The Impact of Agroindustries

Oil Palm: The Expansion of Another Destructive Monoculture

by Ricardo Carrere

Over the past few decades, oil palm plantations have rapidly spread across the South. They are causing increasingly serious problems for local peoples and their environment, including social conflict and human rights violations. In spite of this, a number of actors -national and international- continue actively to promote this crop, against a background of growing opposition at the local level.

Basic Facts

The oil palm (Elaeis guineensis) is native to West Africa, where local populations have used it to make foodstuffs, medicines, woven material and wine. Today's large-scale plantations are mostly aimed at the production of oil (which is extracted from the fleshy part of the palm fruit) and kernel oil (which is obtained from the nut).

Oil palm plantations composed of specially selected and cloned varieties of palm trees start to produce fruit after four to five years and reach maturity and the highest rate of productivity when the trees are 20 to 30 years old. The fruit bunches, each weighing between 15 and 25 kgs, are made up of between 1000 and 4000 oval-shaped fruits, measuring some three to five cms long.

Once harvested, the fleshy part of the fruit is converted into oil through a series of processes, while the palm kernel oil is extracted from the nut itself. The processing of the crude oil gives rise to two different products: 1) palm stearin and 2) palm olein. The stearin (which is solid at room temperature) is used almost entirely for industrial purposes such as cosmetics, soaps, detergents, candles, lubricating oils, while the olein (liquid at room temperature) is used exclusively in foodstuffs (cooking oil, margarines, creams, cakes and pastries).

Oil Palm Plantations around the World

Oil palm plantations are being established principally in tropical regions where, by 1997 they occupied 6.5 million hectares and produced 17.5 million tonnes of palm oil and 2.1 million tonnes of palm kernel oil.

In Asia, the two main oil palm producing countries are Malaysia and Indonesia (both with more than two million hectares of plantations), which have become the world's principal producers of palm oil. Malaysia generates 50 per cent of world production (of which 85 per cent is exported), while Indonesia is the next largest producer with almost 30 per cent of global production (of which 40 per cent is exported). However, other countries are joining them in large-scale oil production. The most important of these are Thailand (with more than 200,000 hectares) and Papua New Guinea (which is the world third-largest palm oil exporter). Ambitious plans also exist for the Philippines, Cambodia and India, as well as the Solomon Islands.

In Africa it is difficult to obtain precise figures for industrial plantation areas, due to the fact that the oil palm is native to many West African countries. For instance, in the case of Nigeria, production is obtained from an area of three million hectares of oil palm, among which there are some 360,000 hectares of industrial plantations. Other countries also hold large areas covered by oil palms, such as Guinea (310,000 ha) and Congo Democratic Republic (formerly Zaire) (220,000), with important areas of industrial plantations particularly in Ivory Coast (190,000), Ghana (125,000), Cameroon (80,000), Sierra Leone (29,000), and smaller areas in Benin, Burundi, Central African Republic, Republic of Congo, Equatorial Guinea, Gabon, Gambia, Guinea Bissau, Liberia, Senegal, Tanzania, Togo and Uganda.

In Latin America, oil palm plantations are covering increasing areas in Ecuador (150,000 ha), Colombia (130,000) and Brazil (circa 100,000), as well as spreading over numerous other countries such as Honduras (50,000), Venezuela (30,000), Costa Rica (30,000), Peru (15,000), Guatemala (15,000), Dominican Republic (9,000), Nicaragua (4,000), Mexico (4,000) as well as areas in Panama, Suriname and Guyana.

Social and Environmental Impacts

As the areas under plantations increase, so do the negative impacts on the environment and on local societies. This is because, as is the case with monoculture plantations of pine and eucalyptus, the problem is not the tree itself but the plantation model under which it is grown.

Yet the promoters of this model insist on presenting palm plantations as a solution to unemployment problems and even try to demonstrate environmental benefits. The Colombian oil palm producers' federation puts it thus: "oil palm plantations are forests which protect our ecosystems". At the same time, a director of the International Finance Corporation (the branch of the World Bank which grants loans to the private sector), stated that the establishment of IFC-financed oil palm plantations in Ivory Coast "would lead to more employment and higher living standards [and] promote exports that will earn foreign currency, while supporting agricultural production with maximum sensitivity to the environment" (Africa News Online). A Malaysian minister went so far as to declare that palm plantations are in fact "better than the developed nations' pine trees in terms of absorbing carbon gases" (Lohmann 1999).

However, as will be shown in more detail below in the cases of Indonesia, Ecuador and Cameroon, the cultivation of this palm is bringing with it a series of negative impacts affecting people and the environment wherever it is established.

One of the principal impacts is the appropriation of large areas of land which have hitherto been in the hands of indigenous or peasant populations and have provided their livelihoods. This dispossession commonly generates resistance from local people, which is in turn confronted by repression by state forces as well as that of the oil palm companies themselves. The violation of land rights is thus typically followed by other human rights violations, including even the right to life.

Against the background of a world increasingly concerned about the loss of tropical rainforests, it is worth noting that almost all these industrial monoculture oil palm plantations are established in forest areas. Large oil palm plantation companies, which found it convenient to "clear" forest areas for plantations by setting them on fire, were responsible for the gigantic forest fires in Indonesia which shocked the world in 1997. Behind nearly every industrial oil palm plantation lies some such process of deforestation, even if it is usually not so extreme.

