The Economy, Land & Climate Podcast

Can palm oil be ethical and sustainable in Indonesia?

July 22, 2022 Economy Land & Climate Insight Team
The Economy, Land & Climate Podcast
Can palm oil be ethical and sustainable in Indonesia?
Show Notes Transcript

Lauren talks to Tania Li, Professor of Anthropology at the University of Toronto, about the sustainability of the oil that's in 50% of supermarket food products - and the issues with labour and land rights in Indonesia's palm oil industry.

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Lauren:

Hello and welcome to the Economy Land and Climate Podcast. I'm Lauren Sneade. And this episode we have Tania Li, Professor of Anthropology at the University of Toronto researching forms of social, political, cultural, and economic life that exist in Indonesia's oil palm plantation zone. I asked her about her research.

Tania:

So you can have 50,000 hectares of monocrop palm declared sustainable, so long as it doesn't infringe in a protected area. Like how is 50,000 hectares of a monocrop sustainable?

Lauren:

Tania co authored Plantation Life: Corporate Occupation in Indonesia's Oil Palm Zone with Pujo Semedi published last year. Tania can you talk to me about the premise of your book briefly?

Tania:

Okay, so Pujo and I, our disciplinary background is in anthropology. So we're interested in kind of everyday life, how people live in different parts of the world. And it struck us that oil palm plantations have massively expanded in Indonesia. But we have no real kind of deep account of what kind of life people lead, if they're in a domain of oil palm, whether it's workers or families in the surrounding areas, or former landholders who've been displaced by plantations. So the premise of the book was, we should take a deep dive into everyday life, what we call plantation life in this context, and try to shed some light on how it's lived, you know, what are the experiences and pressures, knowing that those would be quite diverse, right? People have different kinds of plantation life, different kinds of experiences, and that's what we wanted to put on the table.

Lauren:

A third of Indonesia's total agricultural land has been given out as palm oil concessions for the future. When did palm oil farming begin to take over there?

Tania:

The big expansion started around 2000, there had been oil palm grown since the 1930s. But its massive expansion was around 2000. And of that area, I think it's 22 million hectares represents a third of Indonesia's current total farmland, about 12 million hectares have already been planted, which means around 10 million are held by corporations in what they call land banks. So that's the amount which is already under license or in process of gaining a concession license, and that will eventually become a plantation.

Lauren:

So what was happening around 2000, which caused this massive monoculture explosion?

Tania:

it's hard to name one factor, I mean, you know, the growth...it was always there. Malaysia really led the way with oil palm but you know, as areas available in Malaysia dried up more Malaysian capital and Malaysian plantation companies moved into Indonesia, you know, Indonesians also saw the potential. And after the financial crisis of 1998, you know, the price of palm oil, which is designated on global markets became extremely attractive to corporations and to farmers. So a combination of kind of attractive price, Indonesia having apparently massive reserves of available land, this being a highly profitable crop, you know, increasingly in demand in food industries, that also the promise of using palm oil as a biofuel, you know, as countries we're starting to look at, you know, so called green fuels and so on, you know, a bundle of factors came into producing what we call a boom, you know, an oil palm boom, which is still ongoing, right? It's still expanding.

Lauren:

And why is this monoculture so bad for

Tania:

I would distinguish between the crop you know, which Indonesia? I actually don't think is bad, you know, oil palm is a highly productive crop, it produces a lot of oil per hectare, highly efficient in terms of land. And it doesn't require enormous amounts of labour. And growing it actually is pretty farmer friendly. It's not high tech, you know, so long as you have high quality seedlings, and that's an issue and enough fertiliser, it's not actually difficult to grow. So I don't actually think there's much wrong with oil palm as a crop. The problem in my view, is the massive takeover of, you know, millions of hectares of Indonesia's farmland by corporations. So it's more the corporate form of growing the crop than the crop itself, which I think is a problem. And when you talk about monocrop, you know, you think small scale farmers, they may very well have, you know, 10 hectares of oil palm but they've probably also got some rubber and some rice and some other crops. You're going to see more of a landscape mosaic with smallholders growing this crop, then you will with a plantation whose whole kind of raison d'être is to, like mow everything down, flatten everything that was there before, you know, reshape the landscape change the course of rivers and streams if necessary, basically eradicate all other vegetation and forms of life in order to install a monocrop on a vast scale. So it's really the scalar issue, than the crop itself. Of course, there is still a risk of having, you know, so much land under a single crop, you know, if you think about the historic blights, you know, potato famines and such, right, I mean,

