The real conditions faced by oil palm farmers on those 4 provinces are similar, mostly



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CONTEXT

The discourse of oil palm farmers union or Serikat Petani Kelapa Sawit – SPKS will ultimately brought us to see to a wider perspective on the environment it resides, the industry, government policy in the investment and to related industry, and the social and political dynamic of its movements. It will reveal several numbers or figures, the written policy and description about the real condition farmers are facing and the efforts they have done on their circumstances; and hence, the heart of the work lays on the life of the farmers; and their expectations for a better condition, better life.


It is in this particular area that Sawit Watch has put some efforts and energy for the farmers to reach those objectives through facilitating SPKS in 4 provinces: West Kalimantan, East Kalimantan, Riau and Jambi. SPKS Kalbar was declared on June 9, 2006; SPKS Kaltim was declared on January 9, 2007; SPKS Riau was declared on August 30, 2007 and SPKS Jambi was declared on October 3, 2007. Type of farmers being member of SPKS are the independent farmers, plasma farmers under PIR scheme and KKPA1 farmers.
The real conditions faced by oil palm farmers on those 4 provinces are similar, mostly2:

  • absent of respect to customary law and indigenous peoples on land acquisition process,

  • area of oil palm plots allocated to small holders aren’t commensurate with the areas of land released by the communities for oil palm development,
  • due misinterpretation of customary law for the benefit of the Company, this is especially on the land acquisition,


  • unfair conversion of land, most of farmers still haven’t gotten their 2 ha of oil palm plots after more than 10 years of agreement; some have gotten their plots, however it’s less than 2 ha

  • the imbalance relationship of nucleus and plasma; this being deteriorated by in some cases, absent of partnership agreement,

  • exclusion of farmers involvement in deciding loan scheme, and the unit price of loan itself

  • unfair treatment between nucleus and plasma plots; this stretches from absent of guidance for plasma farmers for their plots management to the issue of distribution channel,

  • minimum commitment from nucleus companies to infrastructures,

  • lacking transparency on pricing of FFB; in some cases the price of FFB from plasma farmers are lower than those of the nucleus,

  • weak bargaining position on the Cooperatives; in some cases the deductions of their FFB is not clearly allocated: is it for fertilizers or pesticides or else,

  • escalation of social conflict between peoples and Company, horizontal conflicts; the conflict has yet received proper concern from the Government,

  • lacking of working opportunity for the peoples to work in the mills or nucleus plots,

  • Negative environmental impacts being reduced the quality of livelihoods, especially reduced opportunity for hunting, fishing, gathering, use of forest products [food, raw materials for women’s additional income, traditional medicines] and access to clean water,
  • Most recently replanting issues; farmers being opted to Government program called “Revitalization”; this is quite hard to encounter especially since the plantation system do not actually prepared small holders to face the replanting period, in terms of capital and the absence of income during this period. The farmers of PTPN XIII in East and West Kalimantan as well as PTPN VI in Riau.

Having those as the reasons of struggle, it become clear for Sawit Watch to position itself as the supporter and facilitator of SPKS; hence the Coordinator of Sawit Watch released Letter of Decision Number 6/K-PSW/III/2007 which govern the reference of SPKS team towards the empowerment of SPKS. The facilitators mainly have the responsibilities to encourage SPKS to set up their management, legality, socialization process and recruitment of members, networking, data and information processor function, empowerment of farmers and revenue generating units. Arie Rompas was appointed to be facilitator of SPKS Kalbar on January 2007, Rahmawati Retno Winarni was appointed to be national facilitator of SPKS on June 2007, and Darto Alsy Hanu was appointed to be the facilitator of SPKS Kaltim on July 2007. The nature of people’s organization is dynamic, and even though the facilitators have their stated responsibilities; on the field they must be able to be flexible, and most of the time have shown progress, initiatives and creativity that are beyond their job descriptions.



Types of Smallholder Scheme3

Nucleus-plasma schemes: Between 1978 and 2001, the Government of Indonesia provided policy support and the World Bank financial support to nucleus-plasma (Perkebunan Inti Rakyat or PIR) supported grower schemes, in which plantation companies would develop palm oil plots for smallholders in a ‘plasma’ area around their own plantation ‘nucleus’. Management of plasma plots, generally 2 ha of oil palm plus 1 ha for other crops, would be transferred to individual smallholders after 3-4 years. The nucleus-plasma schemes were conceived as an integral part of the government’s resettlement (transmigrasi) program, through which Javanese and Sumatran people transferred to start a new life in the less populated islands. Thus many, though not all, of the plasma smallholders have been new settlers.

Nearly 900,000 ha of palm oil smallholdings were established under variations of this model (Table 2). Land for the schemes was allocated by central government from a land category called conversion forest. Much of this land was simultaneously under the management and traditional ownership (adat) of local communities, who in this sense were, consensually or not, contributing a capital investment of land into the nucleus-plasma schemes. The original apportionment between nucleus and plasma was 20-80, but this tended towards 40-60 over time.


Table 1: Types of nucleus-plasma schemes in Indonesia

Type

Main features

Performance

A. PIR Lokal, from 1978

On government plantations only. Each smallholder allocated 2 ha oil palm so long as member of scheme.

Not good. Major problems will fail subsistence crops and food security. Few income sources in 4 yrs of immaturity then limited incomes from 2 ha, especially as govt stipulated low price for FFB + 30% deduction. Many abandoned schemes.

B. Assisted PIR, from 1984

On government and private plantations, partly funded by WB and ADB. Priority to (1) locals and (2) transmigrants (some from failed schemes, thereby releasing land). Each smallholder allocated 2 ha oil palm and 1 ha food crops. Schools, health centers, markets, roads etc also provided.

