Local Consequences of EU Biofuel Policy
The Case of Indonesia
A critical analysis of assumptions and shortcomings in policymaking
Bachelorthesis Cultural Anthropology and Development Sociology
Student: Petra van der Kooij Word Count: 11.956 Student number: 6048668 Date: 21-12-2012
E-mail: petravanderkooij@gmail.com Institute: University of Amsterdam Supervisor: Dhr. dr. Gerben Nooteboom
Table of content
Introduction………3
European Union biofuel policy.………...………..…………7
Global developmental politics………9
A neoliberal policy for development………..9
Geopolitics of agriculture………...….12
The case of Indonesia………...…15
Development schemes and land use changes………...15
Investing in oil palm from Indonesia………...16
Changing livelihoods in Indonesian villages………...19
Different opinions about oil palm schemes for development……...23
EU biofuels and the case of Indonesia……….27
A global agricultural regime and promised development………...………….27
A global agricultural regime and failed development……….29
Conclusion………33
Introduction
‘…at every opportunity I told them if you depend for survival on only old rubber gardens, this doesn’t have a future. If you don’t have a job as an official or have oil palm, it is really difficult to see how you can have a future…’
Village head
(McCarthy 2010: 835)
‘…before, Paya Rumbai’s people didn’t want to work for companies because there were other choices – there were a lot of forests and fish. Now hardly any of this is left, and we have no choice but become labourers on the company plantations…’
Paya Rumbai Villager (Tiominar 2011)
The traditional Indonesian inhabitants are called ‘indigenous peoples’. Originally, indigenous communities lived in the forest depended on fishing, hunting and gathering for their survival and were dependent on natural resources for their livelihood. Besides these activities, they also used forest gardens (cleared areas for temporary cultivation by cutting and burning the vegetation) for agriculture to provide in food, firewood, timber and medicinal plants for household use. Their land use management was based on complex social structures and related to many aspects of human life, such as religion, kinship, social and economic activities. They believed that the degradation of resources could lead to serious negative consequences for their livelihoods. However, due to socio-political interventions, trading and development activities, these social structures have undergone major changes (Mulyoutami et al. 2009: 2054).
Oil palm is one of the most rapidly expanding crops in the world during the past decades. In Indonesia, cultivation of oil palm increased from 3.6 million hectares in 1961 to 7.8 million hectares of land in 2009. With growing demand for food and biofuel export, as well as the domestic demand for biodiesel from oil palm, further land use changes will occur. Present plans are to increase the production of crude
palm oil (CPO) up to 40 millions tons by 2020, in comparison to the 22 million tons of CPO produced in 2010 (Rist et al. 2010: 1010; Obidzinsky et al. 2012: 25). The Indonesian government is stimulating the growth of oil palm production by supporting large-scale plantation investments in ‘marginal land’ (Obidzinsky et al. 2012: 25). However, this land is almost never unused or unpopulated and therefore land use changes have consequences for the way of life of the villagers on former marginal lands.
The changing livelihoods of the indigenous peoples in Indonesia, as consequence of the land use changes, are linked to global environmental policies. Concerns and observations about the global interconnections between the growing population, food production, industrial production, pollution and the consumption of non-renewable natural resources became an important topic in the global environmental debate. These concerns are not new and were mentioned before in 1972, when the Club of Rome presented their report: limits to growth. They warned for a global crisis of the world’s future, and nowadays we still have to deal with the crises in climate, biodiversity, fuel, food and water (UNEP 2011: IV). Therefore the European Union’s heads of state and government discussed solutions for these crises at the Hampton Court summit in October 2005. One solution was found in using biofuels instead of fossil fuels in order to reduce the emissions of greenhouse gasses (GHG). The European Commission set up guidelines for sustainable, competitive and secure energy in their report: Strategy for Biofuels. In these directive guidelines is said that by 2020, 20 percent of the energy used and 10 percent of the transport fuel must come from renewable sources (CEC 2005: 9). To meet this target in an economic efficient and sustainable way, the European Union has to invest in crops like sugarcane, soy, rapeseed and oil palm produced in the Global South. From now on the interconnection between oil palm plantations in Indonesia and the EU biofuel policy came into being.
With their biofuel policy, the European Union (EU) has the opportunity to link the economy of degraded areas in developing countries from the Global South to the global markets (McCarthy 2010: 822). The assumption is, that this interaction is a win-win situation for both: the Global North and the Global South. There are GHG savings that save the environment, which at one side do not affect economic growth and welfare in the Global North, and at the other side give an opportunity for
development in the Global South (Borras et al. 2010: 576). The biofuel policy set up in the Global North leads to new land use changes in Indonesia, to create new opportunities and economic development (McCarthy et al. 2012: 524). But investing in biofuels also has another dimension. It will lead to new demands of arable land, to grow biofuel crops that can compete with fossil fuels on the international market. But what is the consequence of the new demand on land for the indigenous peoples? What does it mean for the most vulnerable actors who are interrelated in the land use changes? Are it the indigenous people who have to deal with the negative consequences of the new oil palm plantations, which affect the human health, destroy cultural heritage and leads to the loss of autonomy and self sufficiency?
The connection between the biofuel policies of the Global North and the livelihood of the indigenous people in the Global South has led to an international debate. To explore this debate, the focus in this paper will be on the relationship between the EU biofuel policy and the consequences of this policy for the livelihood opportunities of the indigenous peoples from Indonesia. I use this case to make a critical analysis to explain the discrepancy between the promised development of the EU biofuel policy and its outcomes, as a logical result of the underlying assumptions of the used development approach. To make a critical understanding of EU biofuel policy and the underlying interests and relations of power, there has to come more insight in the political, economical and socio-cultural dynamics in which multiple stakeholders play a part (Borras et al. 2010: 578). The case of Indonesia and the rising number of oil palm plantations, gives the opportunity to show different perspectives of the international biofuel debate, and gives the possibility to make a clear overview of the different stakeholders and opportunities that are playing a part in land use changes, in which are winners, but also losers. It exposes how these ‘winners’ and ‘losers’ are connected to assumptions, interests, power relations and development strategies. To expose all these dimensions of the biofuel debate I will answer the leading question of this research: What are the assumptions and shortcomings of the European Union biofuel policy, in regard to the promise of development in the Global South, and specifically in the case of Indonesia?
