Oil Palm Plantations Make No Contribution To The Economy | Myth & Facts 3-01

FACT – An economic activity is said to be exclusive if it only brings limited benefits to the actors and does not affect the public. To prove whether the palm oil industry is exclusive or inclusive, it can be seen through some multiplier effect indicators, such as on output, income, value added and labor. The data presented on the following input-output table about Indonesia’s economy in 2008 shows the multiplier index of oil palm plantations (Table 3.1).

The multiplier indexes of output, income, labor and added 30 value of oil palm plantations are each greater than one. This means the multiplier impact of oil palm plantations is greater than the average multiplier impact of all national economic sectors. It also means that the development of oil palm plantations triggered by increased consumption, investment and exports will create greater benefits in terms of output, income, added value and employment creation, not only on oil palm plantations but also in the economy as a whole.

The sectors of the national economy that get benefits (output, income, added value and employment creation) from the growth of oil palm plantations are presented in Table 3.2. If an increase in palm oil exports directly leads to increased revenues for oil palm plantations, it also increases the income through indirect effects and induced consumption effects of some sectors of the national economy, especially in 10 major economic sectors. Similarly, through the same mechanism, the creation of new employment opportunities does not only occur in oil palm plantations, but also in those sectors of the national economy.

Therefore, oil palm plantations are not exclusive economic activities but inclusive ones. The growth of oil palm plantations will either directly or indirectly create “economic cakes” for some sectors of the national economy.

Source: Myth & Facts 3-01 | Featured image via mysabah.com