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Oil palm plantation investments in Indonesia’s forest frontiers: limited economic multipliers and uncertain benefits for local communities

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  • Krystof Obidzinski
  • Ahmad Dermawan
  • Adi Hadianto

Abstract

This paper examines the implications of oil palm estate development in Indonesia’s frontier province of Papua. Government planners believe that oil palm investment will develop the local economy, create jobs and reduce poverty. Using the input–output approach, we find that, in aggregate terms, oil palm investments boost the economic output in the province, generate jobs and increase worker salaries. However, the oil palm subsector operates in isolation and has limited economic multipliers. The number of jobs is potentially large, but those best positioned to benefit from them are mostly skilled migrants, not local poor. The government should reduce the size of plantation investments and plan their implementation as part of a broader development package to allow greater economic integration and skill acquisition by local communities. The priority areas for plantation development should be degraded, non-forest land. Copyright Springer Science+Business Media Dordrecht 2014

Suggested Citation

  • Krystof Obidzinski & Ahmad Dermawan & Adi Hadianto, 2014. "Oil palm plantation investments in Indonesia’s forest frontiers: limited economic multipliers and uncertain benefits for local communities," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 16(6), pages 1177-1196, December.
    • Handle: RePEc:spr:endesu:v:16:y:2014:i:6:p:1177-1196
    DOI: 10.1007/s10668-014-9519-8
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    2. Slamet Haryono & Rizabuana Ismail & Zulkifli Lubis & Sismudjito & Muryanto Amin, 2020. "The origin of oil palm social conflict in Laman Satong, Ketapang, Kalimantan Barat, Indonesia," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 9(1), pages 39-45, January.
    3. Purnomo, Herry & Okarda, Beni & Dermawan, Ahmad & Ilham, Qori Pebrial & Pacheco, Pablo & Nurfatriani, Fitri & Suhendang, Endang, 2020. "Reconciling oil palm economic development and environmental conservation in Indonesia: A value chain dynamic approach," Forest Policy and Economics, Elsevier, vol. 111(C).
    4. Ruml, Anette & Chrisendo, Daniel & Osabuohien, Evans & Karakara, Alhassan & Iddrisu, Abdul Malik & Lay, Jann, 2021. "Smallholders in Agro-Industrial Production: Lessons from Rural Development at New Frontiers from a Comparative Analysis of Ghana’s and Indonesia’s Oil Palm Sectors," 2021 Conference, August 17-31, 2021, Virtual 315162, International Association of Agricultural Economists.
    5. Santika, Truly & Wilson, Kerrie A. & Budiharta, Sugeng & Law, Elizabeth A. & Poh, Tun Min & Ancrenaz, Marc & Struebig, Matthew J. & Meijaard, Erik, 2019. "Does oil palm agriculture help alleviate poverty? A multidimensional counterfactual assessment of oil palm development in Indonesia," World Development, Elsevier, vol. 120(C), pages 105-117.
    6. Ruml, Anette & Chrisendo, Daniel & Iddrisu, Abdul Malik & Karakara, Alhassan A. & Nuryartono, Nunung & Osabuohien, Evans & Lay, Jann, 2022. "Smallholders in agro-industrial production: Lessons for rural development from a comparative analysis of Ghana’s and Indonesia’s oil palm sectors," Land Use Policy, Elsevier, vol. 119(C).
    7. Ryan Edwards, 2015. "Is plantation agriculture good for the poor? Evidence from Indonesia's palm oil expansion," Departmental Working Papers 2015-12, The Australian National University, Arndt-Corden Department of Economics.
    8. Krishna, Vijesh V. & Kubitza, Christoph, 2021. "Impact of oil palm expansion on the provision of private and community goods in rural Indonesia," Ecological Economics, Elsevier, vol. 179(C).

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