Palm oil is the world's most traded vegetable oil: in August 2012, the share of palm oil (including kernel oil) in world supply was 37.6%. Palm oil is extracted from the fruit of the oil palm tree (Elaeisguineensis); the main products are crude palm oil (CPO) and palm kernel oil (PKO). In terms of land use, the oil palm tree is more efficient than any other oil crop, and in economic terms palm oil is highly competitive. The value chain of palm oil and its derivatives has a strong degree of vertical integration, and its production costs are relatively low compared to other vegetable oils. It is therefore seen as one of the cheapest and most attractive vegetable oils traded on the world market.
There is a growing demand from the commercial food and oleo-chemical industries that use oil palm in processed foods, cosmetics, soaps, pharmaceuticals, industrial and agro-chemical products, and as a feedstock for bio-diesel. The growing worldwide interest in bio-diesel as an alternative to fossil fuel is expected to lead to the further expansion oil palm plantation. Tilman and colleagues assert that this might lead to a food -- energy -- environment 'trilemma'. Even though oil palm trees are not a problem (they are 'green'), the rapid expansion of oil palm plantations across Southeast Asia, and particularly Indonesia and Ma? laysia, could cause the destruction of rainforests, as well as a lot of social problems, including food security challenges. There are concerns that oil palm expansion will lead to the loss of biodiversity and the conversion of forest area and the aggravation of social conflicts.
With these controversies in mind, this chapter provides an overview of the pros and cons of oil palm development in Indonesia, paying attention to changing government policies and focusing on the implications of increasing oil palm investments for migration, settlement/ resettlement and local economic development.