The Oil Palm

Research highlights socioeconomic benefits of palm oil to rural household

The palm oil industry offers significant socioeconomic benefits in South East Asia, according to a recent study undertaken by the World Agroforestry Centre.

A technical report – Socio-Economic Impact Assessment of Palm Oil Production – found that palm oil production is one of the most economically attractive forms of land use throughout South East Asia’s lowland tropics. The study focussed on plantations within Indonesia, with wider relevance for the region’s palm oil growing industry.
Researchers found that new oil palm plantations stimulated economic opportunities for surrounding villages by creating a market for rural populations to sell palm fruit to local mills.
According to the research, villages where oil palm was the major source of income showed significantly lower prevalence of malnutrition, higher levels of in-migration, and a tendency to perform well against physical, financial and human capital indicators.
On a household level, the study found that almost 45% of households where palm oil was the major source of income had increased their income by between 22 and 25 times over a 10 year period. In the first five years of cultivation, almost 20% of households at least doubled their income.
While generating significant socioeconomic benefits, the study also indicated that ambiguous tenure arrangements within Indonesia had resulted in some problems. This is not recognised as a problem in Malaysia, where land tenure is secure and land permits and zoning is generally well regulated.
Socioeconomic studies showing the significant contribution of the palm oil industry in driving economic growth throughout South East Asia are timely. Policies in Europe are threatening South East Asian development. The European Commission recently launched a proposal that would reduce the amount of crop-based biofuels it sources. In France, the government recently proposed a tax on palm oil imports for food consumption. The European community may not fully understand the extent to which their policies can harm rural communities that rely on palm oil cultivation for livelihood.