To get a better understanding in the fallacies of assumptions from the EU biofuel policy in regard to Indonesia, I will first explain the EU biofuel policy to reduce the GHG. After that, I will show the critics on former development approaches
on which EU biofuel policy is based. Then, I will explain the economic dimension of the EU biofuel policy, supported by an outline of the everyday reality for oil palm smallholders in Indonesia, and I will show the socio-cultural dimension. With this background, I will make an analysis of the interrelatedness of local and global policies of biofuel and agriculture. For this analysis, I place this new global policy in the context of the history of former, comparable development schemes. To draw conclusions, I use the inclusion versus exclusion theory of sociologist and political scientist Giddens, and Marx’ classic concept of primitive accumulation, which were both critical notions on former global development policies. In this paper, I apply these theories and concepts on the EU biofuel policy. By making an analysis of the promised, but not fully realized development, I will reveal the limits of the biofuel policy as a consequence of its assumptions and policy approach, which I will illustrate with the local outcomes of EU biofuel policy in Indonesia. It is important to analyse the outcomes of the assumptions that are made in policymaking, because it affects the livelihood of real people. In addition, the understanding of the fallacies of specific assumptions in policymaking can give new insights for future policy making.
European Union biofuel policy
The awareness of the limited available fossil fuels led to a global debate about energy use. In the European Biomass Action Plan, the importance of energy is emphasized ‘as the key in helping Europe to achieve its objectives for growth, jobs and sustainability’ (CEC 2005: 4). The limited availability of the current energy sources and the high oil prices made Europe aware of its vulnerable and dependent position. Therefore a new energy policy is important to meet the European energy demand in a competitive and sustainable way (CEC 2005: 4). The rising oil prices and the importance of transport in the economic sector, where nearly all the energy comes from oil, made biofuels a priority of Europe’s new energy policy. The European Commission set up values that by 2005, 2 percent of all transport fuel must come from renewable resources and 5,75 percent in 2010. By 2020, 10 percent of all transport fuel has to come from renewable resources. Unfortunately, biofuels are an expensive way of reducing GHG emissions (CEC 2005: 9). In order to meet the biofuel directives in a way that is competitive and sustainable,the European Union set up a biofuel policy to stimulate the use of biofuels instead of fossil fuels in which tax exemptions and biofuel obligations are set.
To be economically profitable, the prices of the biofuel must cover the production and distribution costs of the conventional transport fuels. To stimulate investing in biofuels and make them more competitive to fossil fuels, the government promotes the introduction of the market in biofuels. The large-scale commercial production in the Global South creates a low risk environment for investors. Other relevant activities for the support of the market-introduction in biofuels are the mutual benefits of international cooperation (CEC 2006: 16). With this policy the EU aims: a global use of biofuels, where a global production will lead to a competitive alternative for fossil fuels; improvement of the cost-competitiveness of biofuels by optimising the cultivation of dedicated feedstocks; the promotion of research in ‘second generation biofuels’ and the exploration of the opportunities for developing countries for sustainable biofuel production (CEC 2006: 6). By investing in the Global South for production of biofuels, the EU assumes a win-win situation for the Global North and the Global South. Together with GHG savings, the EU claims to generate economic and environmental benefits in the developing countries with its biofuel
policy, by creating jobs, reducing energy import bills, adding market infrastructure and opening up export markets, to improve trade and aid flows to foster greater international cooperation (CEC 2006: 4). The facts learn that under current conditions the only way to produce cost-competitive biofuels, is by importing biofuels from the Global South. As a result, the EU starts with the penetration of the biofuel market in the Global South (Ryan 2006: 3193).
With EU market-oriented strategy, the production of biofuels is based on capitalist, industrial, large-scale, monocrop agriculture; a strategy that is better known as a neoliberal approach. The stimulation of new markets with the EU biofuel policy and the assumption that markets drive beneficent developments for the Global North and Global South has strengthened the links between markets, environment and development (Levidow et al. 2012: 159). This development model is based on the new agriculture agenda as introduced by the World Bank. In this model, agricultural development is ‘led by private entrepreneurs in extensive value chains linking producer to consumers and including many entrepreneurial smallholders supported by their organisations and governed by market intensification, via publicly subsidised agribusiness in which the private sector drives the organisation of value chains that brings the market to smallholders and commercial farms’ (McMichael 2010: 613). With this policy there will be new rural job opportunities from the creation of new labour-intensive and high-value agriculture that will be linked to the nonfarm sector (McMichael 2010: 614). The EU not only assumes GHG savings in their own countries, but also promise development opportunities for the Global South.
Not everybody is fond of this neoliberal policy, and convinced of the assumption that this biofuel strategy actually is a win-win situation and leads to the promised development. According to critical authors, this approach is expected to produce negative social outcomes. To understand the background of the win-win assumption made in EU biofuel policy, it is important to know how the neoliberal approach in development strategies became dominant, and it is important to be aware of the critics on former neoliberal development policies to get a better understanding of the outcomes of the biofuel policy in the Global South. Before getting this understanding, I first give a historical overview of neoliberal development policies and its criticism, after that I will show the outcomes of the biofuel policy by an outline of land use changes in Indonesia.
Global developmental politics
A neoliberal policy for development
In regard to globalisation and the history of development policies in a world economy, it is not surprising that the EU has chosen for a neoliberal approach with its biofuel policy. Different eras of development characterized by specific strategies passed by. At the end of the 1970s and at the beginning of the 1980s, as a consequence of the debt-crisis, there was a global political shift towards a neoliberal remedy to reform the economy. This economic and political approach is based on the assumption that stimulation of free markets, free trade and private property rights, advances economic growth at which the human well-being will automatically follow. In this approach the state should be limited to a minimal role, and is only necessary to create and preserve an institutional framework for free markets. In this view, markets are important for the regulation of common goods like education, health care, social security, land, water and the environment. The market is seen as the economic regulator that will lead to economic growth and prosperity for all via the ‘trickle-down effect’, which assumes that development is the logical outcome of economic growth (Chant and McllWaine 2008: 39-40). Neoliberal ideas originated in the Global North, but with its development policies these ideas were rapidly expanded to the Global South. Participation of developing countries in the world market to achieve development became the leading theme in development thinking in institutions like the World Bank. In the neoliberal view, the lack of development in the Global South is due to the lack of commodification of production and market liberalisation to make profit out of production (Chant and McllWaine 2008: 39-40).