Lauren:

And in Indonesia, there's what's known as a plasma you know, these were caused by viral and other infections in a monocrop. So it is always risky. But smallholders are quite capable of managing this risk, because they tend not to put all their eggs in one basket, right. And if they see that there's either a market risk or an ecological risk, or the palms aren't doing so well, you know, they're more nimble in switching to something else than a corporation, which has got tons of capital and massive infrastructure dedicated to this one crop. So those are some of the elements. scheme intended to lift communities out of poverty. Can you explain how those schemes work and whether they're being used properly?

Tania:

You know, smallholder, small scale farmers in Indonesia have always been enthusiastic producers of cash crops. You know, going back to 1710, when coffee seedlings were first introduced into Java, small scale farmers eagerly adopted this. So farmers are not averse to growing global market crops. They are long experienced in this and if the market's good and the crop is accessible, and they have the infrastructure, they're keen to do it. And the same is true with oil palm. Farmers love to grow it, it's a good crop for them, they make good money. Plasma schemes are schemes which were designed to make oil palm accessible to small holders, but closely tied to plantation corporations. So the idea was that the corporation would develop a core area. And then small scale farmers would be given plots, two hectare plots, to farm on their own. The flaws with this are first of all, two hectares is not enough to live on, can't sustain a family. So a family that just has this standard two hectares is destined to lose it, you know, effectively, they won't be able to make ends meet, eventually they'll go into debt, they'll have to sell it, right? So it's a it's a flawed scale. But also because the farmers are completely dependent on one corporation, the corporation is in what we call a monopsony position, right? It can provide good infrastructure or provide lousy infrastructure, poor roads, and the farmers can do nothing about it because they have no option or opportunity to grow anything else or to sell to any other buyer or any other mill. So what you have is you're setting up a sort of David and Goliath situation in which farmers are happy to grow the crop and would like to prosper with it, but can't actually prosper. Because the nature of their relationship to the corporation keeps them in an independent and highly vulnerable position with extremely limited bargaining power, they are sometimes unable to pay back their debt. Some people have described them as a kind of unfree, or bonded workforce, because they don't even get paid a salary by the month. What they receive in cash is the value of the crop they produced minus the debt they have to repay. And if the debt which they assume for developing this crop, so the debt that they owe to the corporation, which kind of planted the thing and handed it over to them, that incurs the debt. And so often they end up with negative or nothing. So they worked all month, but they have nothing. If you're a worker, at least you get a salary, right? So you could say they're a kind of unfree worker that isn't really guaranteed any return on their labour. And if it's the only thing they're depending on, they can become deeply impoverished. So plasma schemes have, you know, this kind of flaw. And there could be different ways of organising farmers to produce this crop. Just imagine a farmer-led cooperative where farmers develop their land, get together to build a small mill, it could be a small one, not a giant one. Ideally, you know, you'd have five or six mills competing because then a mill which treats farmers fairly is going to get the business and those you know which cheat on the weights or the measures or are slow in payment you know will go out of business. You could say capitalism would work for farmers. What doesn't work for them is monopsony, you know, when they're locked into a relationship with a single supplier, and in this case, a single market. So, you know, farmers love it, there could be ways of growing it, you know, which capitalise on some economy and scale in terms of infrastructure and milling. But right now, the only way that this is being done in Indonesia is through these large scale corporate schemes, which really have the farmers in a very vulnerable position.

Lauren:

And when we talk about corporations, we're talking about Indonesian corporations, or are we talking about the international corporations?

