05/03/2010 (Go All Over) - So far debates about the future of the palm oil industry have focussed upon reducing the impact on Indonesia’s rainforest and the orang-utan that inhabit them.

A possible way forward that has so far received little attention would be to redress the current inequality of land distribution away from big businesses and towards local smallholdings.

Environmentalists have long decried the destruction of Indonesia’s rainforests, which was made possible by a one-time logging deal deal that mostly benefited the country’s corrupt elite and foreign corporations.

But the growth of the palm oil industry has begun to filter down through to a wider group of people, with profound implications for both spreading prosperity and the prospects of furthering democracy in Indonesia.

“We are seeing the emergence of a rural middle class,” says John McCarthy of the Australian National University.

“I was doing research in a town in Sumatra and I went to a local school and nine of the 13 teachers had palm oil plantations,” he said.

Intrigued by his findings, McCarthy expanded his survey to a number of other villages in the region, with very interesting results.

Villagers with four hectares or more were earning on average $12,000 (£7,775) a year. A second group with 2 hectares were earning much less, around $2,000 (£1,300) a year, but this was still enough to provide financial security for themselves and their families.

Villagers without palm oil all fell below the poverty line.

Achmad Surambo is the executive director of Sawit Watch, an Indonesian NGO that has campaigned for several years on the palm oil front: He is of the opinion that palm oil in itself is not a bad thing for Indonesia, but to fully realise its benefits, the system needs to change:

“We have to make the system more fair, accommodate the interests of farmers, communities and labourers,” he says.

“The system right now is tilted toward the big companies and that has to change.”Laws have to be enforced, people and the environment need to be protected, the land rights of local communities must be respected.

There are currently huge abuses. Plantations continue to be opened up that flout the laws. Corruption flourishes, local communities are being marginalised with habitats terribly degraded.

Steaven Halim, of Lyman Agro, a small plantation company managing 60,000 hectares in Borneo, points to the roads, schools and health clinics that have been built as proof of the company’s commitment to its social responsibility.

He is sure that the way for the industry to meet the rising demand for palm oil is to increase productivity rather than acreage.

The key for him is increasing productivity of the many burgeoning smallholdings.

“If we can get them to 35 tonnes a hectare per year [it now is about 20 tonnes] we can do it.”

That is not far off what Sawit Watch wants. It has called for a moratorium on expansion, as well as more support and better treatment of farmers and labourers.

If production can be shifted towards a focus on smallholdings rather than big multinational corporations then the whole industry could benefit.

From a PR point of view; small, local businesses would promote a much better image of the industry than the large companies that have come in for such bad press lately.

The industry has also been demonstrated as being a successful method of wealth redistribution, and an increase in the number of landowners should provide more Indonesians with the ability to become self-sufficient and raise themselves above the poverty line.

From a conservation point of view; small businesses that live on the same land that they work are far more likely to manage the land sustainably and ethically than multinational corporations.

To justify a move towards more smallholdings running the industry, it would require their efficiency to be improved in order to meet the growing worldwide demand for palm oil. But if smallholdings can be successfully regulated then both the environment and the people of Indonesia should benefit greatly.