170
7 Bioeconomy in the Oil Palm Republic of Indonesia
communities to private companies and the government. Moreover, short-term financial gains and otherwise limited access to modern services have helped obtain the
local communities’ support. Such communities have generally been supportive even
though most benefits accrue to state and private industry actors, local food security
becomes more vulnerable to external shocks, and their access to land and clean water
decreases. In a way, their inclusion co-opts such rural communities who otherwise
are known to enter conflicts against private companies, and who could attempt to
coordinate agency and confront the dominant coalition with the support of conservationists. The oil palm plantation strategy pre-empts such moves and tames potential
opposition while increasing dominant agents’ material capabilities and control over
vital natural resources. As in the other cases, this is a cyclical process of self-serving
power accumulation by plantation businesses and Indonesia’s central government
(see Fig. 7.2).
This context is particularly worrisome for Indonesia because of the environmental
unsustainability of this development path. Even its short-term development benefits
are limited, as investors are primarily cashing-in at the cost of the country’s biodiversity, water, and soil while keeping most benefits to themselves. Indonesia could learn
from the erstwhile “banana republics” of twentieth-century Latin America, which
based their economies on foreign investments in single-crop plantations, environmental degradation, cheap labor, and inequitable development (see Bucheli 2008).
However, as this analysis demonstrates, shifting the course of development is not an
easy task. It requires not only institutional reform but also a counterweight to the
agency that keeps the current structures in place.
7.4.2 Alternatives
First, to increase economic benefits and spur technological development, the government could incentivize further domestic value-added through palm oil refining. The
increasing production of palm-based biodiesel is a step in this direction, but the
bioeconomy is likely to make such downstream industry options much vaster. Oil
palm cultivation could also become much more sustainable by conditioning to socioenvironmental requirements the policy incentives given to plantation companies. In
particular, more equitable outcomes could be achieved by increasing the land that
smallholders retain in nucleus-plasma schemes (beyond 20–30%) and by returning
it to them at the end of leasing contracts.
Second, an additional safeguard would be to mix oil palm plantations with food
crops to reduce smallholder vulnerability. Moreover, integrated agroforestry systems
could break with the land-sparing paradigm that so ravages Indonesia—squeezing
smallholders between “green grabbing” on one side and corporate-controlled plantations on the other—and help local communities. The utilization of oil palm within
agroforestry systems, instead of monoculture plantations, could significantly improve
local economic benefits while conserving Indonesia’s biodiversity (Bhagwat et al.
2008). In time, such systems could potentially develop a plethora of new bioeconomy
7 Bioeconomy in the Oil Palm Republic of Indonesia
communities to private companies and the government. Moreover, short-term financial gains and otherwise limited access to modern services have helped obtain the
local communities’ support. Such communities have generally been supportive even
though most benefits accrue to state and private industry actors, local food security
becomes more vulnerable to external shocks, and their access to land and clean water
decreases. In a way, their inclusion co-opts such rural communities who otherwise
are known to enter conflicts against private companies, and who could attempt to
coordinate agency and confront the dominant coalition with the support of conservationists. The oil palm plantation strategy pre-empts such moves and tames potential
opposition while increasing dominant agents’ material capabilities and control over
vital natural resources. As in the other cases, this is a cyclical process of self-serving
power accumulation by plantation businesses and Indonesia’s central government
(see Fig. 7.2).
This context is particularly worrisome for Indonesia because of the environmental
unsustainability of this development path. Even its short-term development benefits
are limited, as investors are primarily cashing-in at the cost of the country’s biodiversity, water, and soil while keeping most benefits to themselves. Indonesia could learn
from the erstwhile “banana republics” of twentieth-century Latin America, which
based their economies on foreign investments in single-crop plantations, environmental degradation, cheap labor, and inequitable development (see Bucheli 2008).
However, as this analysis demonstrates, shifting the course of development is not an
easy task. It requires not only institutional reform but also a counterweight to the
agency that keeps the current structures in place.
7.4.2 Alternatives
First, to increase economic benefits and spur technological development, the government could incentivize further domestic value-added through palm oil refining. The
increasing production of palm-based biodiesel is a step in this direction, but the
bioeconomy is likely to make such downstream industry options much vaster. Oil
palm cultivation could also become much more sustainable by conditioning to socioenvironmental requirements the policy incentives given to plantation companies. In
particular, more equitable outcomes could be achieved by increasing the land that
smallholders retain in nucleus-plasma schemes (beyond 20–30%) and by returning
it to them at the end of leasing contracts.
Second, an additional safeguard would be to mix oil palm plantations with food
crops to reduce smallholder vulnerability. Moreover, integrated agroforestry systems
could break with the land-sparing paradigm that so ravages Indonesia—squeezing
smallholders between “green grabbing” on one side and corporate-controlled plantations on the other—and help local communities. The utilization of oil palm within
agroforestry systems, instead of monoculture plantations, could significantly improve
local economic benefits while conserving Indonesia’s biodiversity (Bhagwat et al.
2008). In time, such systems could potentially develop a plethora of new bioeconomy