But a look into neoliberal development programmes from the past shows a ‘lost decade of development’ (Chant and McllWaine 2008: 43). According to its critics, neoliberalism is a coercive economic system in which there has to be awareness for negative outcomes, such as unemployment and job insecurity. Market liberalism will exacerbate the global inequalities and hit the developing countries, because these development strategies lack attention for the specific context and indigenous people, and it is especially due to the misinterpretation of the local circumstances that development fails. I will use three important criticisms on
neoliberal development approaches in my analysis of EU biofuel policy and its promises for development. The first critique I use is ‘adverse incorporation’, which can be understood out of the ‘exclusion/inclusion’ theory. The second critic is ‘accumulation by dispossession’, and the last important critique is the expansion of the ‘metabolic rift’.
The first critic, appointed as adverse incorporation can better be understood out of the assumptions from the exclusion/inclusion theory. The important assumption that arose from this theory, and which is adopted in the neoliberal development approach, is that chronic poverty is the cause of exclusion from the world market. So by focusing on inclusion prosperity will be reached (Fortin 2011: 27). This assumption is made in the extension of the definition from exclusion, the assumed opposite of inclusion. However critics point on the fact that this dualistic relationship between inclusion and exclusion is not so simple. There are different meanings of exclusion. The first is about the highly skewed distribution of land, where the access and ownership of land is under the power of a few large stakeholders, while a substantial amount of people cannot get any access to the land (Hall et al. 2011: 7). This definition is mostly about inequality, while the other definition is more about private property. In this second definition, exclusion is about the ownership and property rights to land, the right to exclude others of the land and the right of alienation (Hall et al. 2011: 7). To analyse the contradictions between the two definitions of exclusion, a third definition of exclusion is introduced: ‘the ways in which people are prevented from benefiting from land’ (Hall et al. 2011: 7). This last definition is more in term with adverse incorporation, which originate from the awareness that ‘processes of change are more complex than simple narratives of inclusion/exclusion suggest. Actors face complex situations where few are ever simply excluded or included. The key insight here is that poverty and disadvantage themselves often flow not from exclusion, but from inclusion on disadvantageous terms’ (McCarthy 2010: 825). Interesting in this concept is that it is ‘in contrast with a residual approach to poverty held within mainstream development modes that points to exclusion from the benefits of markets as being the cause of rural poverty’ (Fortin 2011: 6). In terms of adverse incorporation, chronic poverty is a side effect of development policies, focusing on inclusion and the ensuing prosperity through the fact that it does not oversee how poverty is created through adverse incorporation
(Fortin 2011: 27). These policies assume that incorporation to their development models logically will bring prosperity; in reality the engagement in the global market also can be disadvantageous (McCarthy 2010: 825). These disadvantageous can be explained better by the other two concepts and critiques, namely: metabolic rift and accumulation by dispossession.
The process of metabolic rift indicates the negative consequences of the integration of agricultural industry from the Global South into the global economy for the alleviation poverty. They warn for the subordination of people and nature to the markets by the expression of it in economic terms of value, when agriculture will be a tool to meet the benefits of the markets. This leads to ‘the separation of social production from its biological foundations and underlies the spatial separation of urban life from rural life as agriculture industrializes’ (McMichael 2010: 621). This is problematic because it can lead to accumulation by dispossession, the last critique on the neoliberal development approach I will use.
Accumulation by dispossession is a re-conceptualization of primitive accumulation and is expanded to agriculture. The concept primitive accumulation, as introduced by Marx refers to: ‘core elements of the process by which non-capitalist social formations are transformed into capitalist ones, in particular the separation of workers from direct access to the means of production, most notably through land enclosures that dispossess farmers and turn land into private property and capital’ (Hall et al. 2011: 13). The meaning of accumulation by dispossession is defined in the context of neoliberal globalisation and is fundamentally linked to the current mode of capitalist production. It involves ‘the exploitation of living labour and the appropriation of productive assets such as land through either force, fraud, or predation and represents the aspects of accumulation that have become internalized within neoliberal capitalism’ (Fortin 2011: 6). Critics see this as problematic when there are skewed relations of powers and different interests. These skewed relations of power and different interests often play a part in complex development situations, in which: ‘neoliberalism is giving rise to accumulation and self-interest over communal obligations and social obligations to neighbours and the wider community’ (Potter et al. 2008: 94). People and nature will be subordinated to markets and valued in economic terms, and the interests of the vulnerable will subserve the interests of the powerful.
At one side there is a strong belief in the win-win narrative of the neoliberal development approach by policymakers, at the other side there are the critical authors who warn for disadvantageous side effects of these policies. In the neoliberal narrative, the assumption is that by inclusion of developing industries into the world market there will be economic growth for both, the Global North and the Global South, and development will logically follow up on economic growth via the trickle-down effect. In their view, economic growth will be realized with the stimulation of free markets and private investors. The critical authors towards this approach warn for the negative outcomes for the most vulnerable and the further exacerbation of inequality between developed and underdeveloped countries, as result of the assumptions. In the next section I will show how these assumptions are used in former policymaking processes, and how the outcomes of these policies influenced the world agriculture.
Geopolitics of agriculture
Neoliberal development policies based on the integration of agriculture in the world economy, accomplish new relationships between land use and land property.Through economic liberalization of the agriculture, new arrangements in land use lead to displacement of small farmers into an expanding circuit of contract labouring and local and cultural provisioning will be subjected to the global market (McMichael 2005: 270). As a result, agriculture becomes more market-driven instead of farmer-driven. Through the development programmes from the Global North, the agrarian markets of the Global South will be integrated in the urban world markets. The political means of the Global North are not only about development or the subjection of agriculture to commodities, but also about artificially depressing agricultural prices through a regime of accumulation. In other words: ‘The North can foresee in its own needs by dispossession of the vulnerable, which will be a precondition of the construction of the world agriculture’ (McMichael 2005: 271-274).
