Processes of inclusion and adverse incorporation: oil palm and agrarian change in Sumatra, Indonesia

Abstract

Changes in globalised agriculture raise critical questions as rapid agricultural development leads to widespread social and environmental transformation. With increased global demand for vegetable oils and biofuel, in Indonesia the area under oil palm has doubled over the last decade. This paper presents a case study of how micro-processes that are linked to wider dynamics shape oil palm related agrarian change in villages in Sumatra, Indonesia. It pursues related questions regarding the impact of agribusiness-driven agriculture, the fate of smallholders experiencing contemporary agrarian transition, and the impact of increased demand for vegetable oils and biofuels on agrarian structures in Sumatra. It argues that the paths of agrarian change are highly uneven and depend on how changing livelihood strategies are enabled or constrained by economic, social and political relations that vary over time and space. In contrast to simplifying narratives of inclusion/exclusion, it argues that outcomes depend on the terms under which smallholders engage with oil palm. Distinguishing between exogenous processes of agribusiness expansion and endogenous commodity market expansion, it finds each is associated with characteristic processes of change. It concludes that the way successive policy interventions have worked with the specific characteristics of oil palm have cumulatively shaped the space where agrarian change occurs in Sumatra.

Keywords:

• Southeast Asia
• adverse incorporation
• oil palm
• agricultural policy
• social differentiation
• commodity markets
• biofuel

Notes

¹For a wider discussion see special editions of Journal of Agrarian Change 9(2) and Journal of Peasant Studies 36(3).

²See Food and Agricultural Organisation of the United Nations (FAOSTAT) at http://www.faostat.org.

³This periodisation here is of course schematic: there are continuities across these periods without necessarily clean breaks between them.

⁴While the government has launched a program of ‘revitalising plantations’ that aims to support smallholder oil palm development, this program has yet to have significant impact (Kompas 2009).

⁵For further discussion, see Levang (2003).

⁶Although there were five PIR schemes implemented in the period following 1978, we focus here on PIR-Trans implemented in this particular district.

⁷For a discussion of the domestic political objectives of transmigration, see Levang (2003).

⁸Other research in other areas of Indonesia reveals the wide variation, with many villages continuing with a wider portfolio of livelihood activities (see Cramb et al. 2009). In this lowland area by comparison, oil palm and timber plantations enclosed large areas, closing these options (McCarthy 2008).

⁹From 1997 a series of ministerial decrees set out a formula for calculating oil palm FFB prices, working to reduce the dominance of the plantation monospony arrangement.

¹⁰The price of crude palm oil increased 88 percent from US$570 per metric ton at the beginning of 2007 to over US$1440 per metric ton in early March 2008.

¹¹For discussions of cooperatives in Indonesia, see White (1997), Henley (2007), and McCarthy (2008).

¹²Interview, former village head, February 2008.

¹³It remains unclear to what degree this may lead to ‘occupational multiplicity’, the de-linking of livelihoods and poverty from land (and from farming), delocalisation of livelihoods and the spatial fracturing of households discussed by Rigg (2006).

¹⁴In 1994 a state poverty alleviation program (Inpres Desa Tertinggal or IDT) identified the poorest or ‘left behind’ villages (desa tertinggal) for special assistance, including this particular village.

¹⁵For further detail, see McCarthy (2008).

¹⁶The two villages surveyed included the second village discussed above and the fourth village described below.

¹⁷This figure is particularly low. Poor land preparation affected the productivity of the ‘plasma’ lands. Further, these oil palm plants had yet to reach the peak of production.

¹⁸Interview, plasma farmer, 9 Feb 2008

¹⁹Further, many entitlements were already small. While in theory each farmer should obtain 2 ha after providing 2.8 ha to the scheme, due to pressure to include more and more farmers in the plasma lands developed on communal lands, the average provision was 2 ha and hence those with entitlements only received 1.6 ha.

²⁰Interview, village head, March 2009.

²¹Interview, former village head, 10 Feb. 2009.

