the failure to conserve percentage
of natural forest in large scale in large scales cattle and soy plantation. Indonesia faces the same problem,
80% deforestation was illegal, 15.5Mha forest loss to palm oil and pulp plantation 75% of which is
imported. In Papua New Guinea, 0.6Mha tropical forest converted into cocoa and oil palm plantation.
 Figure 1. The expansion of tropical forest into crop plantation

Right now palm oil plantation dispersed and has become a driver in deforestation in tropical countries.
The demand for palm oil increases because not only used for the food industry and chemical product
(39%), palm oil also contributes to biodiesel supply (61%). In the USA, soybean oil has been used to
support biodiesel but food industries were using vegetable oil (palm oil) instead. That's why palm oil
demand decreases dramatically and became a key ingredient.

Indonesia and Malaysia is the biggest producer of palm oil. Both countries produce 84% of global palm
oil demand in 2015. Followed by Thailand, Colombia, Nigeria, Ecuador, and Guatemala. The top
importers of palm oil are India, EU, China, Pakistan, and Bangladesh. Those countries often got blamed
because of GHG emissions and deforestation. But is the palm oil plantation contributes to major
deforestation in the world?

This statement has become an important issue since the international NGO said that and Europe
Parliament has published a report about palm oil and deforestation. From the article by Baron et al (2017),
Europe Parliament through the report stated: "The conversion of land to oil palm plantations alone is
responsible for 40% of the loss of natural forest cover around the world."

Yes, agriculture is, therefore, the leading cause of global deforestation, with 24% of the land used for
livestock and 29% for crops. The report provides some details of the 29% chunk of deforestation due to
crops, highlighting the crops with the highest contributions – soybean (19%), maize (11%), oil palm (8%
%), rice (6%) and sugarcane (5%).
Baron et al (2017) said in his article about the mismatch of data and its reference. It says "40% of global
deforestation is due to the shift to large-scale oil palm monoculture plantations" and that "… 73% of the
world's deforestation results from land clearance carried out for the production of agricultural raw
materials [ …]." These are the same deforestation figures for world agriculture and the oil palm sector,
but this time taking into account all forms of agriculture, not just "intensive" or "industrial" agriculture.

Some of the researchers also tried to calculate the total forest lost, (Ordway, et al., 2019) has stated that
globally, oil palm (Elaeis guineensis) is the second most significant driver of deforestation, accounting for
2 Mha of forest cleared in 2000–2010 and 1.77 GtCO2e of global greenhouse gas emissions during the
same period. An estimated 60% of 18 million Ha that has been planted with palm oil in 1990-2015 was
directly converted from primary forest. (Ordway, et al., 2019)

If we take a look deeper, there are some mismatch data. From the report by Europe Union (2013), palm
oil plantations account for only 8% of the deforestation attributed to crops. In total, this represents 8% of
29%, thus 2.3% or 5.6 million hectares from the 239 million hectares of forest lost between 1990 and
2008. Indonesia also "answer" that issue by said not all palm oil plantation is from the forest conversion.
In Indonesia as one of the biggest producers of palm oil, the plantation also comes from the non-forest
area. In Jambi, Indonesia, 8% palm plantation occurred by a direct clearing of intact forest in the study
area in the last 25 years. Oil palm concessions in the last 25 years were mostly developed on logged forest
(Tarigan, et al. 2015)

In West Kalimantan found that between 1989-2008, the primary source of land use for oil palm
development were intact forests (21%), secondary (21%) and logged (7%) forests. The last study included
intact forest areas in peatlands and that was the main reason why the figure for intact forest clearing was
higher (Tarigan, et al. 2015). Article from Tropenbos (2014) also stated that 10% of the total peatland in
Indonesia converted into palm oil plantation and it much less compared to Malaysia which has been
converting 50% peatland to palm oil plantation. In the other country, Cameroon, 67% of oil palm
expansion from 2000–2015 occurred at the expense of forest (Ordway et al. 2019).

In Indonesia maybe those numbers give 40% of forest loss to oil palm plantation (for all types of forest)
in Indonesia but the number not for the whole world. Research by Working Group of the Roundtable on
Sustainable Palm Oil (RSPO) also stated that land cover change of the primary forest into oil palm
plantation is less than 5% in the three countries. Only 0.1% of oil palm plantations were sourced from the
undisturbed upland forest, while undisturbed swamp forest contributes 4%. The others were established
on land previously covered with secondary forests, shrublands, grasslands, plantations and agroforestry,
annual crops, mines, settlements, and even bare soil landscape (Tropenbos, 2014). Therefore we need
more information and recalculate for data mapping to answer the issue of palm oil as deforestation drivers
and carefully announce the result.  