World agriculture practices are not new, Sociologist Philip McMichael described the historical process of integration of the economies of Southern countries into the economies of the Northern countries before. According to McMichael the current policies of biofuel are a continuation of previous policies (White and Dasgupta 2010: 599). The first period of agrarian change in the Global South led by
development policies from the Global North, came from Britain’s model of ‘free trade imperialism’. Within this policy of economic liberalism, Britain consolidates commercial dominance in the world economy by stimulating the first capital world market with the gold standard. Cheap food could be imported from the colonies to provide in the consumption for the proletariat (McMichael 2005: 274-275). The second period is called ‘embedded liberalism’. With this approach the US managed agriculture by introducing commodity stabilization programmes and stimulated public support for capital-intensive agriculture, by striving for food surpluses. They set up a food aid regime in whichthe overproduction of agricultural commodities was offered to the Global South for reduced prices. With this aid project, in which the US model of consumption was the goal of the aid, the US creates alliances and markets for its own agribusiness (McMichael 2005: 277-278).
These development eras are associated with a ‘Global Food Regime’ in which projects of development were pursued via agricultural reforms and new geopolitical relations. ‘New social forms of labour arose as sources of economic and cultural hegemony under political legitimacy’ (McMichael 2010: 611). There are big differences in the strategies used in these eras of global development. Nonetheless both eras are characterized with progressive industrialisation and specialisation. The Global Food Regime as a concept is about the underlying political relations, and expresses forms of geopolitical ordering, shaped by accumulation and vectors of power (McMichael 2010: 277).
These periods, which are associated with the neoliberal development approach, had some limits in regard to the agrarian question: ‘What is the political-economic role of agriculture in each regime, and what residual and emergent contradictions drive the rise and decline of each food regime and its associated project of development?’ (McMichael 2010: 611). The limits in the regarding question are a result of the vision of development in which ‘the western culture and consumption pattern is a universal desire and peasants are historical remnants destined to disappear’ (McMichael 2010: 279). This narrative is a universal blueprint for (neoliberal) development, in which transactions are measured in terms of money, and a universal standardized measurement of material well-being (GNP) is the benchmark for development. The critique on this development narrative is that it subordinates the
socio-cultural and environmental dimension, and displaces biodiversity, customary forms of knowledge and moral economy (McMichael 2010: 279 – 280).
To figure out if there is also a lack of understanding with regard to the agrarian question in the case of EU biofuel policy, the question that has to be answered first is: Is the EU biofuel policy a new form of corporate agriculture driven by hegemonic policies of the Global North? After that, the promised development of the EU biofuel policy, from which is assumed that it will logically follow up on the market intensification of biofuels in the Global South, can be critically analysed.
To illustrate answers to these questions, I will use the case of Indonesia to show the different interests and vectors of power of the involved stakeholders and diverse impacts of EU policy on the local level. For a better understanding of the biofuel debate and its role in development, there is a need for understanding of agrarian relations and interests from a political-economic perspective (which economic interests play part in policymaking?) and a political-sociological perspective (what are the consequences of the policy on the livelihoods of local Indonesian people?). Before showing the different perspectives, I will first give a short oversight of the history of oil palm development schemes in Indonesia, to get a better understanding of the context and different groups that are involved in these schemes and policies. After that, I will mention the economic perspective and explain why investors and policymakers are interested in investing in Indonesia, and show the socio-cultural consequences of the EU biofuel policy for the local people in Indonesia.
The case of Indonesia
Development schemes and land use changes
In the 1980s, Indonesian state planners began to realize the developmental potential of oil palm. The era of development narratives attracted corporations to invest in the marginal areas of Indonesia (McCarthy et al. 2012a: 527- 530). The first development schemes where made under the New Order regime in the time period between 1986-1994. These schemes led to interventions of the state in the agriculture to coordinate the extension of arable land for oil palm plantations (McCarthy 2010: 828). With an agribusiness-driven process large areas were transformed into oil palm plantations via state-owned companies. These strategies of transformation are better known as ‘PIR-Trans’ or ‘Nuclues Estate Schemes’ (NES), and aim at market intensification in agriculture aided by the state (McCarthy 2010: 828; Colchester et al. 2006: 44). In these schemes the assumption was that peasant farmers strived for economic growth and that their lack in capital investments, that would enable them to intensify and modernize their production systems, restricted them in gaining this economic growth. With this new model, development for the rural poor was stimulated by the construction of new infrastructure to facilitate the access to forest and village land. The traditional agriculture for subsistence was changed into agribusiness, and customary land rights were often neglected. These NES schemes were based on mutual contracts in which the state provided access to land and credit for companies in exchange for the incorporation of the smallholders as labour workers in their schemes. This was done under a policy in which a plantation ‘core’ was considered as state land and used for oil palm plantations and a ‘plasma’ which was a small parcel of land for food crops and housing of the smallholders. The core consists of around 20 percent of the land, the other 80 percent is plasma land and divided among the transmigrants and former landowners (McCarthy 2010: 830). These schemes were funded by international donors, including the World Bank and the Asian Development Bank, and by bilateral aid programmes (McCarthy and Cramb 2008: 113).
During the 1990s there was a political shift and the government changed its policy. This new policy focussed more on the involvement of the private sector to facilitate foreign direct investment and to accelerate estate crop development. The
states’ influence decreased, and its subsidizing role to achieve oil palm development was stopped. Palm development became a subject of the markets with the new ‘Primary Cooperative Credit for Members’ (KKPA) schemes. In these schemes the smallholders would exchange land in return for the integration into the profitable agribusiness and could count on income security (McCarthy 2010: 830-831).
Nowadays, with the increasing global demands for biofuel, there is an increasing interest in oil palm and a new development model evolved, known as the ‘partnership’ model. These schemes are led by domestic and transnational corporations, that work together with local power elites, to stimulate the free-market and to expand the oil palm industry (Fortin et al. 2011: 8). The state fully withdrew and negotiations about new land transforms for oil palm expansion take place between corporations and customary landowners.
In these negotiations about land use changes for oil palm plantations and economic development, different interests, opinions and vectors of power play a part. By understanding the different perspectives, interests and vectors of power, the promises of the policy on paper, and the outcomes of it in reality can be analysed. Therefore, I will first show the economic interests of the EU and the Indonesian governments for investing in oil palm in Indonesia, after that I will show the interests of the local Indonesian’s by an outline of the socio-cultural dimension and local outcomes of the oil palm schemes.
