Will teaching sustainability standards to oil palm smallholders in Indonesia pay off?

ABSTRACT

This study presents an ex-ante cost-benefit analysis of introducing sustainability standards to smallholder oil palm farmers in the province of Jambi, Sumatra, Indonesia. Sustainability standards are defined as a set of oil palm management practices derived from the Indonesia Sustainable Palm Oil (ISPO) scheme. Economic and environmental benefits of ISPO are derived from a panel data set from some 185 oil palm smallholders collected in 2010, 2012 and 2013. We explore two basic strategies for the introduction of ISPO namely: (1) a conventional extension campaign and (2) a farmer field school approach. Our calculations show that the farmer field school approach results in a higher economic rate of return compared to conventional agricultural extension campaigns. A major conclusion from this analysis is that the Government of Indonesia should invest if ISPO standards are to be adopted on a large scale by smallholder farmers.

KEYWORDS:

• Oil palm
• cost-benefit analysis
• ISPO
• farmer field schools
• Indonesia

Acknowledgements

The authors thank the editor for his guidance and the anonymous reviewer for helpful comments. We also thank the Economy and Environment Program for Southeast Asia (EEPSEA) for partial financial support.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes on contributors

Ernah is a lecturer at the Department of Socioeconomics of Agriculture at the Faculty of Agriculture, Padjajaran University in Bandung, Indonesia. She received her PhD in Economics from the Leibniz University Hannover in Germany in 2016. She has carried our field research on small holder oil palm farming troughout Indonesia.

Priyanka Parvathi is an Affiliated Reseacher at the Institute of Development and Agricultural Economics. She received her PhD in Economics from Leibniz University Hannover in 2014 and thereafter worked as a postdoc and assistant professor. Since 2019 she is with KWS Seed Company International as a Global Market Analyst.

Hermann Waibel is Professor of Agricultural Economics and Head of the Institute of Development and Agricultural Economics at the Faculty of Economics and Management of Leibniz University Hannover. He has supervised some 42 PhD students as their “Doctor father” and has some 35 years experience in research and development, primarily in Asia.

Notes

1 see http://data.worldbank.org/indicator/FR.INR.LEND