Overall palm oil plantation also has problems, that are:

 Loss of critical habitat for endangered species
 Air, soil and water pollution
 Soil erosion
 Climate change (Greenhouse emission)
 Increase of carbon emission
 Community lost the access to forest and not sufficiently compensated by economic gains from
palm oil cultivation
 Human-wildlife conflict
 
Part 2 :
Myanmar Oil Palm Plantation

1. Background of Oil Palm in Myanmar

Oil palm expansion has grown at an unprecedented rate in Myanmar. In the early 2000s, the military junta
head and former dictator of Myanmar, Retired Senior General Than Shwe, decided that agribusiness
expansion in Myanmar would be a cornerstone of economic development. The rationale was that
Myanmar had a comparative advantage in an abundance of vacant land that could be made ‘productive’.
Large economies of scale would ensure high profits and self-sufficiency. So, Oil palm was chosen as a
key crop to boost economic returns from land.

However, this military project to boost the national economy had two major flaws. First, much of the land
targeted was not vacant but populated by local communities and people who had been affected by
conflict; or belonged to absent refugees and IDPs (Internally Displaced Person) who wish to return to
their former land. Second, the potential for investment and technology to lead to greater efficiency or to
create an economy of scale was grossly overestimated. The highly inefficient, environmentally
unsustainable and socially inequitable palm oil sector had the opposite effect to what was expected.

In total, 1.8 million acres of oil palm has been allocated to the private sector from 2011 to 2016, which
represents 35% of all agribusiness concession areas nationally. However, of the 1.8 million acres, only
535,000 acres will be planted by the end of 2016, which is equivalent to 29% of the total area granted. In
Myanmar, oil palm plantations are grown in Thanintharyi Region.
 Figure 2. Oil Palm Concessions in Southern Thanintharyi Region (Source: Green Desert Report)

2. Myanmar Stark Prestige Plantation (MSPP) Case Study

In Myanmar, there are 44 oil palm companies. Among them, I would like to emphasize on Myanmar
Stark Prestige Plantation (MSPP) case study. 95 percent of MSPP is owned by Malaysia Conglomerate
and Mya Thida Swe Tin, who is Myanmar businesswoman with connections to the military and business
elite, belongs to 5 percent of MSPP. Regarding with MSPP, there are area discrepancies. Myanmar
Investment Commission (MIC) awarded 38,000 acres to MSPP but this document was kept
confidentially. And there are 42,200 acres according to MSPP company signboard. But, the area is 49,227
acres according to GIS calculations.

Another issue is that the customary lands of four ethnic Karen villages are included in the concession
area. Furthermore, MSPP is overlapping government land designations. That is the government
designated the land where MSPP concession is in the National Park. There are also impacts on Local
Livelihoods due to MSPP. These are;
 A. Logging and destruction of crops
Substantial areas of cashew and betel that belong to affected communities were destroyed and burnt by
MSPP, with no warning and no offer of compensation, which is illegal under Myanmar Law. Prior to
2016, 6000 acres of land had been cleared, 1200 acres of which was comprised of villagers’ orchards.

B. Water contamination by MSPP

Fertilizers and pesticides are applied to the crops regularly. The effects of chemical pollution in natural
waterways is causing devastating effects on communities who rely on the water sources for drinking
water. The community is unable to drink the water and has been forced to find alternative drinking
sources. And they encounter health problems (skin irritation and outbreaks of dysentery. Livestock
(cattle) have died due to chemical fertilizers.

C. Loss of livelihood and Increased Debt

Local livelihoods have been totally destroyed by MSPP destroying crops and contaminating water
supplies and killing livestock. Families have had their productive farmland destroyed and they have lost
everything. As a result, many households have fallen into high levels of debt, as they have been left with
no other choice than to borrow money to survive. Consequently, many villagers from the concession area
now have to work as day laborers on very low wages.

 
Part 3 :
Indonesian Oil Palm Plantation

In relation to climate change, oil palm is believed to be the largest contributor in the agriculture section to
deforestation across nations put together (FAO 2016). Palm oil lies mostly in the Southeast Asia region.
Since 1990 to 2010 as much as 3.5 million of palm oils has rapidly grown up to 12.9 million ha in
Indonesia and Malaysia (Austin et al. 2017). Ever since that period, many problems related to oil palm
has arisen such as land rights issue, severe environmental impact, and unsustainable kind of business
(UNEP 2011, Wich et al. 2011, Balaton-chrimes and Macdonald 2016, Petrenko et al. 2016).
Nevertheless, despite global demand for environmentally friendly vegetable oil and EU’s petition of
banning palm oil, the state of palm oil in Indonesia is still irreplaceable (Susanti and Maryudi 2016,
Gelder et al. 2017, Keating 2019).