Investing in oil palm from Indonesia
A key element of EU biofuel policy is that the production of biofuel must be cost-competitive and that the market price can compete with the market price of fossil fuels. So, to be economically profitable, the prices of the biofuels must cover the production and distribution costs of the conventional fuels (Ryan 2006: 3186). Therefore, investors are interested in biofuels made from the cheapest and most efficient oil crops, such as soy, palm or rapeseed (Greenpeace 2007: 52). The need for investments in cheap and efficient oil crops, in combination with the deficit of arable land in Europe, make that biofuels need to be imported from the Global South to provide Europe with biofuels that can compete with fossil fuels (Ryan 2006: 3187). The result is that the production of biofuels from suitable feedstocks takes place in developing countries.
From an economic perspective oil palm is, due to its properties, an important material for many purposes, and thus a good opportunity for global trade (FAO 2006: 1). The positive techno-economic properties of oil palm as commodity have led to its dominant role in the global oils and fats supply and demand. There are different advantages of oil palm. First of all, oils and fats are essential in the daily livelihood of any community, in developing countries as well as developed countries, so it is important that there is security of supply. The European countries are not self-sufficient to meet increasing domestic demand of oil, thanks to the biofuel policy of the European Union, so the oils and fats will be imported from the Global South, where the costs of palm oil production are very low and thus price competitive (Basiron, 2002: 6). The prices of oil palm from the Global South are low because of the low production costs and low labour costs of oil palm compared to other oil crops (FAO 2006: 2). In addition, there are trends of urbanisation and the increase of infrastructure that cause a shrinking availability of arable land. As palm oil has the highest value output per hectare land in comparison to other oil crops, the cultivation of oil palm is the most obvious option to meet the world’s growing oils and fats needs (Basiron 2002: 4). The industry has been successful in attracting domestic and foreign investors to expand oil palm plantations in mainly Malaysia and Indonesia, two countries with a favourable economic environment. Palm oil has a good price on the market and is thereby an important export product. The accession of the industry has lead to increased infrastructure, shipping facilities and the promotion of trade in Indonesia (FAO 2006: 2).
Initially it was thought that the production of oil palm was environmental friendly and a good alternative for fossil fuels (Basiron, 2002: 7). Policymakers eagerly embraced this idea and based their policies on this given. Nowadays there is a debate about the environmental impacts of the production of oil palm in Indonesia. In this part I only focus on the socio-cultural consequences of the EU biofuel policy in regard to the assumed development.
The advantages of the oil palm industry and the increasing demand for it, due to the biofuel subsidies and policies from the Global North, has attracted investors towards Indonesia (Colchester et al. 2006: 822). The Indonesian government is interested in the production of oil palm because of its potential to substitute fossil fuels, since also Indonesia is dependent on import of fossil fuels. The government
encourages investors to apply for land and industrial licences, and is therefore supporting the conversion of forest into plantations (Obidzinsky et al. 2012: 3). With the increasing global demand for biofuels, these land use changes are needed. The outer islands of Indonesia are good areas for the land changes. It contains a lot of uncultivated land and the population density is low. In these areas, the regime interests interface with the desire to strengthen the state’s capacity to support smallholder development schemes with improved rural development (McCarthy et al. 2012b: 557).
From a top-down economic view, these marginal lands are perfect to create land schemes that promise poverty alleviation and the creation of rural employment by the conversion of marginal land into oil palm plantations. Oil palm is a good option to meet the financial needs of the farmers, because it is lucrative whereas land is the only possession of the farmers, and oil palm generates the highest returns, and requires very low labour proceedings in comparison to other agricultural activities (Rist et al. 2010: 1014-1016). Stimulating the oil palm industry will provide new job opportunities for the farmers. It was expected that by 2010 the biofuel industry would have created 3.6 million jobs in rural areas and reduces rural poverty by 16 percent (Obidzinsky et al. 2012: 3). Unfortunately these targets have not been reached. An important component of this default was the drop in price of fossil fuels on the international market and the high prices of oil palm based biofuels. So the biofuels were uncompetitive to the fossil fuels (Obidzinsky et al. 2012: 3). This is a striking example of the dependency of national biofuel markets in Indonesia on the international markets.
From an economic perspective, EU biofuel policy is in favour of different actors that are involved in the policy. With its neoliberal development approach the EU suggests that the market spurs agricultural growth and reduces rural poverty by linking smallholders to the global market, so it would generate wealth and employment. But the economic benefits are especially for those who are in power and set up the plans for oil palm plantations, namely the Global North and the Indonesian government. But besides the economic dimension, there is, as well, a socio-cultural dimension involved within this policy. The expansion of oil palm also has implications for rural Indonesians: ‘It implies a major reallocation of land and resources, dramatic changes to vegetations and local ecosystems, substantial
investment and new infrastructures, movements of people and settlements, major transformations of local and international trade and requires the intervention of multiple government agencies’ (Colchester et al. 2006: 11). By having a look in the past and the understanding of former failed neoliberal development policies, there are a lot of NGOs and social movements sceptic about this policy and warn for ‘the creation of new social vulnerabilities, increasing pressure and competition for land and further weakening of the relative position and food security of the most vulnerable actors’ (McCarthy et al 2010: 822).
These mostly economic interests of land use changes together with the oil palm development schemes, village common and private lands will be commodificated and become mostly or completely property of the companies. This results in an irreversible shift of landownership in which contract farming is the new mode of production (Fortin et al. 2011: 8). These changes in agrarian structures, due to the processes of resettlement schemes, the emergence of cash crop commodities and alter land uses as consequence of the EU biofuel policy, also led to shifting livelihoods. In the following section I will elaborate on the changing livelihoods for Indonesian villagers, and show the consequences of the oil palm policies on the local people that are involved in the oil palm development schemes. For this illustration I use case studies that describe the local processes and outcomes of land use changes.
Changing livelihoods in Indonesian villages
‘According to one villager, there are three kinds of people in Paya Rumbai. The first group is people who think about living self-sufficiently and develop their own small-scale plantations; the second group is the people who only live for today; and the third group is people who use up whatever they have. It is this group that is the biggest, and these are the people who have sold the land they owned before.’
Paya Rumbai Villager (Tiominar 2011: 37)
After analyzing many different case studies of the everyday life in Indonesia, it seems clear that there are lots of different local groups involved in the oil palm development schemes. Dependent on their situation, there are different consequences and opportunities for each group. To get a better understanding of the different outcomes of the oil palm development schemes on the livelihood for each different local group, I will make an analysis of the villages in which oil palm plantations are entrenched. For this analysis, I will use a distinction in local groups based on the distinction that Obidzinsky et al. (2012) used. They identified stakeholder groups affected directly or indirectly by oil palm plantations:
- Employees: nucleus estate labourers or farmer workers.
