Role of Oil Palm in Poverty Alleviation

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Role of Oil Palm in Poverty Alleviation Zulkifli Alamsyah Agribusiness Department Faculty of Agriculture University of Jambi - Indonesia zalamsyah@unja,ac,id Presented in the Twentyfirst Session of the Conference of the Parties (COP21). Paris, Dec 3, 2015. Indonesia Pavilion Hall 2B

2 Outline: Introduction Overview of Indonesian Oil Palm Plantation The economic of Oil Palm Sector The Role of Oil Palm in Poverty Alleviation Conclusion

Introduction CPO in the Oils & Fats Market

4 Oil palm is the most efficient oilseed crop in the world 10 major oilseed area in 2012 Yield and Production Cost of Major Vegetable Oil 17 major oils & fats: global production in 2012 Source: - Oil World (2009) - Oil World (2013) in Sime Darby (2014)

World exports, consumptions and prices of vegetable oils 5 World Export, 2012 World Prices (USD /T), 2012 World Consumption, 2012 60 50 52,1 41,7 40 30 20 24,2 14,5 10 0 Palm Oil Soybean Rapeseed Sunflower Oil Oil Oil Source: Oil World (2013) in Sime Darby (2014)

6 Indonesia is the world s largest producer and exporter of crude palm oil (CPO) Palm Oil: Exports and Production of Key Countries (Mn T) Share of Production 2014 Exports Share of Exports 2014 Production Source: Mielke (2014, 2015) (Source: Index Mundi, 2015)

Overview of Indonesian Oil Palm Plantation

8 Distribution and Centers of Oil Palm Plantation 24% 65%

9 Oil Palm Plantation in Total Land 65% 24% Share of oil palm plantation in total land

Area and Production of Oil Palm Plantation 10 Total Area (Mil, Ha) Share of Area by Category of Producers 13,00 12,00 60% 11,00 40% 10,00 20% 9,00 y = 0,6224x + 7,3525 R² = 0,9837 8,00 7,00 0% 2004 2009 6,00 2009 2010 2011 2012 2013 Gov 2014 Total Production (Mil, Tonnes CPO) 2010 2011 2012 2013 2014 Smallholders Privates Share of Production by Category of Producers 35,00 30,00 60% 25,00 40% y = 1,647x + 19,406 R² = 0,9937 20,00 20% 15,00 0% 2009 2010 10,00 5,00 2011 2012 0,00 2009 2010 2011 2012 2013 Source: DG of Estate Crops (2015) 2014 Gov Smallholders 2013 2014 Privates

Palm Oil Export by Type of Products Palm Oil Exports 11 Bil, US $, Mi, Tonnes Crude Palm Oil; 23,50% Other Palm Oil; 70,43% Total Volume and Value of Palm Oil Export 30 Crude Oil of Palm Kernel; 1,64% Other Palm Kernel Oil; 4,43% 25 Export by Destination Countries, 2014 20 15 India; 21,3% Others; 40,3% 10 5 China; 10,3% 0 2008 2009 2010 2011 2012 2013 2014 Total Value, FOB (Bil US $) Total Volume (Mil Tonnes) Source: Statistics Indonesia (2015) Pakistan; 7,9% Malaysia; 2,5% Singapore ; 3,4% Netherland; 5,3% Egypt; 4,4% Banglades h; 4,6%

The economic of Indonesia Oil Palm Sector

Palm Oil Export is the Biggest Contributor in Total Non Oil&gas Net Exports 13 Share (%) Bil, US$ 40 160 35 140 30 120 25 100 20 80 15 60 10 40 5 20 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Non Gas&Oil Net Export Palm Oil Net Export Source: Bank of Indonesia in PASPI (2015) 0

14 Output and Value Added Growth Rate of Oil Palm Plantations Faster than Other Sectors in Indonesian Economy, 2000-2008 120 Oil Palm Plantation Vegetable Oil Industry Agricultural Sector National Output 100 80 60 40 20 0 2000-2005 Oil Palm Plantation Vegetable Oil Industry Agricultural Sector National 90 80 70 60 50 40 30 20 10 0 Value Added 2000-2005 Source: PASPI (2015) 2005-2008 2005-2008

15 Oil Palm Plantation Stimulates Other Sectors of Indonesian Economy Linkages Value Sectors Backward 1,51 Surplus Reinvestment Fertilizers, Chemical, Pesticides Labor Financial Oil Palm Seeds Agriculture Building Transp, Trade, Rest/Hotel, Comm,,etc Other Sectors 33,94 18,43 17,31 9,85 4,64 3,56 4,07 4,19 4,74 Forward 1,42 Cooking oil industry Oleochemical industry Food industry Oil Palm Plantation Others 80,00 14,00 0,31 4,64 0,05 Multiplier Output Income Employment Value Added Share (%) Index 1.71 1.79 2.64 1.59 Multiplier Indeces of the Oil Palm Plantations Source: Statistics Indonesia, I-O Table 2008

16 Labor Absorption in the Oil Palm Plantation Million 3,50 3,00 2,50 2,00 1,50 1,00 0,50-2013 Farmers 2014* 2015** Labors Source: DG of Estate Crops (2015) Employment Multiplier: o for all sectors of the economy = 1,84 o for the oil palm sector = 1,05 (Source: Indonesia I-O Table 2008) Palm oil development has the potential to increase the absorption of labor in all sectors of the economy,

The Role of Oil Palm in Poverty Alleviation

18 Comparison of RGDP Oil Palm-based Economy and Non Oil Palm-Based Economy (Mil, IDR) Riau North Sumatera Oil Palm Non Oil Palm Source: PASPI (2015) Non Oil Palm Central Kalimantan South Sumtera Oil Palm Oil Palm Non Oil Palm Oil Palm Non Oil Palm

Effect of CPO Production on RGDP 19 (Cases in 4 major oil palm producer Provinces) South Sumatera Source: PASPI (2015) Central Kalimantan

20 Oil Palm Farmers Earn Higher Income than Non Oil Palm Farmers Source: PASPI (2015)

21 Comparison of Oil Palm Household Income and Poverty Line (Million IDR / yr) Urban Poverty Line 40 35 Rural Poverty Line 30 Plasma Oil Palm Farmer's Income 25 20 Independent Farmer's Income Non Oil Palm Farmer's Income 15 10 5 Non Oil and Gas National Income Per capita Source: PASPI (2015) 0 2009 2010 2011 2012 2013

22 Oil Palm Plantation Reduce number of poor people in rural area and improve income distribution 25,00 Sumatera Utara 20,00 Riau 15,00 Sumatera Selatan % of Poor People in 4 Major Oil Palm Producing Province 10,00 Kalimantan Tengah INDONESIA 5,00 0,00 2007 2008 2009 2010 2011 2012 2013 2014 0,50 0,40 North Sumatera Riau South Sumatera Central Kalimantan INDONESIA 0,30 0,20 0,10 0,00 Source: Statistics Indonesia (2015) Gini Ratio in 4 Major Oil Palm Producing Province

Conclusion

24 Conclusion Oil palm plantations play an important role in Indonesian economic development : 1. Source of income through foreign exchange earnings 2. Contribute highly significant to the growth of output, employment and added value of other economic sectors. 3. Boost economic growth in rural areas through increased employment, improved infrastructure, and create new sources of economic growth. 4. Increase farmers income and reduce poverty.

Thank you... zalamsyah@unja.ac.id

26 Success stories 1991 2012

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