IDEAS home Printed from https://ideas.repec.org/a/ags/pjemad/309271.html
   My bibliography  Save this article

Economic Impacts of Smallholder Oil Palm (Elaeis guineensis Jacq.) Plantations on Peatlands in Indonesia

Author

Listed:
  • Agustira, Muhammad Akmal
  • Rañola, Roberto F.
  • Sajise, Asa Jose U.
  • Florece, Leonardo M.

Abstract

Oil palm smallholders on peatlands have contributed significantly to economic development in rural areas by augmenting income and reducing poverty. However, these plantations also cause adverse environmental impacts such as carbon emission, haze and peat fires, deforestation, water supply disruption and biodiversity loss. The objective of the study is to determine the economic impacts of developing smallholder oil palm plantations on peatlands in Siak District Riau Province, Indonesia. Cochran sampling technique was employed to select the respondents. Cost benefit analysis was used to determine the economic impacts of the smallholder oil palm plantations. Results reveal that the development of 94,726 ha oil palm smallholder plantation on peatlands in 2014 had generated an estimated 37,326 jobs and increased the average total income of smallholder households to US$ 4,556 per year with a multiplier effect estimated at 3.01 for the Siak economy. Total benefit from the 94,726 ha oil palm smallholder plantation was computed at US$ 2,152 million per year. However, the unsustainable oil palm cultural practices of smallholders have led to negative environmental effects. It was estimated that approximately US$ 1,116 million is lost per year due to the adverse environmental impacts such as carbon emission, deforestation, water supply disruption and biodiversity loss, among others. The results of the economic analysis show NPV, BCR and EIRR to be equal to US$ 1,036 million, 1.93 and 21.91%, respectively. These results indicate that smallholder oil plantations on peatland in Siak provide net economic benefits for Siak’s economy. Proposed policies include the encouragement of sustainable oil palm plantations characterized by a synergistic relationship among legal, social and financial aspects in order to provide optimal economic impacts to communities and minimize adverse effects on the environment.

Suggested Citation

  • Agustira, Muhammad Akmal & Rañola, Roberto F. & Sajise, Asa Jose U. & Florece, Leonardo M., 2015. "Economic Impacts of Smallholder Oil Palm (Elaeis guineensis Jacq.) Plantations on Peatlands in Indonesia," Journal of Economics, Management & Agricultural Development, Journal of Economics, Management & Agricultural Development (JEMAD), vol. 1(2), December.
  • Handle: RePEc:ags:pjemad:309271
    DOI: 10.22004/ag.econ.309271
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/309271/files/Economic%20Impacts%20of%20Smallholder%20Oil%20Palm%20%28Elaeis%20guineensis%20Jacq.%29%20Plantations%20on%20Peatlands%20in%20Indonesia.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.22004/ag.econ.309271?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Midingoyi, Soul-Kifouly & Houedjofonon, Elysée & Sossou, Hervé & Codjo, Victor, 2024. "Productivity and Welfare Implications of Switching to Improved Varieties from Oil Palm Research in Southern Benin," IAAE 2024 Conference, August 2-7, 2024, New Delhi, India 344388, International Association of Agricultural Economists (IAAE).
    2. Januar, Rizky & Sari, Eli Nur Nirmala & Putra, Surahman, 2023. "Economic case for sustainable peatland management: A case study in Kahayan-Sebangau Peat Hydrological Unit, Central Kalimantan, Indonesia," Land Use Policy, Elsevier, vol. 131(C).

    More about this item

    Keywords

    Crop Production/Industries;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:pjemad:309271. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/ceuplph.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.