Fronds of a dilemma

http://www.greenpurchasingasia.com/pdf/GPA_SEPT_Digital.pdf

Fronds of a dilemma

→ 25,000 farmers in schemed smallholdings in three countries achieved RSPO certification last year
→ Future of smallholder farmers is in question, due to lack of access to financial and other necessary services

By Jason Tan

The environmentalist’s dilemma, restated: what do you do with all the jobless people who once made a living off unsustainable oil palm plantations?

The corporation’s dilemma, restated: where to plant, when the planet can no longer sustain consumer demand and economic growth?

The point is this: while the palm oil sector underpins the economies of Indonesia and Malaysia, its industrial scale cultivation comes with far reaching social and environmental consequences that are not yet fully accounted for in its pricing.

Research by the London based Institute of International Development and Environment (2006) notes the significance of smallholders in Indonesia and Malaysia, who account for 35% to 40% of the total area of planted oil palm, and as much as 35% of output in Indonesia, according to the RSPO.

“I was doing research in a town in Sumatra and I went to a local school and nine of the 13 teachers had oil palm plantations,” John McCarthy told BBC Radio 4’s Food Fights programme last year. An economist with the Australian National University and an industry expert, McCarthy thought that oil palm cultivation might be creating a new rural middle-class. As he went deeper into the woods, he found that villagers with four hectares or more earned an average of US$12,000 a year. Those with two hectares earned much less, at US$2,000 a year, and those below the poverty line had no oil palm plantations.

But the link between oil palm hectarage and poverty or affluence is not straightforward. There are state-supported smallholders, and independent smallholders, and an alphabet soup of schemes in between. The former can have better yields, and the latter better earnings. Apart from fluctuating commodity prices, there is the question of management; in Malaysia, the government-run Federal Land Development Authority (Felda) smallholder scheme faces several class-action lawsuits by smallholders for undervaluation of yields.

There is the question of control of nature. Because the fresh fruit bunches (FFB) of oil palm must be processed within 24 hours of harvesting, expensive mills have to be built within or near to plantation holdings, which affects the lives of local and indigenous communities around it in various dimensions – the earnings of smallholders, for one, depends on their relationship with the mills, while the industrial processing of palm oil demands extensive pollution mitigation measures if the local (and global) quality of life is not to be affected.

The corporation’s dilemma is represented by Sawit Watch, an activist group set up in 1998, in the wake of the Asian financial crisis. It is part of a network of over 50 local organisations working with communities in Sumatra, Kalimantan and Sulawesi and has documented over 500 conflicts, mostly rooted in land disputes and compensation over smallholding arrangements. It points out that such conflicts might be reduced, if not avoided, if governments and corporations use the principle of Free, Prior and Informed Consent, which has been adopted by the RSPO, and that its members commit to.

Sawit Watch says it seeks to promote the best deal for those communities that choose to live with oil palm plantations, and for those that choose otherwise, to secure their land rights and sustain their traditional community adat laws through conflict resolution. Its actions include taking land right cases to court, and the direct occupation of lands.

A turning point in Indonesian history illustrates how what plays out between actors on the world stage affects ordinary lives. As Sawit Watch notes: “The Indonesian government stopped new foreign investment in oil palm plantation in early 1997, because 1.5 million hectares had already been allocated for oil palm plantation to Malaysian and other foreign investors.
The IMF/World Bank’s 50-point programme for Indonesia to counter the economic crisis of 1997 was conditional on the liberalisation of oil palm plantation, but was not based on any social or environmental studies carried out by the World Bank.”

Following pressure from NGOs, the World Bank Group this year revised its engagement policy with the palm oil sector to reflect the triple-bottom line of people, planet and profi t. Couched in more consultant-speak, the management of the world’s forests has changed hands: from local communities to multinational companies; from catering for local economies to the global one; from mixed crops to agricultural commodities. The search for sustainability might entail a change of strategy, from mergers and acquisitions and joint ventures.