Tania:

60% at least of the product is directly grown by corporations in their main large scale fields. And of these around 10% are owned by the state owned corporation, which was the sort of byproduct of nationalising some colonial era plantations, these went over to the state and became nationalised state owned plantations, they still exist. So of the remaining 50%, half is in the hands of publicly listed corporations. So these are listed on the stock exchange, whether it's in Singapore, or London, or Kuala Lumpur, or Jakarta publicly listed, you know, where you can see who are the shareholders, and the other half are owned by private Indonesian individuals. So they are not listed. They produce very little data or accounts, they're not obliged to, since they're private corporations. So they're a huge part of the sector as well. So when we're talking corporations, we're talking several different kinds, both private and public and state. But in general, heavily Indonesian, even some studies have shown that even the public companies listed on the stock exchange, which are considered multinational, actually if you scratch a bit below the surface have very strong Indonesian ownership. So some of the Indonesian tycoons, the owners of massive capital, are heavily represented in ownership of these so called multinational corporations. So this isn't a question of sort of bad foreigners and good locals, you know, it's a question of a corporate form, you know, a form of growing this crop on massive plantations, in which the owners are quite diverse. But one surprising finding of our study was that the effects on the ground are rather similar, you know, for people living a plantation life, you know, whether as a worker, worker family, people living around the edges, former land holders, small holders, plasma people in these contract farming schemes, the conditions are actually remarkably similar. You know, the nature of plantation life doesn't change much depending on the nature of the corporation.

Lauren:

You say palm oil corporations tried to publicise that 40% of palm oil farming happens through smallholders. How is that a misleading idea?

Tania:

Well, I think they promote this because you know, there's a bit of a halo around the smallholder both in Indonesia's kind of national rhetoric, you know, about their farmers, but also perhaps globally, you know, the idea that smallholding is a good thing, everyone's a little bit suspicious of corporations, right? But of that 40, so called 40%, first of all, at least half or more is in these tied contract schemes, where the farmers are not really independent of the corporation, but deeply tied to it and indebted to it in the way I described. Right? So it's not quite the kind of haloed image of the smallholder, you could say it's a bonded worker, you know, tied by debt. So there's that element. And secondly, the definition of a smallholding in Indonesian law is 25 hectares or less, but there are many so called small holdings, which are in fact unlicensed plantations. So some rich person, you know, gets hold of 1000 hectares, registers in the name of his friends, allies, cousins and clients in 25 hectare lots, but it's in fact, operated like a plantation, so many so called small holdings are in fact, plantations which don't have a proper plantation license, but which actually operate very much like plantations with managers and supervisors. They're anything but the kind of family farm, you know, that the idea of the smallholder conjures. And a third element is that, you know, the people who've been able to get into smallholding sometimes, as in our study, like you know, these are the people on the spot right, the Indigenous people of the location in the case of our book, these are Indigenous Malay and Dayak farmers who have started to grow oil palm on their own land, they like it to, as I said, it's a lucrative crop. Sometimes they're converting rubber fields or rice fields to oil palm. So there's that kind of, you know, one might think of as the genuine smallholder kind of adding a crop to their repertoire because they like the looks of it, it's a good crop. And others though, are city people, you know, school teachers, politicians, business people who are buying up land and either to farm or in fact to hold in speculation or, or they're operating as absentees. So again, it may look like smallholding, but it doesn't necessarily mean that farmers are prospering; it might mean that a new class of urban based landowners, absentee landowners, are finding this a lucrative crop and you know, getting hold of patches of land, setting an overseer in charge and operating it, again, like a small plantation. Basically there's a variety of things going on under the smallholder label. And if what you want to support is, you know, the autonomous farmer farming on their own land, adding a good crop to their repertoire to increase their family's prosperity. Like that's something you might want to support, right? But some of these other kinds of smallholding are things that you might actually not want to encourage, because they are other forms of land grabbing. And they are displacing you know, the farmers on the spot, increasing the price of land, out-competing the locals. And, you know, not necessarily bringing prosperity to the rural area, which is where you'd like to see it.

