History of palm oil in Malaysia and Indonesia
Palm oil has been cultivated in Malaysia and Indonesia for centuries, and it has played an important role in the economies and cultures of both countries. The first palm oil plantations were established in Malaysia in the late 19th century, and the industry grew rapidly in the 20th century. Today, Malaysia and Indonesia are the world’s two largest producers of palm oil.
Oil palm plantations and its impact on local ecology and economy
Oil palm plantations can have a significant impact on the local environment. Palm oil trees are grown in monocultures, which means that there is little biodiversity on plantations, potentially leading to habitat loss for wildlife and increased soil erosion. Palm oil production can also lead to water pollution from the use of pesticides and fertilizers.
However, palm oil plantations also have a positive impact on the local economy. They provide jobs and income for millions of people. Palm oil is also a major export crop for both countries, and it generates billions of dollars in revenue each year.
The role of small holders in palm oil production
Smallholder farmers play a major role in palm oil production in Malaysia and Indonesia. An estimated 3.5 million smallholder farmers produce palm oil in Malaysia, and 2.6 million smallholder farmers produce palm oil in Indonesia. Smallholder farmers typically own and operate plantations that are less than 5 hectares in size.
Besides its importance in the manufacturing of food, household goods, cosmetics and pharmaceuticals, The RSPO estimates that oil palm farming provides an income for over 7 million smallholder famers globally.
Smallholder farmers play an important role in the palm oil industry, but they also face a number of challenges, including:
- Lack of access to land and credit
- Limited access to technical assistance
- Low yields
- Poor market access
Smallholder farmers are crucial to the socio-economic development of their communities: in Malaysia, palm oil has been a key contributor to reducing poverty from 50 per cent in the 1960s to just 5 per cent today, with smallholder production accounting for 40 per cent of total palm oil plantation areas.
The impact of organisations like RSPO and MSPO on the socio-economic environment of smallholding farmers
Organizations such as the Roundtable on Sustainable Palm Oil (RSPO) and the Malaysian Sustainable Palm Oil (MSPO) certification schemes are working to improve the socio-economic environment of smallholder farmers. These schemes provide farmers with training and support to help them produce palm oil in a sustainable manner. They also provide farmers with access to better markets for their products.
The RSPO and MSPO certification schemes have had a positive impact on the socio-economic environment of smallholder farmers. Farmers who are certified by these schemes have higher incomes and better living standards than farmers who are not certified. However, there are still many smallholder farmers who are not certified by these schemes.
Unlike the RSPO, which is a voluntary organisation, around 96% of Malaysian palm oil plantations—many of them run by the 300,000 smallholder farmers—are now MSPO-certified under the Malaysia Sustainable Palm Oil (MSPO) scheme. This was a new nationally mandated sustainability standard enforceable by the law, the first of its kind around the world.
The MSPO is more inclusive than the RSPO as it aims to bring in smallholder farmers and make them more accountable for their actions and farming practice, and while MSPO has the same aims as the RSPO, it is much cheaper for smallholders to participate than RSPO, which is aimed at larger corporate entities with deep pockets.
The MSPO works more closely with state governments to resolve land issues, in particular in relation to smallholders to improve the MSPO traceability system for the whole supply chain.
The future for the small holding farmers in Malaysia and Indonesia
The future of smallholder palm oil farmers in Malaysia and Indonesia is uncertain. The industry is facing a number of challenges, including:
- Declining palm oil prices
- Increasing competition from other vegetable oils
- Pressure from environmental groups to reduce deforestation
- Climate change
However, smallholder farmers are also facing a number of opportunities. The demand for sustainable palm oil is growing, and smallholder farmers who are certified by sustainable palm oil schemes are able to access better markets for their products.
Governments and industry stakeholders can also do more to support smallholder farmers. This includes providing them with access to land, credit, and technical assistance. It also includes helping them to get certified by sustainable palm oil schemes.
This will allow smallholder farmers to:
- Invest in sustainable farming practices
- Improve their yields
- Gain access to better markets for their products
Challenges and opportunities for smallholder palm oil farmers
One of the biggest challenges facing smallholder palm oil farmers is climate change. Climate change is causing more extreme weather events, such as droughts and floods. These events can damage palm oil plantations and reduce yields.
Another challenge facing smallholder palm oil farmers is competition from other vegetable oils. Other vegetable oils, such as soybean oil and rapeseed oil, are becoming more popular in some markets. This is putting pressure on palm oil prices.
Despite these challenges, there are also opportunities for smallholder palm oil farmers. The demand for sustainable palm oil is growing. Consumers are becoming more aware of the environmental and social impacts of palm oil production, and they are looking for sustainable alternatives.
Smallholder palm oil farmers who are certified by sustainable palm oil schemes are able to access better markets for their products. They can also get higher prices for their products.
The role of governments and industry stakeholders
Governments and industry stakeholders can play an important role in supporting smallholder palm oil farmers. Governments can provide farmers with access to land, credit, and technical assistance. They can also help farmers to get certified by sustainable palm oil schemes.