Oil Palm and Regional Economic

A study by PASPI (2014) shows that the growth of crude palm oil production has a positive and significant impact on the growth of regional gross domestic product (RGDP) in palm oil production centers. Regional economic growth is even very responsive to an increase in palm oil production. The increase in the production of palm oil has led to the greater growth in the regional economy than the CPO production (Figure 1).


Figure 1: Impact of CPO production on regional gross domestic product (PASPI, 2014)

Regions with oil palm plantations book higher economic growth than regions without oil palm plantations. Consequently, there is a sharp difference in the growth of RGDP between the palm oil centers and the non-palm oil centers (Figure 2).





Figure 2: Comparison of non-oil and gas regional gross domestic product (RGDP) in oil palm centers and in non-oil palm centers (PASPI, 2014)

Thus, the notion that oil palm plantations do not contribute to regional economic growth contravenes the existing facts. In contrast, the growth of oil palm plantations has significantly increased the economic growth of the oil palm centers at a higher rate compared to non-oil palm centers.

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