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Palmed Off: Incentive Problems with Joint-Venture Schemes for Oil Palm Development on Customary Land


  • Cramb, R.A.


The oil palm boom has prompted governments and plantation companies to find ways to incorporate customary landholders in large-scale plantation developments. This paper examines the joint-venture model that has been widely promoted in Sarawak, Malaysia. Principal–agent theory is used to analyze the structural relations between the actors in joint-venture projects—the landholders, the government agency that acts as their trustee, and the private investor. The analysis shows that unequal access to information and influence has compromised the stated objectives of the joint-venture schemes, leaving customary landholders vulnerable to significant exploitation and losses. Thus there has been a systematic failure to achieve the anticipated developmental outcomes.

Suggested Citation

  • Cramb, R.A., 2013. "Palmed Off: Incentive Problems with Joint-Venture Schemes for Oil Palm Development on Customary Land," World Development, Elsevier, vol. 43(C), pages 84-99.
  • Handle: RePEc:eee:wdevel:v:43:y:2013:i:c:p:84-99
    DOI: 10.1016/j.worlddev.2012.10.015

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    References listed on IDEAS

    1. Klaus Deininger & Derek Byerlee & Jonathan Lindsay & Andrew Norton & Harris Selod & Mercedes Stickler, 2011. "Rising Global Interest in Farmland : Can it Yield Sustainable and Equitable Benefits?," World Bank Publications, The World Bank, number 2263.
    2. Stiglitz, Joseph E., 1988. "Economic organization, information, and development," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 5, pages 93-160 Elsevier.
    3. Klaus Deininger, 2003. "Land Policies for Growth and Poverty Reduction," World Bank Publications, The World Bank, number 15125.
    4. 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.
    5. Fold, Niels, 2000. "Oiling the Palms: Restructuring of Settlement Schemes in Malaysia and the New International Trade Regulations," World Development, Elsevier, vol. 28(3), pages 473-486, March.
    6. Zahari Zen & Colin Barlow & Ria Gondowarsito, 2005. "Oil Palm in Indonesian Socio-Economic Improvement A Review of Options," Departmental Working Papers 2005-11, The Australian National University, Arndt-Corden Department of Economics.
    7. Stiglitz, Joseph E., 1986. "The new development economics," World Development, Elsevier, vol. 14(2), pages 257-265, February.
    8. Cramb, R. A. & Wills, I. R., 1990. "The role of traditional institutions in rural development: Community-based land tenure and government land policy in Sarawak, Malaysia," World Development, Elsevier, vol. 18(3), pages 347-360, March.
    9. Rosalind Levacic, 2009. "Teacher Incentives and Performance: An Application of Principal-Agent Theory," Oxford Development Studies, Taylor & Francis Journals, vol. 37(1), pages 33-46.
    10. R. A. Cramb, 2011. "Re-Inventing Dualism: Policy Narratives and Modes of Oil Palm Expansion in Sarawak, Malaysia," Journal of Development Studies, Taylor & Francis Journals, vol. 47(2), pages 274-293.
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    Cited by:

    1. Schwarze, Stefan & Euler, Michael & Gatto, Marcel & Hein, J. & Hettig, Elisabeth & Holtkamp, Anna Mareike & Izhar, Lutfi & Kunz, Y. & Lay, J. & Merten, J. & Moser, S. & Mußhoff, O. & Otten, Fenna & Qa, 2015. "Rubber vs. oil palm: an analysis of factors influencing smallholders' crop choice in Jambi, Indonesia," EFForTS Discussion Paper Series 11, University of Goettingen, Collaborative Research Centre 990 "EFForTS, Ecological and Socioeconomic Functions of Tropical Lowland Rainforest Transformation Systems (Sumatra, Indonesia)".
    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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