Smallholders represent a significant portion (38%) of oil palm cultivation in Indonesia, and represent a critical component of the palm oil industry, as well as constitute a significant opportunity to improve livelihoods in resource-poor settings. Smallholders’ engagement in oil palm cultivation began as part of Indonesian government to promote tree plantation crops in the late 1970s. The initial programme consisted basically of direct state investments through state-owned companies (PTPN) and was integrated with government-sponsored transmigration programmes to provide a labor force for the new plantations. This integration was embryonic for smallholder engagement in state-led agribusiness. The emergence of smallholder oil palm planters constituted a spread effect of plantation development led by the government. The state agribusiness-driven policy has transformed rural areas and settlement development was started in the surrounding of large-scale oil palm plantation.

1. Suseno Budidarsono
One Day Seminar
“Tree cover transitions and investment in multicolored economy :
hypotheses grounded in data”
Bogor, March 13, 2013

2. Oil palm plantation distribution in Indonesia, by province
BPS (2012), Indonesian Oil Palm Statistics 2011. Jakarta

3. 5,000 100.0%
4,500 90.0%
4,000 80.0%
Planted area (1000 ha)
3,500 70.0%
3,000
60.0%
2,500
50.0%
2,000
40.0%
1,500
30.0%
1,000
20.0%
500
10.0%
-
2002
2007
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2003
2004
2005
2006
2008
2009
2010
2011
0.0%
1999
1992
1993
1994
1995
1996
1997
1998
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Smallholders State-owned plantation Large scale private plantation Smallholders State-owned plantation Large scale private plantation
2010
Smallholders : 39.6%, State-owned plantation : 7.7%, Large scale-private plantation : 52.8%

4. 14,000 100%
90%
12,000
80%
CPO production (1000 ton)
10,000 70%
60%
8,000
50%
6,000
40%
30%
4,000
20%
2,000
10%
- 0%
1995
1992
1993
1994
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2002
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2003
2004
2005
2006
2007
2008
2009
2010
2011
Smallholders State-owned plantation Large scale private plantation Smallholders State-owned plantation Large scale private plantation
2010
Smallholders : 37.6%, State-owned plantation : 8.5%, Large scale-private plantation : 53.9%

8. Direct and indirect impact of oil palm plantation on
socio-economic of local people
 at the village level : infrastructure development,
employment generation, income opportunities, land
pressure and migration (PODES)
 at the household level : welfare and livelihood, such as
education, family income, employment, capital
accumulation (household survey)

9. Parameters, variables and data to be observed
in the socio-economic impact assessment of
palm oil industry at village level.
Parameters Variables
Settlement development Settlements patterns (in the surrounding
area of the plantations)
Physical characteristics and its natural
resource endowment
Accessibility
Public utility and infrastructure
Demographical development Population growth
Migration
Employment
Education
Health
Rural Economy development Economic activities

10. Main findings on comparison between villages with oil palm as
main commodity (OPC) and villages with other main commodities
(NOPC) in the surrounding area of the 23 plantation samples
1. Adoption rate :
• 11.4% within 10-km surrounding areas (11.4% of the villages
have oil palm as the main commodity) and ranges from 3-45%
across the 23 samples
• 7.9% within 20-km surrounding areas with a range from 0-35%
adoption rate across samples
2. Villages of OPC tend to be more highly populated and the
percentage of men in the population is significantly higher than
that in NOPC.
3. The percentage of households that makes use of governmentally
owned Electricity Company is not significantly different between
OPC and NOPC

11. 4. Percentages of households served by non-government electrical company are
much higher in OPC than NOPC, perhaps with the facilitation or helps from
the oil palm companies or the higher income generation that allow people to
access other facilities.
5. Accesses to elementary schools are similar between OPC and NOPC. Distances
to secondary schools, hospitals and other medical services are significantly
higher in OPC than NOPC. This means that perhaps OPC are more remote and
that public/government facility developments perhaps are not prioritized in
OPC.
6. With regards to health indicators, OPC show significantly lower prevalence of
malnutrition, per capita health insurance for poor family and also per capita
service for poor people than those in NOPC.
7. From industry-sides and economic opportunities, only wood industry, number
of shops, and number of minimarkets and number of hotels are significantly
higher in OPC and NOPC.
8. The number of cooperatives (koperasi) and village unit cooperatives (KUD) are
significantly higher in OPC than in NOPC villages

