The Institutional Environment of the Palm Oil Value Chain and Its Impact on Community Development in Kapuas Hulu, Indonesia

Abstract

The aim of this study is to present the multi-scalar institutional environment that has emerged around the palm oil value chain, and to analyze how this influences community development outcomes in the Kapuas Hulu district of West Kalimantan. A common narrative presented by many environmental organizations, and indeed often reinforced in the academic literature, is one where local communities actively resist the expansion of oil palm plantations but are ultimately powerless to halt it. This narrative tends to depend on, and reinforces, a portrait of traditional communities as being dependent on subsistence food provisioning and natural resources for their livelihoods, thus making them particularly sensitive to the widespread environmental changes caused by this highly transformative—in a landscape sense— type of commercial agriculture. This research draws upon mixed method data collection techniques, including eight months of participant observation fieldwork across three villages in 2016 and 2017, group discussions, household surveys, and semi-structured interviews. Conceptually, we develop an understanding of the institutional environment as applied within global value chain theory, which we present as a complex amalgam of social structures from within the value chain (especially governance by lead firms), those external to it (including formal state institutions and NGOs), and the changing customary institutions within production landscapes. The ability of local communities to participate in the construction of this broader institutional environment, and to benefit from it, is of critical importance when assessing the impact of incorporation within the palm oil economy. This study thus helps present a more nuanced analysis of community engagement with palm oil and the processes driving contemporary agrarian change.