Partnerships in Palm Oil Builds Inclusive Economy

“The growth of oil palm plantations is drawing not only growth in economic activities directly related to palm oil, but also rural and urban economic sectors (inclusive growth)”

Several palm oil partnerships in a form of community-corporation in Indonesia which was developed since 1980 namely Special PIR, Local PIR, PIR Transmigration, KKPA PIR and PIR Plantation Revitalization, have opened access and made farmers as one of the important actors in the Indonesian oil palm plantations. Initially, oil palm plantations that belong to smallholders are developed under plasma scheme only. The success of the plasma scheme attracts local farmers to invest and join in planting oil palm which is then known as independent smallholders.

The growth of independent smallholders’ plantations is faster than the plasma smallholders’. They dominate the national oil palm plantations. This partnership has brought revolution of oil palm in Indonesia that is indicated by the increase in the share of people’s palm oil, and Indonesia became the “king” of CPO around the world.

Moreover in terms of regional development, the partnership also succeeded in managing a synergy between private investment, state-owned enterprises, the people and the government into a big-push strategy investment in the central area of ​​oil palm plantations which gave birth to new economic developing centers. The growth of nucleus and plasma oil palm plantations as well as independent farmers has encouraged the development of small-medium-union businesses (UKMK) engaged in urban industrial goods or services suppliers, as well as agricultural / fishery / livestock products to meet the communities’ need of food. In the next stage, in the growth of oil palm plantations, especially after palm oil (CPO) has been produced; people start to develop residential centers, offices, and markets surrounding the area in such a way that overall became a new agricultural cities. Big-push strategy creates new oil-based economic developing centers that are inclusive in rural areas.

According to the Ministry of Manpower and Transmigration (2014), until 2013 there at least 50 underdeveloped or isolated rural areas which have developed into new growth areas which based on CPO production centers. Among these areas are Sungai Bahar (Jambi), Pematang Panggang and Peninjauan (South Sumatera), Arga Makmur (Bengkulu), Sungai Pasar and Lipat Kain (Riau), Paranggean (Central Kalimantan) and many others. Most of these CPO production centers have developed into new sub-districts and districts in rural areas.

The followings are the new economic growth centers as the result of the development of oil palm plantations: : (1) North Sumatra Province (Stabat, Belarang, Sei Rampah, Limapuluh, Perdagangan, Rantau Prapat, Aek Kanopan, Aek Nabara, Kota Pinang, Sosa, Sibuhuan, Panyabungan, etc.), (2) Riau Province (Pasir Pengaraian, Bangkinang, Siak Sri Indrapura, Rengat, Tembilahan, Bengkalis, Bagan Siapi-api, Teluk Kuantan, Dumai, Pekanbaru, etc.), (3) South Sumatra Province (cities such as Sungai Lilin, Tugumulyo, Pematang Panggang, Bayung Lencir, Musi Rawas, Peninjauan and several cities towards the area of South Sumatra from Kota Muara Enim to Kota Lahat), (4) Jambi Province (Sarolangun, Sungai Bahar, Sengeti, Kuala Tungkal, etc.), (5) Central Kalimantan Province (Sampit, Kuala Pembuang, Pangkalan Bun, Kasongan, etc.), (6) East Kalimantan Province (Sangatta, Tenggarong, Tana Pase, Tanjung Redeb, Nunukan, Sendawar, etc.), (7) South Kalimantan Province (Batulicin, Kotabaru, Pelaihari, etc.), (8) Sulawesi Province (Mamuju, Donggala, Bungku, Luwu, Pasangkayu, etc.).

The development of new growth centers which is based on inclusive palm oil attracts and integrates rural and urban economies. New growth centers in rural areas become market for rural and urban products.

A study by PASPI (2016) stated that the sales of products from urban areas to oil palm plantation communities (oil palm farmers, oil palm plantation employees) reach 336 trillion Rupiah per year. While sales between rural agricultural products produced by crop farmers, ranchers, or fishermen that are sold to the oil palm plantation community reach 92 trillion Rupiah per year. This consists of crop farmer sales of 54.6 trillion Rupiah per year, farmer sales of 24.1 trillion Rupiah per year, and fishermen sales of 13.7 trillion Rupiah per year.

In short, the growth of oil palm plantations not only attracts growth in economic activities directly related to oil palm but also attracts rural and urban economic sectors simultaneously. Such economic characteristic is called inclusive economic growth.


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