Oil Palm Boom and the Fate of Oil Palm Small-Holders in Sumatra-Indonesia, 1965-2015

In recent decades, oil palm industry, with its spectacular growth has contributed significant foreign exchange earnings to a number of countries in Southeast Asia. The current oil palm boom is a direct result of the changed global context, namely the response of capital accumulation strategies to the convergence of multiple crises and the emerging needs for resources by the new centers of global capital (Borras, Jr. 2013). In Indonesia, the imported plant from West Africa was developed into large scale and commercial plantations in 1911 (Jiwan, 2013) where Deli’s plantation belt in eastern coastal plain of Sumatra was opened around 1866 (Stoller, 1992). During the colonial era the plantations were largely controlled by large foreign private companies while in the first fifty years of independent Indonesia it was largely dominated by state plantation companies. After the Indonesia-IMF agreement in 1998 the industry has undergone radical transformation (Okamoto 2001, Jiwan 2013). While the production in Indonesia is concentrated in Sumatra, it is characterized by foreign ownerships and a large number of smallholders. Amidst its social and environmental impacts, as with the previous logging industry, the industry represents a vast economic opportunity for the Indonesian government. The strategic role of the industry is due to the Indonesian comparative advantage in labor and land costs (McCarthy 2010) and its expansion was justified under the principle of the “right to development”. The Indonesian development is characterized by biased toward economic development (Salim 2005) and can be categorized as an extractive regime (Gellert 2010). Through the perspective of political economy, this study focuses on the mutual relationship between social structure, social change and biophysical environment (Hannigan 1995) in the context of neoliberal globalization. Particular attention is given to the fate of oil palm small-holders in Sumatra during the New Order and Reformation Era of Indonesia.