Estimating the economic damage and treatment cost of basal stem rot striking the Malaysian oil palms

Abstract

Oil palm, a vital crop, contributes significantly to the economic and social development of Malaysia. However, a pathogen such as the Basal Stem Rot (BSR) poses a significant threat to the oil palm that would lead to significant economic losses. Motivated by this development, we utilize a partial equilibrium model of Malaysian agriculture to measure the level of economic damage in terms of real agricultural output, agricultural prices, and agricultural employment. As expected, a slow-moving Ganoderma boninense can devastate the oil palms in Malaysia by 2040 with a loss of 860,610 ha of mature oil palms that result in significant losses of real agricultural output and employment while inducing higher agricultural prices. Furthermore, BSR leads to further deforestation as landowners replace the BSR infected land by clearing rainforest. At last, paying an annual treatment cost to maintain healthy oil palms lead to a partial recovery from the economic damage of BSR. Although real output, agricultural prices, and agricultural employment improve while deforestation slows, the economic measures do not return to their baseline levels with an absence of BSR.