12. 7. From industry-sides and economic opportunities, only wood industry,
number of shops, and number of minimarkets and number of hotels are
significantly higher in OPC and NOPC.
8. The number of cooperatives (koperasi) and village unit cooperatives (KUD)
are significantly higher in OPC than in NOPC villages

13. Sumatera
209
Kalimantan
204
Island
43
Sulawesi
Partnership
137
Independent
222
97
Mixed
Plot Management
Indigenous
225
status
Farmer
Migrant
231
91
North Sumatra
88
Riau
30
South Sumatra
47
West Kalimantan
Province
72
Central Kalimantan
Household level survey : sample distribution
50
East Kalimantan
35
South Kalimantan
43
West Sulawesi
456
Total

14. Households characteristics
Variable %
Household sample (n) 456
Family members 2007
Nuclear 1807 97.5
Extended 200 2.5
Sex Ratio 1 : 1.08
Household Size
1–4 268 58.8
5–8 183 40.1
>8 5 1.1
Average Family size 4.4
Economically Active Population 70.6
Dependency ratio 41.7

15. Households characteristics :
Occupation of oil palm household members
family
Variable %
member
Main Occupation
Oil palm farmer 378 55.1
Non-oil palm farmer 55 8.0
Entrepreneur 79 11.5
Farm & non-farm labourer 71 10.4
Civil Servant 28 4.0
Private company employee 74 10.8
Total 685 100
Side Occupation
Oil palm farmer 73 24.1
Non-oil palm farmer 79 26.1
Entrepreneur 51 16.8
Farm & non-farm labourer 43 14.2
Civil servant 9 2.9
Private company employee 48 15.8
Total 303 100

16. Households characteristics : Educational attainment
n %
Respondents 453 100
Never go to school 4 0,9
Elementary School 221 48,6
Junior High School 105 23,2
Senior High School 108 23,6
University 18 3,7
Family members
Never go to school 16 0,8
Elementary School 694 34,6
Junior High School 393 19,6
Senior High School 386 19,2
University 70 3,5
Not in schooling age 448 22,3

17. Households characteristics : Housing
Survey Indonesia*
Variable
n % %
Floor area
< 19m2 2 0.4 5.5
20 - 49m2 97 21.3 35.3
50 - 99m2 238 52.2 43.1
100 - 149m2 78 17.1 10.5
> 150m2 41 9.0 5.7
Floor area per person (m2 ps-1) 19.59
Main drinking water source
Packaged water 16 3.5 13.1
Public tapped water 36 7.9 15.3
Well pumps 277 60.7 17.8
Well and springs 76 16.7 48.4
River and rain water 50 11.0 5.2
Others 1 0.2 0.2

18. Households characteristics : Housing
Survey Indonesia*
Variable
n % %
Lighting
State electricity 268 58.8 89.3
Privately generated electricity 167 36.6 4.3
Pumped lamp 4 0.9 0.8
Oil lamp 17 3.7 5.0
Others 0 0.0 0.6
Domestic sewage and toilet
Yes, indoor 287 62.9 63.8
Yes, outdoor 153 33.6 17.4
No 16 3.5 18.8

19. Households characteristics : Landholding
Std
Number of Max
Number of Avg Min Dev
Land use type plots (Plot (ha
households -1)
(ha HH-1) (ha HH-1) (ha
HH HH-1)
HH-1)
Oil palm 456 2 4.66 0.12 80.0 7.59
Rubber 95 1 1.85 0.10 20.0 2.35
Coconut 9 1 3.36 0.25 9.5 2.85
Food crops 73 1 1.39 0.16 16.0 2.38
Abandoned
26 1 3.98 0.25 20.0 4.78
land
Total 5.56 0.40 80.0 8.18

