The Palm Scribe

Researcher: The pitfalls of lumping smallholders in Indonesia’s palm oil sector into a single group

Indonesia, the world’s largest palm oil producer, is rapidly recognising the rising prominence of independent farmers in its palm oil sector. However failure to account for their heterogeneous nature may undermine the effectiveness of regulations and policies targeting this segment.

ILLUSTRATION. Palm oil smallholders. (Photo: Wicaksono/The Palm Scribe) ILLUSTRATION. Palm oil smallholders. (Photo: Wicaksono/The Palm Scribe)

Isdert Jelsma, a researcher currently attached to the Centre for International Forestry Research (CIFOR), said that a recent research conducted in a district in Riau, have pointed out to existence of various typologies within the “independent farmers” category.

“It is not homogeneous, we need to differentiate between them,” Jelsma said.

Recognising the wide diversity of players among the smallholders, he said, would help policy makers formulating effective and targeted policies.

A recent report prepared as a result of a research conducted by the Palm Oil Agribusiness Strategic Policy Institute (PASPI) earlier this week said that in 2017, plantations linked to belonging independent farmers, also known as smallholders, accounted for 53 percent of the some 16 million hectares of oil palm plantation in Indonesia.

The official figures so far have put the total surface of oil palm plantation at close to 12 million hectares with about 4.7 million hectares of them in the hands of smallholders.

The PAPSI figures means that for the first time in Indonesia’a  long palm oil history, smallholders’ plantations are beginning to dominate the sector.

Government officials have repeatedly pointed out the rising importance of smallholders in the country’s palm oil industry and have come out with polices and programs directed at this segment in a bid to boost their productivity and access to various facilities such as financing, know-how, sustainable practices and even sustainability certification.

However, policies and programs often fail to understand and account for the wide range of players among the smallholders and treat smallholders as a homogenous population sharing the same traits and behavior.

“Each of these groups have different characteristics and needs. They have different dynamics,” Jelsma said.

He said that the reality on the ground show that smallholders are far from a uniform population, with poor and rich ones, with plantations of up to three hectares or 15 hectares and more, those who cultivate palm oil in normal mineral ground and those who do so on peat soil, whether they are families or individuals.

Although he said that one could still argue about how to “slice” this smallholder category, he said the research differentiated the smallholders along the line of :

– Small local (indigenous) farmers with between 0.1-3.0 hectares of land

– Medium-sized local farmers with between 3.1and 15 hectares of land

– Large resident farmers, migrants and local, with more than 15 hectares of land

– Small migrant farmers with between 0.1-3.0 hectares of land

– Medium scale migrant farmers with between 3.1 and 15 hectares of land

– Small and medium peat farmers

– Large peat farmers

Further criteria could also be added to fine tune the classification, such as geographical location, and ethnic characteristics.

This diversity warrants the adoption of more specifically targeted polices and interventions to promote improvement in practices and compliance of standards.

Financial capabilities, he cited as an example, differed between small farmers and medium and large farmers and therefore in some groups, lack of financing was not really the issue that needed to be addressed.

“Those with 15 hectares or more, could easily sell some of their land to get the necessary funds,” he said.

The different classification meant that any regulation, legislation targeting this category should not be of a one-fits-for-all approach or solution.

“This (classification) should help to  better target policies and move way from the blank sheet policies applicable to a whole range of farmers,” Jelsma said.

“It would all depend on the objective,” he said. He took the example of the government’s ongoing drive to rejuvenate the crops of people’s plantations.

“If the target is to cover as much surface as possible, then the policy should target the large farmers, if it is the number of farmers, then the policy should be aimed at the small farmers,” he said.

One of the dominant characteristics of small local farmers is that they do not have the proper land titles, for example. Their migrant counterpart would usually come under  a nucleus or plasma plantation scheme, or under a transmigration program, and thus their land deeds would usually be in order.

These small and medium local farmers without land documentation would benefit from land certification initiatives.

In another example, the government’s drive to provide legal land documents to smallholders, so that they can have access to knowhow, certification and financing that would help  them boost their productivity, would not be effective for the large farmers planting on peat land.

“It would be problematic to legalize these large farmers planting on peat soil, for example,” he said, adding that such a move may encourage  a wider illegal use of peat land for planting.

Despite the differences, Jelsma said that all these seven groups of smallholders also shared similarities.

All seven classes had low productivity levels, even though the larger farmers may have slightly better yields mostly due to slightly better seed quality.

“The cultivation practices are the same too for all categories. More money apparently does not translate into different cultivation practices,” he said.

Having larger tracts of land for plantation and thus more money, he said, does not automatically translate into better practices  such as using fertilizers, techniques etc.

“This needs to be addressed by all stakeholders together,” Jelsma said, citing that companies could bring the knowhow and share their experience, the government the supporting legal frameworks, financial institutions the funding.”

Another problem was the rigid requirements, demanded by financing and certification institutions, for smallholders to organize themselves into formal groups in order to have access to funding, technology and facilities.

“They are called independent farmers, you do not want to be dependent on others,” he stated.

The freedom to decide, is one of the constraint in organizing independent farmers, he added.

“Is raising productivity also really wanted by all farmers? Not always. Maybe the farmers deem  that the cost and efforts involved is not commensurate with the rise in productivity and would rather opt for their current level of production,” Jelsma said.

He said encouraging farmers to organize themselves into rigid organizations with secretary, chairman and manager, was akin to the “plasmafication” of independent smallholders.

The PAPSI report illustrated how fast the role of independent farmers has grown. From two percent of the total palm oil plantation in 1980, it had grown to 26 percent a decade later and by 2016 it had reached 41 percent. It also carried a forecast that said that by 2030, farmers’ plantations are expected to account for 60 percent of the total.

Indonesia is the world’s largest palm oil producer, as well as consumer. Indonesia and Malaysia, the second largest palm oil producer, together account for some 85 percent of the world’s palm oil supply.

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