Palm Oil Development in Riau, Indonesia: Balancing Economic Growth and Environmental Protection

Abstract

Indonesia is the world's top producer of crude palm oil, and this strategic commodity has boosted the nation's economic growth. The palm oil industry expanded significantly following the launch of the Perkebunan Inti Rakyat (PIR) transmigration program by the Indonesian government during the Suharto era. In the 1980s the PIR program brought many Javanese transmigrants to Riau to cultivate palm oil, helping Riau Province become Indonesia's largest producer of palm oil, accounting for almost one fifth of national production in 2018. The growth of the palm oil industry has spurred economic growth in Riau while also contributing to an increase in environmental degradation, deforestation, forest fires, and the risks associated with land use change, leading to a clash of narratives between pro-palm oil coalitions and environmental groups. Drawing on evidence from Riau, this study investigates the competing claims of groups touting economic growth and others decrying environmental degradation. To what extent does the palm oil industry drive economic growth and affect environmental conditions in Riau? How do we account for the lack of sustainability policies implementation in Indonesia? This study includes qualitative data obtained from smallholders in eight villages in Riau as well as the perspectives of provincial NGOs, researchers, and government representatives. This study finds that the economic benefits enjoyed, and risks encountered, by smallholders are highly variable with a different balance of outcomes in each village. Many smallholders claim that palm oil harvests have improve their economic situation while also acknowledging environmental problems. However, they argue that economic necessity leaves them no choice but to join the palm oil boom. The government has played a contradictory role by facilitating the growth of the palm oil sector and encouraging it to meet production targets while also passing sustainability policies and imposing moratoriums to respond to local, national, and global pressures.