Lauren:

And recently, you've seen corporations advertising their products as using sustainable palm oil, for example, Aldi, a supermarket in the UK is really big on this. Do you think that there's such a thing as sustainable palm oil anywhere in the world?

Tania:

One chapter of our book, we take a serious look at claims about sustainability. And I think we definitely conclude that, you know, greenwash is what is happening there. And our basic argument is that for plantations to be certified as sustainable, whether by the Roundtable on Sustainable Palm Oil, which is an international organisation, or the Indonesian Sustainable Palm Oil standards (Indonesia developed its own standards), at the end of the day, even if they obey these standards, they are still corporations taking over massive areas of land and displacing the local population, and making it harder for local farmers to access land, to grow oil palm and other crops. So you could say that, you know, they're still giants, even if they're virtuous and well behaved giants, they're still giants. They're still going to be in the same structural position of gobbling up massive areas of land, you know, at the expense of local farmers who could use it very well, for oil palm and other crops, if they were able to stay in control of it, right? So the land issue, the way that corporations take over the land, the processes of land acquisition, and just the sheer monopoly of such large areas of land, would still be a problem. So that's one element. And you know, the second element that the sustainability standards promote is that they're ecologically sound. But what that looks like for the Round Table on Sustainable Palm Oil, is that the criteria are, first of all, they don't tip toe over the edge of a protected area. So you can have 50,000 hectares of monocrop palm declared sustainable so long as it doesn't infringe in a protected area. Like how is 50,000 hectares of a mono crop sustainable, right? But the criteria is that the protected area's safe, so therefore, you can do what you like on your plantation. Right? There's also a provision for what they call high conservation value. So that's taking little islands within the plantation, which have particularly rich biodiversity, perhaps there's little remnant areas of primary forest often on kind of hilly land or land which isn't particularly good for oil palm anyway, and setting these aside for conservation. So that's a good thing. But it doesn't compensate for the massive destructive element of everything else, which is mown flat, you know, in order to produce this crop on this scale. So I think from an ecological point of view, the standards in my mind actually don't make sense from a sustainability point of view. The Indonesian standards are particularly low, you know, the only requirement for the Indonesian to meet the standards of sustainability for the Indonesian Sustainable Palm Oil Scheme is that you obey national law. But since national law isn't very strong in protecting anything; labour rights, land rights, environmental rights, environmental assessment, and in fact, last year, Indonesia passed an umbrella law which further reduced all of these protections in the name of encouraging investment, you'd have to say you're not holding your breath for a, you know, a sustainable palm oil standard which simply requires businesses to obey the law. It's good that they obey the law. But the standards of the law are extremely low, and would not satisfy me that land grabbing, exploitation of labour, ecological destruction, has not taken place. Just reading the law, you'd have to say there is no serious protection. So just to give one example, labour; so you have to obey the labor law, but the labor laws were rewritten in 2003 so that outsourced and casual workers are not covered by the labour law. So yes, you can obey the labour law, which is good if you happen to be one of the very few kind of formally employed full time workers, it gives you some protection, a good thing. But many of the workers, especially the women workers, are casual outsourced day workers who are not covered by this law and have no protection at all. So does this make you confident, you know, about sustainability? Not really, right? It doesn't actually feel like this is something you would want to support.

Lauren:

You say in the book that 50% of all items in supermarkets contain palm oil. So it seems unlikely that our palm oil consumption will change all that quickly. What can we do to be able to make the palm oil industry more sustainable in a genuine way?