- Former landowners: individual family groups whose customary land has been converted to nucleus estate and land using community members who are not customary landowners, but whose land has been converted for nucleus estate - Customary land users: community groups who have de facto rights over the
lands.
- Investing households: independent growers, who voluntarily invest in oil palm, or participating farmers who join PIR, PIR-transmigrasi, and KKPA programmes. These are the earlier discussed transmigrants form other areas.
The outcomes of the EU biofuel policy are noticeable in the provinces of West Kalimantan, Papua and West Papua. The former landowners and transmigrants from these areas are now incorporated into the oil palm development schemes, which resulted in different situations where some are still entitled in the scheme and still own some land, some sold their scheme entitlements and others became cheap contract labourers (McCarthy 2010: 826). In Papua, for example, the government stimulated the conversion to oil palm plantations for biofuel production to generate pro-poor rural development (Obidzinsky et al. 2012: 6). In these provinces some significant economic gains from oil palm plantations were found. Unfortunately these economic advantages are not available for everyone (Obidzinsky et al. 2012: 7).
The former landowners and customary land users, whom I called the indigenous people before, are most negatively affected by oil palm plantation (Obidzinsky et al. 2012: 9). They had to change their way of living and could not live
from forest products anymore, because of the deforestation that was needed for new oil palm plantations. In West Kalimantan, a private company acquired land from local communities; for whom they promised to establish plasma plantations, roads and infrastructure like schools in return. The companies would provide jobs, offer compensation for the land they acquired and pay for land clearing. After several years the promises were only partially fulfilled (Obidzinsky et al. 2012: 10). It mostly are the former landowners and customary land users (the indigenous peoples), who lost their land to the company, who experienced negative livelihood outcomes from the plantations. A reason for the negative outcomes for the former landowners has to do with the exclusion of this group to ownership of the oil palm plantations, due to limited skills and aversion of giving up their traditional ways of life (Obidzinsky et al. 2012: 10). As a consequence of the lack of safety nets and access to credit for these groups, farmers sold their land in periods of stress and economic shocks. These farmers had their own rubber plantations, but were affected by the collapse in rubber prices in 2008. In these times the land prices were low and companies offered large sums of money for land. The farmers, who experienced indigence and were in need for money, sold their land and became landless. They sold their lands out of fear for being trapped in debts and their lack of knowledge about oil palm processing and the value of future harvests. These farmers ended up in insecure livelihoods and find themselves as poorly paid day labourers dependent on the oil palm company for planting material, fertilizers and marketing networks or they are forced to activities such as illegal logging and mining gravel in local rivers (McCarthy 2010: 843 and McCarthy et al. 2012b: 559).
The ones that are more positive about the plantations are the new oil palm growers. This group is made up primarily out of migrants, who moved in the 1970s to these areas under the transmigration program (PIR-trans and NES schemes) of the government (Obidzinsky et al. 2012: 11). Their success was based on their knowledge of oil palm techniques, which they gained with the participation in the NES schemes and their ability to use their landholdings to get loans at the bank to expand their oil palm production. These transmigrants together with local elites had better access to knowledge and capital then the indigenous people had (McCarthy et al. 2012b: 559). But these transmigrants are dependent on the oil palm corporations as well. The corporations assigned them land in return for incorporation into the oil palm
production. These farmers are dependent on the global market price to sell their oil palm, and they have to repay the corporations for the cleared land that is given to them. They get their land rights if they repay the corporation; this led to the situation that the transmigrants live under the power of the oil palm corporations. Even though these transmigrants live under the control of corporations, most respondents report positive changes following land transfers, such as regular income flows and improved facilities, such as schools, health clinics or religious centres. In these same districts the indigenous people experience negative consequences and a decline in their livelihoods, because of limited livelihood activities and opportunities for hunting, fishing and collecting forest resources (Obidzinsky et al. 2012: 10-11).
The integration of the market in Indonesia and the expanding oil palm industry, has led to a situation in which most of the still expanding oil palm land is now under private sector holdings. Lots of these private sector schemes are funded through international investments or local subsidiaries from foreign corporations (Colchester et al. 2006: 22). The indigenous people are contracted by companies to plant oil palm on the lands, which were ones their own lands, and have to supply their products to the company: ‘they are tied into monopsonistic relations with the companies they supply’ (Colchester et al. 2006: 38 and McCarthy and Cramb 2009: 116). They are dependent on the company because of the costly oil palm seedlings supplied by the company. They need fertilizers and pesticides, for which they need loans that are supplied by the oil palm companies. There is a need for expensive palm oil processing mills and the oil palm prices depend on the international market. This led to the situation in which smallholders experience technical constraints and are in debt with the company (Colchester et al. 2006: 39).
The different dimensions of the EU biofuel policy, the land use changes and the oil palm development schemes in Indonesia show different stakeholders involved in the development schemes. The understanding of the local outcomes of EU biofuel policy, together with the understanding of the economic interests of the policymakers, can give more insight in the relation between the different interests, the vectors of power of each stakeholder and the outcomes of EU biofuel policy in reality. I will illustrate these differences by quotes from different stakeholders involved in the oil palm development schemes. By having insight in these differences, the following question can be answered: Will history repeat, and the promised development from
the EU biofuel policy fail, just like the neoliberal development policies from ‘the lost decade of development’?
Different opinions about oil palm schemes for development
In the Sanggau district in West Kalimantan there are plans to make this district ‘the centre of agribusiness and agro-industry’ (Colchester et al. 2006: 94). For this reason the government facilitates domestic and foreign investment through faster, cheaper and easier systems. Since customary land rights are not formally recognized, state institutions are weaker and legal land transactions are poorly implemented (McCarthy et al. 2012a: 525). Land is often appointed as ‘marginal’, this means that the land is uncultivated, resource-poor and set away as available for appropriation. But there are different interpretations about marginal land. From an economic perspective, land is marginal when the cost-benefit analysis is negative, this is mostly when the land is of poor quality, remote, arid, infertile or has no infrastructure. For administrators land is marginal if it is temporarily unused (McCarthy et al. 2012a: 525). But for local people it is their home and it determines their way of life. The often insecure and contested land rights in these areas make it is hard to protect the land rights of the indigenous peoples: ‘As the state policies will facilitate the allocation of lands to plantations to support development, private companies are stimulated to carry on buying up the marginal land’ (McCarthy et al. 2012a: 526-527).
