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Can improved oil palm productivity and Indonesia’s forestry moratorium go hand in hand?

Mongabay-Indonesia chief editor Ridzki R. Sigit argues that efforts to increase smallholder productivity among Indonesian smallholders are sorely needed.

A mature oil palm plantation. Photo: Ridzki R. Sigit
A mature oil palm plantation. Photo: Ridzki R. Sigit

In a joint release this week, consumer products giant Cargill and the Bogor Agricultural University (IPB) announced the completion of the first harvest at the IPB-Cargill Palm Oil Teaching Farm in Bogor, a suburb of the Indonesian capital of Jakarta. The pilot project is expected to produce eight to nine fresh fruit bunches per hectare. Through increased productivity, it is hoped that limitations of land available for new oil palm plantations in Indonesia can be overcome.

Oil palm expansion is the main force driving deforestation in Indonesia today. The reason is clear: entrepreneurs have generally chosen extensification over intensification, which is to say they have generally preferred to open new land instead of getting serious about seed quality.

In the old paradigm, forest clearing for oil palm gave businesses big profits in advance. Money from logging could be reinvested in the plantation.

The problem is, the palm oil industry can’t convert forest forever. Besides the limitation of area available to be converted, forest is not suitable only to be sought rent from. What happens if world palm oil prices collapse? Can forests and biodiversity immediately be restored?

Denying the importance of palm oil would not be wise. As a tropical crop that is compatible with Indonesia’s climate, and considering the amount of cheap labor in Indonesia, palm oil can become a major export commodity and boost economic growth in the country. Forest and commodity-based exports contribute $21 billion to the national GDP and employ nearly four million people. Export taxes earn the state about $1 billion per year.

The continuance of Indonesia’s moratorium on new concessions in primary forests and on peat, announced by the government in May, indicates the future direction of land management in the country. With all its limitations, the moratorium needs to be supported by stakeholders in the plantation and forestry industries. One clear message of the moratorium is that forests are no longer solely intended for solely for non-forest interests.

This message should encourage the palm oil industry to pursue land intensification. The industry must shift from its original orientation: expansion, which is detrimental in the long run. On the contrary, it must develop a new land management paradigm based on non-expansion and zero-deforestation policies.

Here, the moratorium can force companies to innovate in boosting productivity and managing land.

Indonesia has more land under cultivation for oil palm – 11 million hectares – than any other country. So why do we do we need still more land for plantations? Look at Malaysia – it has less land under cultivation than Indonesia but higher productivity.

In Malaysia today, one hectare of oil palm produces the same as 1.4 hectares in Indonesia. The higher productivity is due to superiorities in supply-chain and land management; seed selection, including giving seeds to plasma farmers; and more efficient transportation and processing.

Another example of the success of a forestry moratorium is in Brazil, which successfully implemented a moratorium without compromising the soybean industry. A moratorium on the expansion of soybean farming in the Amazon dramatically reduced the country’s deforestation rate, previously the world’s highest.

Prior to the Brazilian moratorium, deforestation as a result of soybean expansion was 30 percent, although after the moratorium that fell to just one percent. Instead, intensification has resulted in the doubling of soybean productivity through improved planting techniques and seed selection.

Land cleared for oil palm in Indonesia's Riau province. Photo: Rhett A. Butler
Land cleared for oil palm in Indonesia’s Riau province. Photo: Rhett A. Butler

Company commitments

Some companies, at least, have committed to purging their supply chains of deforestation and rights abuses. Last year, the Indonesian Palm Oil Pledge (IPOP) was signed by Wilmar, Cargill, Asian Agri, Golden Agri Resources and Musim Mas, which together account for 85 percent of global demand for crude palm oil.

As stated at a meeting titled “Sustainability: A new Profit Driver?” held in Singapore in mid-May, companies like Asian Agri intend to double their harvest by through productivity increases of up to 50 percent. The way to do this is by replanting gradually using new types of seeds (genetic modification) and increase planting on lands that have long been regarded as marginal.

However, the company is aware that increasing productivity is not solely a technical issue related to agronomy and agriculture, but also about social issues and intergrated relationships with stakeholders.

At the level of the palm oil industry supply chain, which involves millions of farmers, the question is how to get millions of plasma farmers to use certified seeds to boost their productivity?

It’s no secret in Indonesia that smallholders, even those who work with big companies, opt for cheap seeds that are easy to obtain. Companies also depend on third-party suppliers. The issue of smallholders is not a simple matter in Indonesia, where around 40 percent of oil palm plantations are owned by small or medium-sized enterprises (SME) or community plantations. In this situation, uniform quality standards are more difficult to implement than if land was controlled by big companies. Right now, productivity on land controlled by SMEs is very small: just two to three tons per hectare. A greater effort to increase SME productivity is needed.

Besides the above problems, companies’ commitments need to be strengthened with binding agreements. Groups like the Roundtable on Sustainable Palm Oil (RSPO) and the IPOP must prove that their commitments are as good in the field as they are on paper.

Land cleared for oil palm in Indonesia's Riau province. Photo: Rhett A. Butler
Land cleared for oil palm in Indonesia’s Riau province. Photo: Rhett A. Butler

The world has changed, and the palm oil industry cannot keep ignoring global market pressures and the urging of activists who want sustainability and an end to deforestation. At present, 96 percent of global palm oil production falls under a zero-deforestation commitment.

In the long run, the moratorium will make it easier for companies to abide by their commitments. In this way, the moratorium is not empty jargon or something to be lamented but a business prospect that provides beneficial effects. With increased productivity, it is expected that forests will no longer be targets for conversion.

This is certainly not an easy thing to do, but isn’t nothing impossible if carried out properly and seriously?

Produced in English by Philip Jacobson.


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