This is the view from the highway as you travel from Kuala Lumpur International Airport into the city of Kuala Lumpur.
It is about 20km from the airport to the government city of Putrajaya, and everywhere you look is oil palm (This is not an exaggeration. For an overhead view, click here and zoom in). For a tourist, these oil palm plantations are often one of the first views of Malaysia, even before landing in its modern airport of glass and steel, and one could be forgiven for imagining these palms to be natural growths and a native of Malaysia. In fact Malaysia’s oil palm is a native of Guinea, Africa, and was introduced to the British colony of Malaya in 1910 by Scotsman William Sime and Englishman Henry Darby. Today, Sime Darby, the conglomerate product of this partnership, boasts of being the world’s largest plantations company, with a total of about 525,000 hectares of oil palm in Malaysia and Indonesia [1].
All in all, palm oil plantations in Malaysia made up 4.5 million hectares of land (13.7% of Malaysia’s land area of 33 million hectares [2]) and generated 15 million tonnes of palm oil in 2008 [3]. In January 2010 palm oil exports were the second largest export product from Malaysia and were worth around GBP £793 million or 8% of total exports from Malaysia in that month [4].
Palm oil obviously makes up an important part of the Malaysian economy, but at what cost? The clearing of land for palm plantations was responsible for the loss of roughly 758,000 hectares of rainforest between 1990 and 2002, or 47% of oil palm plantations planted in that period [5]. Planning permission for palm oil plantations has mysteriously been given to convert thousands of hectares of forest previously classified as ‘permanent reserved forest’, including 6000 hectares of High Conservation Value forest; home to rhinos, tigers, honey bears, gibbons, tapirs, panthers, and ramin trees (an endangered tree species), and 3,899 hectares of forest in Terengganu State, a forest isolated from the main range and containing endemic species. Terengganu may sound familiar as it is famous for its big mammals including tigers, elephants and our large cousins, seladang [5].
Seladang - Picture Courtesy of asianimages.wordpress.com
Surely, forests in their natural state as habitats to these and other species, and serving several ecosystem services, have economic values, even if not in cash terms. Estimating what this economic value can be is what we environmental economists do, amongst other things.
An example of such work is a study on the Leuser National Park in Sumatra, Indonesia (a very similar habitat to rainforest in Malaysia, due to its geographical proximity) which attempted to discover what we call the “total economic value” of the park for different uses of the land, including conservation and deforestation for agriculture.
Calculation of total economic value of the environment is based on individuals’ preferences for the environment and takes account of:
- its direct use value such as the revenue from palm oil, but also as in the Leuser National Park example water supply, timber, non-timber forest resources and fisheries. Some of these uses are marketed like palm oil and timber, while others do not have markets,
- its indirect use value from ecosystem services such as flood and drought prevention, fire prevention, carbon sequestration. Most of these services are not traded in markets ,
- option values for possible future use of the rainforest for medicinal cures or possible future tourism, and
- values people may have for the environment even if they do not use it directly or indirectly (the so called ‘non-use’ value).
The Leuser National Park study found that if the park was converted to produce goods that are marketed, the accumulated Total Economic Value over 30 years would add up to US$ 7 billion. However, if the park was conserved in its natural state, the accumulated Total Economic Value over 30 years would be US$9.5 billion. This clearly shows that conservation has more value than conversion – and this is despite the fact that under the conservation scenario it is not possible to estimate many of the benefits in monetary terms [6].
On a purely economic basis, Malaysia could be losing a lot more than they are currently earning from palm oil. The problem in reality is that even if we can have similar studies in Malaysia (and there are some), demonstrating the value of forest conservation is not enough, if marketed goods remain the only way to ‘capture’ the economic value of forests (or turn them into cash), incentive to conserve will be minimal.
Some policies are developed precisely to make conservation pay for itself. For example, REDD and REDD plus which allow for international payments for carbon sequestration and biodiversity protection, can facilitate this in the very near future [7].
A compromise between oil palm and standing forest can also be reached. A study from the University of East Anglia showed that consumers are willing to pay more for palm oil from an environmentally sustainable plantation. The combination of conservation and these premium prices could create a greater total economic value, including greater value for oil palm plantation owners [8].
Although this has been a very long post and I have in no way shape or form managed a complete coverage of all the factors, I should wrap up by saying that current attempts at creating sustainable oil palm plantations should be applauded.
Some of the oil palm industry in Malaysia is trying its best to be sustainable, with at least half of new oil palm plantations being planted on old plantation land between 1990 and 2002, and the largest companies being members of the Round Table on Sustainable Oil Palm. If only Indonesia could follow in its footsteps!
[2] Asia-Pacific in Figures 2006, UNESCAP
[3] Department of Statistics Malaysia – Production of Major Commodities
[6] Economic valuation of the Leuser National Park on Sumatra, Indonesia
[7] Koh, Lian Pin; Butler, Rhett A. Can REDD make natural forests competitive with oil palm?
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