‘We don’t have anything else to bargain with investors except land. We can’t argue for infrastructure, a good and educated workforce, a steady supply of electricity, quick access to overseas markets-we have none of these things. So the only thing we have currently is land to offer investors, and it is the only thing they are interested in.’
Sanggau government official (McCarthy et al. 2012b: 561)
‘We believe that the oil palm estate has a good multiplier effect. The financial benefits from oil palm estates are by farmers on the estates, through wages for employment, as well as through the opportunities for the community to conduct business around the estate. These can
contribute significantly to the development of the area. We are aware that the development of oil palm plantations can also impose high social and financial costs. Nonetheless, we still feel we are more fortunate compared with other districts [without oil palm]. Due to the lack of financial support for [alternative] agricultural activities, particularly from the commercial banks, it is really hard to develop the agriculture sector in Sanggau District. Therefore, the most feasible activities that can be conducted in the Sanggau District are plantation activities especially oil palm estates.’
Head of Plantation Office in Sanggau District (Colchester et al. 2006: 122)
Other opinions about oil palm development schemes are noticeable among the indigenous people who made their living from agriculture with subsistence crops, coffee and other fruit trees. They used a customary system to govern land use and ownership, which is based on trust and not on formal agreements. When the company entered, it was in need for land for planting oil palm and came as an interruption of the culture of the indigenous, and it are these peoples who had to change their way of life and customary systems of land management (Colchester et al. 2006: 95 - 98).
‘People complain that individual profit seeking has replaced traditions of communality, solidarity and the customary, more collective mode of life. This change to a more individualized and capitalistic ways of life, is leading to everything being measured in economic terms.’
Villager from the Sanggau district
(Colchester et al. 2006: 100)
These quotes from different groups, involved in the oil palm development schemes, reveal the different interests that are prevalent in the biofuel debate. The first two quotes show how the government sees oil palm investments as a good deal for entrance in the global market, and how the plantation owners see opportunities in these economic approach towards development. While in the last quote, it becomes
clear that the indigenous people feel threatened by inclusion in the oil palm development schemes, and disregard the economic profit seeking.
The involvement of different stakeholders in the process of oil palm plantations led to situations of conflict between communities and companies. Several factors play a role in the conflicts about oil palm development, namely: clarity of the contracts signed with companies, weak local governance, failure of companies to meet either contractual or perceived obligations, lack of clarity over land tenure prior to plantation development and changing land values (Rist et al. 2010: 1017). These factors play important roles in the misinterpreting of situations and contracts. Farmers rarely actually read or understand the contract they signed, and companies and local governments made promises that they did not fulfil (Rist et al. 2010: 1017-1018).
In most cases this led to conflict over land between the former landowners and the companies. The communities feel that they have been cheated over their lands and made their decisions on false promises and feel denied in decision-making (Colchester et al. 2006: 15). Even though collaboration is a key point in the ‘partnership models’, during the negotiations the indigenous peoples are not involved in the planning of the proposed oil palm estates. The local government official just informs the communities of the plans for the oil palm plantations and the need for their lands for development. The indigenous peoples have no option to accept or reject these plans, and are forced to accept the development of oil palm estates (McCarthy and Cramb 2009: 116). With the development promises, it seems a good deal and the community members are just told: ‘Do not be confused, just sign the papers!’ (Colchester et al. 2006: 171). For the indigenous peoples it feels like their land is expropriated by the companies. These feelings are a consequence of the unclear land tenures and different interpretations of marginal land and the different vectors of power that are present in the negotiations about the conversion of marginal lands into oil palm plantations (McCarthy and Cramb 2009: 116). As there are different interests, the interests of the powerful stakeholders suppress the interests of the less powerful. The oil palm companies and the Indonesian and international governments have a stronger position compared to the indigenous peoples in the negotiations. This is a consequence of the absence of clear and legal frameworks for negotiating the agreements, and the absence of effective overview from district governments (McCarthy and Cramb 2009: 117).
As learned from the cases, we can conclude that the presence of many different stakeholders in the negotiations and processes about land use changes in Indonesia leads to conflict about land. There are international and national governments, private corporations, transmigrants and indigenous people involved and they all have their own interests and views upon land use. Policymakers see development benefits in the transfer of marginal land into oil palm plantations, while the indigenous people feel threatened in their livelihoods. The different vectors of power, interests and opinions in the negotiations about land use changes, leads to a situation in which are winners, but also many losers. The winners are the policymakers, and subordinate the indigenous people to their policy. These conflicts have led to an international debate about interests and assumptions in policymaking on paper, and the outcomes of it in reality. This debate brings us back to the Global North and EU biofuel policy that stimulates the conversion of land into oil palm plantations in Indonesia, for local development, but even more for their own benefits.
EU Biofuels and the case of Indonesia
A global agricultural regime and promised development
It is important to understand the relationship between EU biofuel policy with its interests, assumptions and expectations on paper, and the outcomes in reality. In the oil palm case of Indonesia there are some noticeable differences between the promised development on paper, and the negative consequences for some of the local Indonesians in reality. The insights from the different cases about the outcomes of the land use changes for different local groups in Indonesia, the insights in the different interests that play a part in policymaking, and the insights in the vectors of power that play a part in the negotiations about land use changes, give enough information to answer the former asked question: ‘Will EU biofuel policy be a new era of corporate agriculture driven by hegemonic policies of the Global North? If this question is answered, a critical analysis of assumptions and shortcomings in policymaking can be made, with regard to the promised development from EU biofuel policy.
To analyse if EU biofuel policy is a new form of the former discussed ‘Global Food Regime’ driven by hegemonic policies of the EU, and to make a critical analysis of the assumptions in, and outcomes of, EU biofuel policy and its investments in oil palm, one of the most important and obvious observation is that there is a shifted institutional setting from livelihood centred use of land, to the use of land for a global market. This shift has been strengthened through the liberalisation and privatisation of agriculture due to EU biofuel politics and its neoliberal development paradigm. While this development paradigm should offer new market and livelihood opportunities, this situation led to ‘the dispossession of small producers to enhance market outlets under a political agreement in converting agriculture to a world industry for profit’ (McMichael 2010: 612-613).
