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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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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.

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Acknowledgments

Data collection and analysis for this paper were carried out with support from CORDAID of the Netherlands, USAID RDMA project ‘Economic choices and tradeoffs to REDD + in Asia’ and the DFID project ‘Emerging countries in transition to green economy: will it make a difference for forests and people?’. The authors would like to express their gratitude for the financial support received and convey their thanks to project partners in Papua for their participation and willingness to share data. Special thanks are due to Sophia Gnych for painstaking review and editing of this manuscript. The drafting of this paper was initiated during a sabbatical leave at the University of Wageningen in the Netherlands. The hospitality of the Rural Development Sociology is gratefully acknowledged.

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  1. Center for International Forestry Research (CIFOR), Bogor, Indonesia

    Krystof Obidzinski & Ahmad Dermawan

  2. Faculty of Economics and Management, Bogor Agricultural University, Bogor, Indonesia

    Adi Hadianto

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  1. Krystof Obidzinski
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  2. Ahmad Dermawan
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Correspondence to Krystof Obidzinski.

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Obidzinski, K., Dermawan, A. & Hadianto, A. Oil palm plantation investments in Indonesia’s forest frontiers: limited economic multipliers and uncertain benefits for local communities. Environ Dev Sustain 16, 1177–1196 (2014). https://doi.org/10.1007/s10668-014-9519-8

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