Indonesia is the world’s largest producer of palm oil (Sequiño and Magallon-Avenido 2015, Pacheco et
al. 2017). Crude palm oil (CPO) export from Indonesia is accounted for the second largest export
commodity after coal (The World Bank 2018). In 2016, the total export of CPO from Indonesia is
US$14.36 million or about 10% of total production. Yet at a national scale, it wasn’t by dint of
government sector, it is smallholders and private company who act as two main contributors in the palm
oil business in Indonesia (Budidarsono et al. 2013, Alwarritzi et al. 2015, Jelsma et al. 2017a, Coello et al.
n.d.). In 2017, there are 2.21 million of small warmers working and owning the smallholder plantation;
3.39 million farmers are working for the private estate; while only 381 thousand farmers working on
government estate. It seems coherent with the fact that government estate only owns 5.19% of total palm
oil land plantation, while private estate and smallholders share their portion almost evenly, which is
49.17% and 45.64% respectively (BPS-Statistics Indonesia 2017, Ministry of Agriculture 2017).
However, even though palm oil businesses are boosting economic condition in Indonesia, yet this
business is not as profitable as it seems (Varkkey et al. 2018).

Sumatera and Kalimantan are the two most important source of palm oil in Indonesia, consequently, with
Java as the axis, beneficiary flow of palm oil is often limited to other areas. Inside the plantation in
Sumatera and Kalimantan, the gap between the private sector and smallholders are exposed. If it being
breakdown by the areas then the proportion is quite similar, but through the side of yield production,
smallholder’s plantation has little much lower production compared to the private estate: 57.7% over
36.9% (BPS-Statistics Indonesia 2017, Ministry of Agriculture 2017). There are several reasons that
underlying the low productivity of smallholder plantation, among other low seed quality, low production
intensification (fertilizer, nutrition), lack of additional labor or farmers to help plantation (land
preparation, planting, harvesting), distance from plantation area to processing mill, lack of transportation,
business strategy and market opportunity (Euler et al. 2017, Kehutanan 2018, Jelsma et al. 2019).

Among the smallholder plantation, the benefit they get from palm oil is also not equally distributed
(Santika et al. 2019). Palm oil plantation resulting in a domino effect in the village neighborhood, where a
single area of plantation could trigger the probability of palm oil expansion on the nearby area (Bou Dib
et al. 2018). Drives to economic pressure and responds to daily life needs, smallholders tend to expand
the plantation areas rather than intensify the production process. Often, due to lack of land support from
the government for expansion activity (Jelsma et al. 2017b), smallholders then occupy abandoned forest,
often worse, forestland itself. Forest area where contain palm oil plantation inside is not always
necessarily protected forest or protected area, even timber production concession area is also being
targeted as area expansion of palm oil (Prabowo et al. 2017). A novel survey has reported 2.8 million ha
of illegal palm oil plantation inside forestland area, which 35% belongs to smallholders, while the rest
belongs to a private company (Hardianto 2018). A vast area of forest and a small number of forest guard
allows illegal plantation inside the forest area. However, corruption and weak law enforcement are still
encountered, thus underpinning the expansion (Eldeeb et al. 2015, Enrici and Hubacek 2018, Pachmann
2018, Transparency International 2018). There are three actors involved in the palm oil business: District
stakeholder/government, Ministry of Forestry and, local community, where district government holds the
most important phase (Setiawan et al. 2016). Since decentralization systems are enforced towards all
province, operation permission is, therefore, working from the bottom up (Permusyawaratan and
Republik 1998, UNDANG-UNDANG REPUBLIK INDONESIA NOMOR 22 TAHUN 1999 TENTANG
PEMERINTAHAN DAERAH 1999). Main power and the first section to pass the permission is done by
the district government and governor. Sometimes corruption level is not only on a single institution, yet it
chained in some parallel systems where individuals are working together to cover the corruption.
Basically, in Indonesia, palm oil plantation could only establish in the non-forest area, however, some
alterations could be made by the Ministry in order to release the forest area permit. Whereas, local people
hold an important part when it goes to the operation process. Some incentives and community services are
needed in order to maintain relationships with the local community and prevent an upcoming conflict due
to land seizure and dissatisfaction (Prabowo et al. 2017).

Recently, to combat internal palm oil dilemma, President of The Republic Indonesia had released a
presidential instruction number 8 of 2018 on moratorium and evaluation of licensing for oil palm
plantations and increasing productivity of oil palm plantations (President of The Republic Indonesia
2018). The period is valid for three years counted from 2018, thus in the meantime, it is expected to clear
all illicit border and documents.  In three years, it is also be expected to be a moment to finish
certification of sustainable palm oil either on a private estate or smallholder (Santoso 2018). Indonesia
hold two kinds of legal certificate for sustainable palm oil, first is by a global base institution, Roundtable
of Sustainable Palm Oil (RSPO) and domestic base certification Indonesian Sustainable Palm Oil (ISPO).
The number of certificates being issued is still low, compared to the existing palm oil land through remote
sensing (Global Forest Watch, 2019). Nevertheless, the certification process is currently ongoing, though
the task is required more serious commitment (Cazzolla Gatti et al. 2019).
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