Kalimantan in the firing line: a note on the effects of the global financial crisis

Abstract

This note examines the impact of the global financial crisis on Kalimantan's four provinces. Although growth in the region slowed dramatically with the onset of the crisis, only in the dominant province of East Kalimantan did overall growth turn (slightly) negative. There were strong negative effects on the agricultural, manufacturing and mining sectors, but these differed greatly across individual provinces. This study presents evidence on price trends for three key commodities – palm oil, rubber and gold – and discusses the effect on farmers of the steep falls in palm oil and rubber prices. Surprisingly, the crisis had remarkably little impact on open unemployment, and the ongoing decline in poverty was hardly interrupted (although this may simply have reflected the timing of the surveys used to measure poverty). The end of the crisis saw oil palm making a speedier recovery than rubber, with gold mining remaining the ‘safety net’ for poor farmers.

Notes

¹The author carried out village-based research in various parts of Kalimantan between 1981 and 2007.

²It has been reported that 53,000 workers were laid off from the timber industry in Central Kalimantan between 2005 and early 2008 (KapanLagi.com, 12/2/2008).

³There are also a number of independent small-holders, but far fewer than in the Sumat- ran provinces of Riau and Jambi.

⁴The plantation and finance departments of the West and Central Kalimantan govern ments, together with representatives from estate mills and producer cooperatives, set monthly prices for farmers’ FFBs that vary according to the export price of CPO and the age of the trees. (Fruit from immature trees fetches lower prices.)

⁵For example, exports of ‘fats and oils’ (mainly CPO) from Central Kalimantan, which stood at 94,000 metric tonnes (mt) in the first quarter of 2008, fell to just 19,000 mt in the fourth quarter of 2008 and 22,000 mt in the first quarter of 2009 (BI 2008-Q1, 2008-Q4, 2009-Q1, Central Kalimantan). The SMERU Research Institute reported that the ‘cancel lation of orders caused a significant decline in CPO exports and the collapse of many processing firms, including those located in … Central Kalimantan and West Kalimantan’ (Isdijoso 2009).

⁶In fact there were only 93,000 hectares of oil palm small-holdings in East Kalimantan in 2008, so the number of small-holders was probably not more than 50,000–70,000 (BPS Kalimantan Timur 2009).

⁷In West Kalimantan, rubber exports were valued at $448 million in 2008. The value fell to just $73 million in the first half of 2009 and to $131 million in the whole of 2009 (BI 2009-Q2, 2009-Q3, West Kalimantan).

⁸ Tembawang – diverse orchards mixed with timber trees and other useful species – are a feature of Dayak village agriculture in parts of West Kalimantan. Many are historic (border ing old longhouse sites) and communally owned. When asked to give up land for an oil palm plantation, villagers try to keep their tembawang; the stronger traditional (adat) lead ers may refuse to allow them to be cleared.

⁹Small-holders must give up land to the plantation in order to receive their two-hectare plot of oil palm. In the case of PT SIA, only about 30% of local villagers gave up the full 7.5 hectares they were supposed to hand over under this scheme.

¹⁰Note that East Kalimantan has noticeably higher rural poverty levels than the other provinces (though showing some decline).