The biofuels integrate the agricultural industry from the Global South into the global economy, by land use changes for oil palm production. The investment in biofuel production of the European Union in Indonesia is not necessarily positive for alleviating poverty, as shown in the cases and ‘corporate interests integrate more and more with the local agriculture of the world’s poorest places’ (Dauvergne and Neville 2009: 1097-1100). With its strategies, the EU biofuel policy is reinforcing the metabolic rift and subordinates the indigenous peoples and agriculture to the carbon
market (McMichael 2010: 626). Substantive agriculture will not be the main livelihood of people in rural areas anymore, because of its, in economic tersm, negative cost-benefit ratio. The former landowners become wage labourers for the market, as oil palm is needed to foresee in the global biofuel demand in a lucrative way. The policy of CO2 reduction characterizes the biofuels as ‘agricultural feedstocks’ that are subjected to ‘burgeoning demand’ (McMichael 2010: 614).
With its biofuel policy and GHG savings, the Northern hegemonies use marginal land to start oil palm plantations for the production of biodiesel. With this policy, the EU has the illusion to bring development in these areas for the indigenous people. A strong macro-policy narrative has legitimized large-scale land acquisition and state involvement in which large corporations take over large areas for agricultural commodity production for export and for carbon sequestration, while displacing peasantries in the local domain. These marginal lands are not governed under laws, and have the status of public or state lands. Since these lands are not yet private property, and policymakers see this lands in terms of absences: ‘the lack of productive land uses, forms of modernized agriculture and a disciplined labour force’ (McCarthy and Cramb 2008: 113), these lands are seen as an opportunity for the production of biofuel feedstocks (White and Dasgupta 2010: 600). The different visions upon marginal land leads to the situation in which these lands are, from a political-economic viewpoint, available for production and seen as ‘blank pages’ on which development agendas might be written by policymakers and corporate actors that favour plantation development for economic and political purposes (McCarthy and Cramb 2008: 113). However, the case of Indonesia shows that the expansion of oil palm plantations happens at the expense of the territories of displaced communities. The biofuels will lead to new forms of rural dispossession through the market and the dependence on agribusiness imperialism. The incorporation of natural resources into the market reveals the shortcomings of the development paradigm and shows a new form of corporate agricultural regime, which is comparable to the former historical global agriculture regimes that were subordinated to the markets and under control of Northern hegemonies.
In Indonesia the process of change of the significance of rural land in making livelihood is remarkable, nowadays land is seen as a productive asset and measured in terms of market value. This commodification of agriculture is constructed in complex
situations through social, political and economic relations. These relations link local processes of land use changes to global biofuel policies, in which there is an increasing asymmetry in vectors of power in the negotiations about land use in Indonesia. As a cause of different interests and vectors of power, the relationship between politics and economic processes determine the way the biofuel intervention will be realized in the case of Indonesia. In EU biofuel policy the economic advantages are preponderate in policymaking, in disregard of the socio-cultural dimension, which leads to the further expansion of large-scale oil palm plantations and the further industrialisation of agriculture. This has led to an international debate about biofuels and development between the proponents who believe in the win-win assumption made in EU biofuel policy, and its opponents who warn for deeper social disparity as consequence of this win-win narrative. To expose the outcomes of this assumption in reality, I make a critical analysis of the expected, but not fully realized, development.
A global agricultural regime and failed development
‘Despite the potent forces pushing real, large-scale transformations, we still find a significant gap between projects, plans and booster rhetoric and actual practices on the ground’
(McCarhty et al. 2012a: 534).
Important is to understand the reason for this gap between plans and implementation, from which the following question arises: what is the reason for the failure of these projects? After concluding EU biofuel policy is comparable to former Global Food Regimes, I will compare this new policy with the weaknesses of the former global regimes, with regard to development. For this analysis I will focus on the lack of development in the former narratives, which were a consequence of the neglect of the interests in the agrarian dimension and the assumption that development can be measured in universal and standardized terms of material well-being, in which the vision of development was that: ‘the western culture and consumption pattern is a universal desire and peasants are historical remnants destined to disappear’ (McMichael 2010: 279). To make a better understanding of the lagging of the
promised development in the biofuel policy, I will use the former discussed concepts: adverse incorporation and accumulation by dispossession.
The lacking trickle-down effect was a main aspect of the failed neoliberal development projects in the 1980s, where land use practices and land rights of local communities are destroyed by capitalism, modernity and the state (Hall et al. 2011: 6). Where a trickle-down effect was expected, an effect of social and economic disparity became visible. Also in EU biofuel policy, a trickle-down effect is expected. However, the case of Indonesia shows that the trickle-down effect is lagging behind for the most vulnerable. This brings us to the criticism appointed as accumulation by dispossession. It involves: ‘the exploitation of living labour and the appropriation of productive assets such as land through either force, fraud, or predation and represents the aspects of accumulation that have become internalized within neoliberal capitalism’ (Fortin 2011: 6). This concept originated as critique on former neoliberal development strategies and is again applicable on this new corporate driven, industrial agriculture for biofuel production of the European Union. For the European Union it is profitable to invest in oil palm and to expand the global market to foresee in their biofuel demand lucratively. This resulted in a new form of imperialism, in which the Global South is subordinated to the production of biofuels, so the lifestyles of the Global North can be sustained. Our demands for energy security will be met by further marginalization of the indigenous peoples from the Global South. This security of energy, which can be obtained with the biofuel policy, is important for the accumulation of profits that benefits the Global North. These advantages from EU biofuel policy for the Global North, weight stronger than the negative consequences for the indigenous peoples in Indonesia. Besides that, there also is the group of the transmigrants from the former NES-schemes who are able to benefit from the oil palm plantations. These facts lead to a situation in which the neoliberal land policies and development approaches are facilitated, notwithstanding the negative consequences of poverty and the disappearing of socio-cultural values that are interrelated to it. The agricultural intensification and integration to the global markets is in favour of some, but is generated in perpetuating poverty for others. It is a process of the creation of wealth at the expense of poverty (McCarthy 2010: 825). Taken this notion into account, it can be stated that the oil palm expansion in Indonesia is linked to the