Reasonable. Problems again with food and incomes. But improvements following govt’s upward revision of prices in 1987. Rules relaxed in 1997 to allow farmers to plant food crops, leading to better food security and higher yields from 9-10 yr old mature palms. Diversification of income activities and many smallholders able to pay off loans.


C. Special PIR, from 1984

On government and private plantations, funded by govt. Priority to (1) transmigrants and (2) locals. Similar to B except additional 35 m3 for housing.

C, D and E all reasonable – as in B. But transmigrants in particular had problems will failed food crops on unsuitable land.

D. Accelerated PIR, from 1984

On government and private plantations, funded by govt. For transmigrants only. Conditions as in C.

E. PIR Trans and KKPA, from 1986, replacing B, C & D

On government and private plantations, funded by govt. For both transmigrants and locals. KKPA loan repayments with limited subsidy, repayable at 16%.

In a typical scheme, holders of the plasma plots would be supported in the early years before the palm oil reached maturity through employment and (often inadequate) subsistence agriculture. The management of the plasma area would come officially under a cooperative of smallholders, which would generally contract technical functions back to the nucleus plantation company. Hence growers often work as laborers on their plots. They receive additional income through the guaranteed sale of fresh fruit bunches at a price set through a government formula (though the efficacy and fairness of this has been questioned, and it was revised in 1997; Zen et al 2005).

The nucleus-plasma schemes continue, though government sponsorship of expansion stopped in 2001 following Indonesia’s major decentralization of government functions that year, and a renewed support for traditional individually owned smallholdings. Zen et al (2005) report that, although there are exceptions, many of the smallholders in mature nucleus-plasma schemes are getting good incomes today (Table 1). But underlying issues such as control over land remain unresolved. Nucleus-plasma schemes not only occupy lands where there are overlapping systems of customary (adat) ownership, but also disrupt adat arrangements, for example by allocating plasma farmers 2 ha plots belonging to another community or even in another sub-district (Alexander 2006).


KKPA schemes: The Indonesian government introduced the KKPA (Koperasi Kredit Primer Anggota, which literally translates as Members’ Primary Credit Co-operative) scheme as a general rural microfinance program, through which formalized local cooperatives could borrow up to a maximum of IDR50 million (today EUR4,500), at a partially subsidized repayment rate of 16%, for small business development (McGuire et al 1998). The scheme was widely applied in the palm oil sector from 1995 onwards, replacing the basic nucleus-plasma scheme. Cooperatives of smallholders have more autonomy under KKPA than under earlier nucleus-plasma models.



Development of Palm Oil Industry

Palm oil is considered to be a very important commodity in Indonesia; it contributes export earnings of USD 5.8 Billions in 2006; an increase of 23% of the previous year. It is exported to more than 150 countries with five biggest importers of Indonesian crude palm oil being: India [38%], Netherlands [17%], Singapore [10%], Malaysia [9%], China [6%] and others [20%]. Together with its derivative products, it ranked first among industrial and agricultural products in export earnings4.


The oil palm plantations have also grown very rapidly from 728,000 hectares in 1986 to 6,100,000 hectares in 2006; about 12% of the plantations are owned by the government, 35% is owned by small holders and the remaining 53% is owned by private sector.

The percentage showed that actually smallholders play a significant role in this industry; however their representation is not yet having a firm basis. No farmers’ organization were actually representing farmers, not speaking off of their rights and interest, not forming a true embodiment of farmers; let alone oil palm farmers. SPKS came into being as a genuine farmers union; its representation is unquestionable; and like any new organizations, it needs more time to learn and grow more solid in the future.

Though through several tables below showed that small holders do exist; they share common characteristics, such as: small in size, lack of access to information, lack of access to technology, used of uncertified planting materials, lack of management know-how, lack of capital, family run company type, low productivity, none or weak organization, faced with land rights problem.
Table 2: Area of Oil Palm Plantations by Category of Producers 1999 – 20065


Year

Area [ha]




Small holders

Government

Private

Total

2000

1,166,758

588,125

2,403,194

4,158,077

2001

1,561,031

609,943


2,542,457

4,713,431

2002

1,808,424

631,566

2,627,068

5,067,058

2003

1,854,394

662,803

2,766,360

5,283,557

2004

2,120,339

664,776

2,781,520

5,566,635

2005

2,356,895

677,792


2,915,662

5,950,349

2006

2,548,452

679,235

3,022,773

6,250,460

The upstream industry of this particular product will relate to refinery, oleo chemicals and bio diesel. The local consumption for refined bleached deodorizer olein is 4,5 – 5 million tons and Indonesia’s total export share of palm oil product is over 68% of production. For oleo chemical, the total production of 2006 is 1,186,925 million ton with 75% of it was exported. Bio diesel issue is still having its pros and cons, especially if drawn to its environmental and social impacts; however the Indonesian Government has set up a policy in favor of this sector in various investment plans and policy. Indonesia’s palm oil production increases by 10-15% every year. Oil World estimated Indonesia’s production reached 15.9 million tons, while the Ministry of Agriculture estimated it 16.5 million tons.



Table 3: Production Growth 2000 – 20066


Year

Palm Oil Production [ton]




Smallholder

Government

Private

Total

2000

1,905,653

1,460,954

2,403,184

5,769,791

2001

2,798,032

1,519,289

4,079,151

8,396,472

2002

3,426,739

1,607,734

4,587,871

9,622,344

2003

3,517,324

1,750,651


5,172,859

10,440,834

2004

3,847,157

1,988,430

6,358,905

12,194,492

2005

4,500,769

2,236,827

7,883,234

14,620,830

2006

5,611,693

2,328,311

8,541,054

16,481,058



Policy Governing the Industry Practices


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