Tania:

Right. I think that's an accurate observation. And as I said, before, there's actually nothing intrinsically wrong with oil palm or palm oil, right? It is a highly productive crop. And compared with other oils, it produces more per hectare. So I think you're right, the question is not to kind of hate oil palms or palm oil, but to figure out how to do it in a better way. So there are some stats, I would say, the EU is attempting to go in this route by some legislation they have in the works now soon to go into effect, really emphasising deforestation, right? That every bit of palm oil that comes into the EU has to have a traceable certification that it wasn't produced on deforested land. So that seems like a really high standard and a good idea. But of course, the devil is always in the details, because what that would tend to do and a report by an NGO Chain Action Research has pointed this out very clearly, what it would tend to do is to favour large corporations more capable of doing you know, traceability, having the bureaucratic capacity, the technical capacity, and so on to do that. And it would work against small scale producers, who produce on hundreds of thousands of small farms, you know, which can't be kind of licensed or inspected in the same way. So there is a problem when demands for higher standards of traceability and kind of virtue in the production chain, end up excluding the small holders. Whereas the argument that I've been making and the argument of the book is that it's precisely large scale corporate domination over massive areas of land and therefore over people in their lives, which is the problem. It is not the palm, it is in fact the corporate form. So we have a sort of a dilemma here, right? It seems that you know, corporations are more capable of checking all the boxes and being licensed sustainable or non deforesting smallholders then appear to be the problem, but from a social point of view and equity point of view, justice point of view, smallholders are not the problem, they are the solution, right? That's where I would locate the emphasis. So that's a problem. So I think it's very important to have, you know, critical watchdogs, always pointing these things out, not just going with what seems like a good plan, you know, a requirement for non deforestation and then leaving it at that as if the matter is fixed, but always to be attentive to, okay, who is this going to benefit who's going to lose out who will be excluded, you know, what really will be the impacts on the ground? So that would be sort of a general comment, you know, to be alert to these kinds of legislated programs that attempt to secure the industry and of course, that is only the EU which is not the biggest consumer of palm oil at all. Most of it is still going to India and China. And so, you know, on a global scale, EU regulations are not going to shift the needle in terms of what's produced or how. On a country level, I think for Indonesia to move, you know, which is the largest producer, it produces half of the world's oil, palm oil. I think what it would take to shift the needle really has to be a kind of a political movement, I don't think there's any other way to shift away from corporate dominance than by popular demand. This popular demand, in theory it should be quite easy to generate, because it is people's demand, right? They don't want their land taken over by corporations, they want support from their government to grow oil palm themselves, right? So you would think that politicians that say, okay, complete moratorium, no more corporate concession licenses, from now on our emphasis in our province, and our district will be to improve the access of small holders to high quality seedlings, to well located Mills so that people have options for where to sell their product, do it in a small holder friendly way you think there would be popular demand for that, and that politicians who who make such a promise could actually be elected, right? I mean, it seems like there ought to be a democratic way to shift this. And I actually think that's probably the only way. It has to be worth politicians while to say rather than being or remaining in bed with corporations, from whom of course they get all kinds of payoffs, both above and below the table is like, 'yeah, but at the end of the day, I want to be elected. And therefore I need the people with me, and this is what the people are telling me'. So a large scale movement, you know, for a complete moratorium on corporate concessions, you know, in favour of smallholder support is thinkable, it will be really hard, but it's thinkable. You know, my recommendation would be step one, you know, what needs to happen is a complete moratorium and popular demand is the only thing that will head in that direction. The second thing that could be done and I think should be done would be for all the land, which we were referring to earlier, which has been assigned to corporations, but not developed. If those 22 million hectares already licensed to plantations, of which only 12 million have already been developed, that leaves 10 million there, a lot, you know, which could be returned to its original owners. And that would be a good thing, right? That would be another way of stopping this train, no more new concessions, all of this hanging land, which has been assigned to corporations, usually with incomplete licenses, but with enough license-like apparatus around it, that it's already excluding the people from using it, you know, because some corporation's laying claim to it, even if they don't have complete paperwork as usually they do not. But that land needs to be returned so that people can get on with planting it themselves, you know, with proper support. So that would be step two, I would say. And, you know, I think of step three as being okay, so for those corporations that have proper licenses, which are in operation, I don't think anyone's suggesting massive land invasions or, you know, some imagined land reform, which would take it back from them. I don't think that's going to happen, but what would be completely reasonable would be at the renewal of licenses of these existing plantations, they need to have a fresh negotiation with their neighbours, with their workers and with the people who live around whose land it was previously, to say 'okay, so, here we are, you know, new license renewal, new era, how should we relate to each other differently, you know, what is it that you would want us to do, what can we offer? How can we actually frame new settlements which are more equitable, more fair, which mean that the plantations have to deal with less conflict and which means that the people around would feel that you know, we too got some benefit out of this?' And most important that a new relationship in which plantations and their neighbors have like a communication forum, a mechanism, a way of talking to each other so that as issues arise around pollution, around labour around you know, roads and all of these points of friction, villagers don't feel that they're in an abyss, but actually they have a means of bringing their concerns to the attention of corporations. And they sit around a table and you do this in a human way, right? I mean, I think all of these are not inconceivable, right? These would be ways of scaling back the expansion, but recognising that these corporations are there, and some of them are, you know, productive and doing their job. But all of them are in a horrible relationship with their neighbours, often conflicts going back 20, 30, 40 years never resolved, and always in a relationship of tension and aggravation, what we actually called in our book, you know, corporate occupation, right? The villagers feel they've been occupied by an unaccountable alien force that does not talk to them, that does not recognise them as equals, as interlocutors, as partners, as citizens, right? And that could be changed. These are changable things.

