The Hesitant Boom:
Research Report
The Hesitant Boom:: Indonesia’s Oil Palm Sub-Sector in an Era of Economic Crisis and Political Change
Anne Casson
Copyright Date: Jun. 1, 2000
Published by: Center for International Forestry Research
Pages: 55
OPEN ACCESS
https://www.jstor.org/stable/resrep02259
Table of Contents
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  1. Front Matter
    Front Matter (pp. i-ii)
  2. Table of Contents
    Table of Contents (pp. iii-iv)
  3. Abbreviations and Glossary
    Abbreviations and Glossary (pp. v-v)
  4. Executive summary
    Executive summary (pp. 1-1)
  5. 1. Introduction
    1. Introduction (pp. 2-2)

    Oil palm has been one of the most dynamic of Indonesia’s agricultural sub-sectors. Dating from the late 1960s, the oil palm sub-sector expanded from around 106,000 hectares to 2.5 million hectares in 1997. This prolific growth has conferred important economic benefits, inasmuch as it has become an important source of foreign exchange and employment. However, it has also become a source of concern, because much of the oil palm expansion has happened at the expense of Indonesia’s humid tropical forest cover.¹ Oil palm expansion has also been held partly responsible for the 1997/98 forest and land fires that affected more...

  6. 2. Rapid Development of the Oil Palm Sub-Sector Until 1997
    2. Rapid Development of the Oil Palm Sub-Sector Until 1997 (pp. 3-7)

    The Indonesian oil palm sub-sector has experienced remarkable growth since the late 1960s. The area of oil palm plantations has increased from 106,000 hectares in 1967 to 2.5 million hectares in 1997, implying an average growth rate of 11.2 percent per annum (See Appendix 2). Most of this oil palm plantation area is concentrated in the six provinces of North Sumatra, Riau, South Sumatra, West Kalimantan, Jambi and Aceh (Figure 1). While North Sumatra could be perceived as a traditional area,² the others are areas of new development, having experienced sharp growth in the last decade. For example, Riau and...

  7. 3. The Hesitant Boom
    3. The Hesitant Boom (pp. 7-17)

    From the beginning of the economic crisis (mid-1997) through to early 1998, it appeared that the Indonesian oil palm sub-sector would continue to expand. Indeed, it seemed as if changes resulting from the crisis would not only allow continued growth but even encourage faster growth. Most important were windfall profits made possible through depreciation of the rupiah against the dollar and a low export tax of 5 percent. By increasing sales to the export market, companies were able to take advantage of high international CPO prices and low production costs. The government then issued a directive removing barriers to foreign...

  8. 4. Prospects for Resumed Growth and the Fate of Forests
    4. Prospects for Resumed Growth and the Fate of Forests (pp. 17-28)

    In the foregoing we have seen that the Indonesian oil palm sub-sector grew at a phenomenal pace in the three decades prior to 1998, and then entered a period in which CPO production declined for the first time since 1969 and area growth began to slow down. The relevant questions to pose at this juncture are: (1) What are the prospects for renewed area growth?; and (2) If growth does resume, what potential impacts will this have on Indonesia’s remaining natural forest cover?

    It is difficult to answer the first question with any degree of certainty because economic and political...

  9. Conclusion
    Conclusion (pp. 28-29)

    The Indonesian oil palm sub-sector expanded rapidly after 1967. Much of this growth has occurred in the last decade and posed a significant threat to Indonesia’s existing forest cover. It has also displaced local communities and increased social conflict. At the beginning of the economic crisis in 1997, there was every expectation that the oil palm boom would not only continue, but also be propelled by the currency depreciation and lifting of foreign investment constraints. But a slowdown in area expansion and CPO production took hold instead. From early 1998 through to mid-1999, oil palm area expansion slowed significantly and...

  10. Recommendations
    Recommendations (pp. 29-30)
  11. Acknowledgements
    Acknowledgements (pp. 31-32)
  12. Endnotes
    Endnotes (pp. 32-35)
  13. References
    References (pp. 36-37)
  14. Appendix 1. List of People Consulted
    Appendix 1. List of People Consulted (pp. 38-39)
  15. Appendix 2. Area and production of oil palm plantations by owner type, 1967-1997
    Appendix 2. Area and production of oil palm plantations by owner type, 1967-1997 (pp. 40-40)
  16. Appendix 3. Malaysian investment in the Indonesian oil palm sector
    Appendix 3. Malaysian investment in the Indonesian oil palm sector (pp. 41-43)
  17. Appendix 4. Policy changes affecting domestic and international CPO and cooking oil prices
    Appendix 4. Policy changes affecting domestic and international CPO and cooking oil prices (pp. 44-44)
  18. Appendix 5. The impact of the economic crisis and various government policies on plantation share prices, 1997-1999
    Appendix 5. The impact of the economic crisis and various government policies on plantation share prices, 1997-1999 (pp. 45-45)
  19. Appendix 6. The government’s new schemes for oil palm development
    Appendix 6. The government’s new schemes for oil palm development (pp. 46-46)
  20. Appendix 7. Some incidents of violence on oil palm estates
    Appendix 7. Some incidents of violence on oil palm estates (pp. 47-47)
  21. Appendix 8. Forest land converted to plantations and conversion forest deficits
    Appendix 8. Forest land converted to plantations and conversion forest deficits (pp. 48-50)