²²Village informants found it difficult to distinguish poor farmers with land from landless wage labourers.

²³Interview, village head, 10 March 2009.

²⁴Interview, village head, 15 March 2009.

²⁵Interview, former village head, 12 March 2009.

²⁶Causal day labourers (BHL) typically work harvesting the fruit and carrying out husbandry tasks (applying fertilizer, pesticides, cleaning and weeding the land, etc).

²⁷Interview, district agricultural officer, 19 Feb. 2008.

²⁸Interview, school teacher, 3 Feb. 2008.

²⁹As will become clear later in the paper, commoditised transfers of land occur both within the framework of local ‘informal’ and state-regulated institutional arrangements. As transactions occurring in both can work against the poor, ‘fixing’ the problem entails much more than the program of formalisation suggested by De Soto's analysis of the role of property rights in economic development. As Cousins (2009, 905) notes, legal empowerment can provide ‘a potential platform’ for change rather than reducing poverty per se, primarily because ‘formal rights in law often have little substantive content’ in the face of ‘asymmetries of power and use of law’.

³⁰The structure of a given network and the ability of an individual to make use of their position within it is sometimes referred to as ‘structural social capital’ (Grootaert et al. 2004). For a critical discussion of the theoretical assumptions underlying the social capital concept and its application, see Mosse (2007).

³¹The exception here is the state program of ‘plantation revitalisation’, which had yet to have any appreciable effect on this oil palm district.

³²While these cases were outside the main research sites, one visit was undertaken to one site. This ‘partnership’ scheme was untaken without effective state oversight, and without farmers understanding land and profit sharing arrangements. Several respondents suggested that, although the company retained the 70:30 land division of the PIR-Trans and KKPA periods, the company would only return 20 percent of the income derived from plasma lands back to participants. With very poor benefits associated with the scheme, most villagers had already sold on their land. For other partnership cases, see Zen et al. (2008).

³³One broker interviewed in the course of this research had used his first scheme plot to trade upwards, selling it for a large profit, and then buying a second and a third plot, which he then sold. Building up his capital along the way, eventually he opened his own plantation. In 2008, he had 300 ha under various stages of cultivation.

³⁴Next to this village there is a large plantation. During the 1990s villagers surrendered large areas of land initially understanding they would obtain ‘plasma’ land in return. There was a lack of agreement within the village regarding this plan because it would enclose productive rubber lands on which farmers depended for their livelihoods.

³⁵At the height of the oil palm boom during 2008, successful transmigrants from the PIR-Trans settlements were earning enough to purchase a car, a motorbike or buy up new areas to grow oil palm.

³⁶Interview, 16 March 2009.

³⁷One villager facing a bleak future obtained the capital to buy up new lands and become a ‘progressive farmer’ in this fashion.

³⁸As a first step in processing a concession license, plantations obtain a ‘location permit’ (izin lokasi) that entitles them to proceed with developing an area subject to the plantation compensating local landowners for land held under ‘traditional’ title. In this case the company proceeded to legitimise its extension over village common land through this pretence of legal purchase.

³⁹Interviews with intermediate traders suggest that most oil palm, even from ‘progressive farmers’ working outside their KKPA entitlements, is from poor quality oil palm seedlings.

⁴⁰Thanks to Philip Hughes for this observation.

⁴¹This is not foreordained. Other ‘partnership’ schemes could lead to outcomes along the lines of the first village studied here. See Zen et al. (2008).

Additional information

Notes on contributors

John F. McCarthy

This research was carried out under an Australian Research Council grant entitled ‘Oil Palm and Agrarian Transition on the Indonesian and Malaysian Frontiers’. I am particularly grateful to Dr Zahari Zen for his involvement in the research as well as to Suma and Roland for accompanying me to the field during 2009. A special thanks also to Philip McMichael, Oliver Pye and two reviewers for extremely useful critical comments. Also thanks to Robert Cramb, Lesley Potter, Zulkifli Lubis, Piers Gillespie and Patrice Levang, for sharing their understandings during the course of this research.