Lauren:

And obviously much of your work focuses on Indonesia, but is there anywhere in the world where palm oil is farmed ethically, sustainably?

Tania:

You know, I haven't looked at all of the other countries in detail. But there's a couple of things to note. And they're interesting, right? One of them is that Thailand, which has had no history of colonial occupation, right, it was not colonised in the same way as the rest of Southeast Asia, to this day it has no plantations. Its entire oil palm sector is based on smallholders and smallholders receive some state support, right? So just there in the region is another model, which is operating on quite different lines, right? So it would be worth looking at 'Okay, so how is Thailand doing it?' I think they're the third biggest producer, but they don't have a single massive corporation. I think their largest is, you know, a couple of hundred hectares, they have nothing like 50,000, and more and more and more, right? They don't do it in this way. And they also seem to do it pretty effectively. Right? So that would be one example. I think some of the examples from Latin America are interesting, you know, Latin American countries are just beginning to get into this production. And some of them follow the same kind of corporate model. Many of them involve a quite different role for smallholders, organised in coops. Now in theory, Indonesia has coops too, but these are engineered by the corporation and are not vehicles for kind of farmer empowerment at all. They're the opposite. They're vehicles for control. But imagine, you know, Latin America has a much richer feistier tradition of farmer based coops, you know, where farmers really do get together collectively, and, you know, organise their production and marketing, and if a corporation is involved, you know, bargain hard as equals in, you know, a proper negotiating relationship. So those are sometimes interesting and inspiring examples. And they come from a different political culture, you know, one in which farmers' unions, peasant groups and coops have a long history. And people are used to this idea that if you get together with your neighbours and you pool your land and your intellectual resources and your political resources, you know, you can do well, or you can do better. You can't just transport that model elsewhere, you know, where the political culture is different. As I said, Indonesia has always talked coops, but these have always been top down and engineered and vehicles for monopoly. It doesn't actually have a rich tradition of farmer based, really farmer based autonomous cooperatives. Other countries do, maybe Indonesians could learn from them. But certainly, you know, there are ways in which some kind of the virtues of kind of scale and organisation can be accomplished by groups of farmers if they are organised. So I think those kinds of models are also worth looking at. Right? Again, it's not going to be like an automatic find the perfect model transplanted elsewhere because these things do have to do with political culture, and how people are accustomed to working with others or not, but they're worth examining and often worth trying as well.

Lauren:

This episode, we've had Tania Li, professor at the University of Toronto. Details of Tania's new book can be found in the podcast blurb. If you like what you've heard, you can follow us on Twitter @ELCInsight or head on over to our website at www.elc-insight.org