Technical formulation for estimating the economic loss impact of the smallholder oil palm replanting program in Indonesia

Abstract

In Indonesia, the smallholder oil palm plantations constitute 42% of the national oil palm plantation area. Therefore, the success of  increasing the productivity of smallholder palm oil will have a major impact on the sustainability of the national palm oil industry.  Replanting aging oil palm trees is a priority in Indonesia. Old trees become less productive, and to maintain or even increase yields to  meet the demand for palm oil without increasing land used, replanting is necessary. For large agribusinesses, replanting is done  regularly, however, for smallholders, this can be a challenge for various reasons mainly related to loss of income, lack of labor, and  uncertainty about the process. It is important to determine the impact of the smallholder palm oil replanting program (SPR Program) in  stages as a material for consideration in formulating more anticipatory and responsive policies so that they are right on target.The  indicator of temporary loss of income is generated through a gradual calculation at three economic levels, namely household (micro), sectoral (agriculture) and regional (macro) economy. The calculated indicator value is in the form of a relative value that can be used as a  reference in decision making, using the approach of the proportion of affected households and the level of temporary income loss, but in  general the two approaches have a unidirectional relationship. The method developed in stages in this paper is recommended to be used  in making decisions in government intervention policies in the context of handling the negative impact of the SPR Program as well  as programming and community empowerment activities. A priority policy to prepare households and regions to face temporary loss of  income sources due to the SPR. Empowerment policies that contain a priority scale both from the target group, implementation time, and  period as well as the form of activities and programs according to their potential and needs.