Norman Jiwan of Sawit Watch responds to emailed questions from Green Purchasing Asia below.

Why did Sawit Watch choose to join the RSPO rather than use other means to achieve its objectives?
The RSPO adopts, promotes and encourages sustainability of the palm oil sector that is consistent with one of the social justice mandates (of Sawit Watch) for smallholders farmers, labourers, indigenous peoples and local communities severely affected by the palm oil sector. In 2004, Sawit Watch voluntarily decided to join RSPO as one of its strategies in promoting responsible sustainable palm oil.

What has been the response of the multinational companies in the RSPO to the proposals of the NGO members, in general, and to those of Sawit Watch, in particular?

The responses of MNCs have been varied, but they have largely been reactive instead of proactive and constructive to NGO proposals; for example, on indicators for greenhouse gas emissions, new planting procedures, and grievance [mechanisms]. Sawit Watch has been critical about human rights violations, labour and social issues, but is seen as playing black and negative campaigns against the palm oil industry.

What kind of relationship exists between Sawit Watch and multinationals that have, among others, their own plantations?

With the private sector, Sawit Watch takes an independent [stance] of transparent and responsible critical engagement, and open dialogue with RSPO ordinary members in promoting human rights and conflict resolution in the palm oil sector. Sawit Watch provides no consulting and professional services to the private sector.

How many – and how well – are smallholders represented on the RSPO, versus the multinational plantation owners and mills? What have been the challenges?

Smallholder oil palm farmers are represented under the grower category of membership. The smallholder seat is occupied by Felda, the national agency for Malaysian smallholders. An independent representative is much needed in bringing the voices and aspirations of independent smallholder groups. In 2010, RSPO grower members from Malaysia, Indonesia and Papua New Guinea had succeeded in bringing [some of] their schemed smallholders to achieve RSPO certification, which benefited 25,000 farmers. This is a breakthrough, but the RSPO needs to mobilise more smallholders for certification and inclusive empowerment programmes.

In terms of economies of scale, smallholders cannot compete on price with large plantations. Is it possible for smallholders of cash crops to be paid a fair price for their produce given this fact?

Yes, it is possible. Large plantations and smallholders are both FFB (fresh fruit-bunch) producers but it is not fair for them to compete without dealing with the political economy and how it affects pricing; a fair price implies not only economic consideration but also a political commitment to change the existing pricing mechanism which discriminates against smallholders, because it is largely [set by palm oil producers rather than oil palm growers]. This includes government pricing regulations that are made unilaterally.

Sawit Watch seeks to secure “land rights and sustain traditional community (adat) laws through conflict resolution and lobbying government at the national and local level for land reform and community sovereignty over natural resource management.” How is it possible to initiate land reform through the RSPO, which essentially relies on non-legally binding self-regulation?

RSPO standards, if consistently implemented, will lead to best practices consistent with international norms and values [that can and] must uphold business activities that are culturally, socially and environmentally [sustainable]. These can be a useful precedent for the development of domestic and national legislation.

How effective can any dispute resolution mechanism be, in the absence of legal enforcement?

It can be effective when a genuine commitment to recognise, resolve, and mitigate disputes is present. It is not about merely “do no harm” as required by law, but doing it right, whether or not legal enforcement exists.

One of Sawit Watch’s goals is “to assist communities in developing or maintaining economically, socially and ecologically sustainable land/forest management.” What does Sawit
Watch see as the future for palm oil smallholders?

The market for commodities is uncertain, and smallholder farmers do not have control to price and market their own FFB. Their participation in the market is used only to consolidate land and mobilise the labour force to produce FFB. Therefore, the future of smallholder farmers is in question – if not uncertain – not only at replanting periods, due to lack of access to financial and necessary services. Also, in extreme cases, when agricultural land has been depleted by monoculture oil palm plantation, there is no more arable land left for food and alternative crops.