Understanding Oil Palm Problems in Indonesia: Policy models, state-regime interests and agribusiness risk

By John McCarthy, Piers Gillespie and Zahari Zen

The production of boom crops, such as oil palm, is associated with critical environmental and social problems across the developing world. Over recent years international policy approaches ’ such as the Roundtable on Sustainable Oil Palm and the Equator Principles ’ have emerged across several commodity export sectors in developing countries to provide the basis for addressing such problems. Nonetheless, in the last months, UNULLever, the world’s largest buyer of palm oil, blacklisted two major Indonesian members of the Roundtable on Sustainable Palm Oil (RSPO) for engaging in ‘unsustainableŸ? practices. Nestle, the world’s biggest food and beverage company, announced it would also withdraw from another key Indonesian supplier. Earlier, in response to complaints, the World Bank Group ordered a complete moratorium on investment in palm oil. Coverage of these controversies tends to focus on specific regulatory problems without systematically addressing deeper causal factors. In contrast, we will discuss how particular policy and business models embedded in local socio-political and economic relations lead to the governmental patterns associated with these outcomes. Based on the analysis of oil palm developments in three sub-districts in Indonesia, we discuss the emergence of current state-society-agribusiness configurations in terms of the workings of state-regime interests and agribusiness attempts to handle risk, considering some of the policy options that might support better outcomes.