Low Emissions Oil Palm Development

For decades, the economy of the Berau district, East Kalimantan, was driven by the mining sector. When mining activities started slowing down five years ago, however, the province’s income gradually declined, shocking the regional budget into deficit in 2015. Agriculture and plantations, on the other hand, have been steadily increasing their contribution to the local economy, reaching a 51% share in 2015.

One of the key commodities that has played an important role in transforming Berau’s economy has been oil palm. Even amidst the moratorium on new oil palm concessions that limits expansion, the Berau district government has made oil palm development as a priority. Therefore, there is a need for a new strategy to achieve economic growth through sustainable palm oil, including to develop the downstream industry within the sector in order to avoid repeating the pattern of dependency on resource extraction.

CPI is partnering with The Nature Conservancy (TNC) and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) on a low-emission oil palm development program in Berau, East Kalimantan from 2015 to 2019. This partnership works closely with East Kalimantan Plantation Agency, Regional Climate Change Council (DDPI), and other relevant stakeholders at the national, provincial, and district levels. The program aims to support the government of East Kalimantan to achieve regional economic prosperity through optimal utilization of limited land and sustainable land resource management. This project is funded by the German Federal Ministry for the Environment (BMU).
CPI’s work in Berau focuses on four main areas:

Fiscal and Finance

Finance and investment are key to spur productivity, provide income, and improve livelihoods.

  • Analysis of oil palm value chain and potential schemes for increasing farmers’ access to finance, and alternative livelihood opportunities for smallholders to buffer low-season risk
  • Identify fiscal support for East Kalimantan’s sustainable agriculture programs and downstreaming efforts

Policy

Policy options exist to incentivize better land resources management and create enabling conditions for mid-to-downstream industries.

  • Identify oil palm actors across the supply chain
  • Identify opportunities to add more value downstream

Institutions

Institutional innovations exist to support organized and sustainable oil palm development.

  • Identify optimal smallholder organization business models through cost-benefit analysis
  • Identify potential role of BUMD/BUMDes in developing oil palm in the region

Beyond Oil Palm

Other economic opportunities exists to stretch palm oil’s utility as a catalyst for wider sectoral growth.

  • Identify opportunities for economic activity on the sidelines of palm oil
  • Analysis of opportunities in palm-oil related energy, agriculture, farming/fisheries, and creative economy.