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Custom and Capital: A Financial Appraisal of Alternative Arrangements for Large-Scale Oil Palm Development on Customary Land in Sarawak, Malaysia

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  • Cramb, Rob A.
  • Ferraro, Deanna

Abstract

The oil palm boom in Southeast Asia has increased demand for institutional arrangements facilitating large-scale plantation development on customary lands. A financial model of an oil palm plantation in Sarawak, Malaysia, is used to explore six project types, including managed smallholders, three different joint-venture arrangements, renting, and (for comparison) a private plantation on state land. Benefit-cost analysis is used as basis for project, private (shareholder), and stakeholder analyses. There is a trade-off between the efficiency and equity outcomes of the alternative arrangements. While joint venture projects provide higher aggregate net benefits, managed smallholder projects provide more benefits to landholders. When the actual performance of the alternative schemes is taken into account, the managed smallholder approach is superior on both efficiency and equity grounds. The joint venture approach could be improved by combining a fixed rent with a share of dividends to reduce the income risk faced by landholders. In all cases, improved management is needed for the schemes to achieve their developmental potential.

Suggested Citation

  • Cramb, Rob A. & Ferraro, Deanna, 2010. "Custom and Capital: A Financial Appraisal of Alternative Arrangements for Large-Scale Oil Palm Development on Customary Land in Sarawak, Malaysia," 2010 Conference (54th), February 10-12, 2010, Adelaide, Australia 59072, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare10:59072
    DOI: 10.22004/ag.econ.59072
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    References listed on IDEAS

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    1. Fadzilah Majid Cooke, 2002. "Vulnerability, Control and Oil Palm in Sarawak: Globalization and a New Era?," Development and Change, International Institute of Social Studies, vol. 33(2), pages 189-211, April.
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    Cited by:

    1. McCarthy, John F. & Gillespie, Piers & Zen, Zahari, 2012. "Swimming Upstream: Local Indonesian Production Networks in “Globalized” Palm Oil Production," World Development, Elsevier, vol. 40(3), pages 555-569.
    2. Euler, Michael & Hoffmann, Munir P. & Fathoni, Zakky & Schwarze, Stefan, 2016. "Exploring yield gaps in smallholder oil palm production systems in eastern Sumatra, Indonesia," Agricultural Systems, Elsevier, vol. 146(C), pages 111-119.

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