20. Households characteristics : Oil Palm plantation
Land holding (ha)
n
average min max sd
Type of farmer
Non migrant farmer 225 3.28 0.12 30.00 3.51
Migrant farmer 231 6.00 0.40 80.00 9.92
Land management
Partnership 137 3.28 1.00 75.00 6.49
Independent 222 3.98 0.12 80.00 7.33
Mixed 97 8.21 2.05 66.00 8.57

21. Households characteristics : Landholding
Asset ownership
Number of assets
Type of Asset HH
(unit) % of total HH
(n=456)
Car 61 50 10.96
Truck 55 37 8.11
Motorcycle 711 428 93.86
Bicycle 227 158 34.65
Television 412 412 90.35
Cellphone 877 419 91.89
Radio 104 104 22.81
DVD Player 255 255 55.92
Complete furniture 190 190 41.67
Refrigerator 160 160 35.09
Savings 234 234 51.32
Jewellery 377 377 82.68

22. Profitability of smallholding oil palm
 Independent :
+ Returns to land of independent smallholder oil palm
plantation : IDR 92 -- IDR 143 million per hectare
+ Return to Labor : IDR 122,000 -- IDR 178,000 per
person day.
 For plasma farmers (with direct link to a nucleus
plantation)
+ Returns to land varied between IDR 125 -- IDR 266
million per ha
+ Return to labor vary between IDR 67,000 -- IDR
297,000 per person day

23. » Oil palm cultivation is not the only source of household
income. About 45% of the family members included in the
survey engage in non-agricultural activities
» Oil palm cultivation contributes only 61% of total family
income.
˃ Sumatra : ranging from 63% to 78%
˃ Kalimantan : ranging from 31% South Kalimantan and to
61% East Kalimantan)
˃ Monthly per capita : IDR 1.34 millions IDR 1.22 million (in
Sumatra) and (Kalimantan and Sulawesi )

24. Monthly per capita income of the household sample by province
Monthly per capita income in 2009
Plantation Household
Province / Island (IDR 000)
sample sample
average min max
North Sumatra 3 91 994 146 5,750
Riau 2 88 1,628 176 11,250
South Sumatra 1 30 1,521 333 4,070
Sumatra 6 209 1,336 146 11,250
West Kalimantan 1 47 747 142 2,783
South Kalimantan 1 35 1,728 140 10,208
Central Kalmantan 3 72 1,101 150 5,253
East Kalimantan 1 50 1,071 250 4,120
West Sulawesi 1 43 1,140 265 3,542
Kalimantan Sulawesi 7 247 1,123 140 10,208
13 456 1,221 140 11,250

25. Monthly per capita expenditure the household sample
by province and Island
Monthly expenditure per capita
Number poverty
Household (IDR 000)
plantation
samples poverty Poverty
samples average min max
line*) incident
North Sumatra 3 91 443 116 1,227 189 9.9%
Riau 2 88 542 199 2,048 227 3.4%
South Sumatra 1 30 425 209 898 190
Sumatra 6 209 482 116 2,048 5.7%
West Kalimantan 1 47 242 90 663 167 19.1%
South Kalimantan 1 35 407 130 975 181 8.6%
Central Kalmantan 3 72 529 108 1,883 199 5.6%
East Kalimantan 1 50 493 123 3,942 225 18.0%
West Sulawesi 1 43 474 254 870 157 0.0%
Kalimantan and
7 247 439 90 3,942 10.5%
Sulawesi
13 456 459 90 3,942 8.3%
*) in thousand IDR, BPS (2010)

26. Households economy
Sumatera Kalimantan & Sulawesi
Household sample engage
in oil palm cultivation to
121 households 177 households
replace their previous
livelihood,
5-10 10 years 5-10 10 years
Years of engagement < 5 years < 5 years
years < years <
Household with Family
income increased after
engage in oil palm 19% 31% 44% 22% 38% 36%
cultivation, by years of
engagement
2.01- 4.38- 25.34- 3.20- 13.17- 22.34-
Average incrased
times times times times times times
Household with Family
income increased after
engage in oil palm 1% 2% 4% 2% 1% 1%
cultivation by years of
engagement
Average decreased (%) -7% -25% -20% -47% -6% -34%