The tropical forests which are eliminated to make way for these plantations are the habitat for an enormously diverse range of species. Studies in Malaysia and Indonesia have shown that between 80 per cent and 100 per cent of the species of fauna inhabiting tropical rainforests cannot survive in oil palm monocultures (Wakker 2000). Those few species that do manage to adapt often become "pests" since, having lost their normal food supply, they begin to make a meal of the young palm plants. This in turn necessitates the application of pest "control" methods which include chemical pesticides, causing further damage to biodiversity as well as to fresh water supplies and the health of local populations.

Oil palm monocultures are also associated with soil erosion: forest clearance leaves soils bare and exposed to heavy tropical rainstorms. Erosion, in turn, causes contamination and sedimentation in watercourses, affecting supplies of drinking water and fish on which the local communities depend.

Oil processing industries also have an impact on water quality because of the large quantities of effluents which they release into rivers -2.5 tonnes for each tonne of oil processed. Pollution control laws are seldom complied with.

Despite all this, proponents insist on presenting oil palm plantations as the solution to all the social ills of the region in which they wish to establish them, declaring that they will generate employment, wealth, infrastructure, educational opportunities etc., in an effort to gain the support of local people.

Reasons for Plantation Expansion

Despite their negative impacts, oil palm cultivation continues to expand across more and more countries. The reason for this expansion is, in the first place, that oil palm can be very lucrative for both foreign and domestic investors. Profits are assured by cheap labour, low-priced land, a lack of effective environmental controls, easy availability of finance and other support, and a short growth cycle. In addition, the market is expanding, particularly in the North. Palm oil is the world’s best-selling vegetable oil, representing 40 per cent of the total global trade in edible oils. It is much more important than soya, which represents 22 per cent of the world market (FAS Online 1998). Moreover, it is expected to eventually increase its share of the world market to 50 per cent.

In addition, the fact that oil palm is a crop usually aimed at export markets makes it attractive to governments overwhelmed by external debt and seeking new sources of foreign exchange. External agencies (such as the World Bank, the International Monetary Fund and the United Nations Development Programme) also support oil palm, as do international banks which finance and profit from it. According to one recent study (Wakker 2000), the main Dutch banks (ABN-AMRO Bank, ING Bank, Rabobank and MeesPierson) all maintain close financial links with large oil palm enterprises in Indonesia.

Other, less visible proponents include the overseas conglomerates which benefit from the international palm oil trade. There is nothing new in their method: massive promotion of a crop in order to reduce world prices and stimulate consumption, thus entrenching a commodity in society in a way which ensures profits from marketing and reprocessing. A recent report on palm oil markets from ARAB (a Malaysian-based research and consulting institution) notes that "palm oil prices are generally lower than that of soybean oil" -which "is the dominant oil and serves as the price leader for trade in vegetable oils":

"The existence of the discount for oil palm arises from the large increases in the supply of palm oil in the last two decades and the need for the trader to offer a discount in order to compete with soybean oil in existing and new markets."

The reason for the increase in the supply of palm oil is quite simple: oil palm "is now being planted on a widespread basis in the tropics."

The peoples of the South have suffered from such strategies before, as in the cases of coffee, cocoa, bananas, sugar cane and many other crops. As the prices of such commodities drop, many producers are ruined. At the same time, trade in the industrialized nations benefits and consumption increases.

Further depressing international oil palm prices is the fact that in some markets, palm oil must compete with oils whose price is subsidized by various US and EEC programs, including soybean, sunflower and rapeseed oils (ARABIS 1996). This economic disadvantage is compounded by the fact that "palm oil differs from its major competitors (soybean, sunflower seed, and rapeseed oil) in that it is obtained from a perennial tree crop. Thus its supply is relatively stable as growers will continue to harvest the fruits even during short periods of depressed prices."

While growers of annual oil crops can easily reduce their hectarages during hard times, switching to another crop is not so easy for oil palm growers. Nor are the latter likely to benefit much from price rises, which will cause an increase in the hectarages of competing soybean, sunflower and rapeseed oils. As economists would put it: clearly a lose-lose situation.

In sum, while oil palm plantations are being promoted in the South, prices will be established by a Northern-dominated and subsidized "free market" which is, in fact, anything but free. Industries in the North and elsewhere will be assured of a continuous supply of oil while Southern producers face economic risk.

In the final analysis, the real reasons for the expansion of this crop have nothing to do either with improving living standards in Southern countries nor with environmental protection. Rather, the boom in oil palm plantations mainly serves local elites and the transnational companies with which they ally themselves to obtain mutual benefit. These firms include Unilever, Procter & Gamble, Henkel, Cognis and Cargill. Some are involved in both production and trade. For example, the Anglo-Dutch Unilever produces in Malaysia while acting exclusively as a buyer of oil in Indonesia.

The following studies carried out in Africa (Cameroon), Latin America (Ecuador) and Asia (Indonesia) demonstrate that the local effects of this new wave of investment include an increase in social injustice and in environmental degradation.