Oil Palm : The Locomotive in Rural-Urban Economy

The development of oil palm plantations in remote areas across 200 districts triggers the development of rural and urban economic sectors. Developing oil palm plantations is one strategy to develop rural and urban economic sector.

Similar to a train where the locomotive pulls a number of long carriages behind it, economy works the same way. In the world of economy there are major economic sectors that have strong links with other sectors. They play the role of the locomotive in world of economy, so that if they develop, they will trigger the development of other economic sectors simultaneously.

Oil palm plantations with an area of ​​11.6 million hectares developed in remote rural areas across 200 districts in 23 provinces in Indonesia are the locomotive of the rural economy. The development of oil palm plantations in remote areas attracts the development of other economic sectors that produce goods or services needed in the economic activities surrounding oil palm plantations. These sectors include the sectors which provide fertilizer, pesticides, plantation equipment and machinery, building materials and property, office equipment, transportation services, financial service, and many others. Government service sector is also one of them.

The economic pull by oil palm plantations as an economic locomotive does not stop only at these sectors. As a result of the development of oil palm plantations and these sectors, it certainly creates income for the workforce involved in it. The increase in labor income escalates both food and non-food consumptions resulting in the development of economic sectors involved. This can be easily seen in oil palm plantation centers. The development of oil palm plantations is also followed by the development of the food and agriculture sector, livestock, fisheries, food and grocery stores, clothing stores, IT stalls, motorbike sellers, electronic devices, and others.

Some of these sectors are rural economic sectors (such as food crops, livestock, fisheries, food stalls, etc.) and some are urban economic sectors (such as finance, transportation services, fertilizers, pesticides, basic food, clothing, motorcycle, etc.). The development of oil palm plantations expands rural and urban economic sectors.

The volume of the economy from rural and urban sectors is quite large. In 2016, the value of transactions between oil palm-communities and the rural sector reached 92 trillion Rupiah per year, whereas in urban areas it reached 336 trillion Rupiah per year. This data is based on the workforce directly involved in oil palm plantations and the garden suppliers alone. This reflects how the developments of oil palm plantations affecting the development of urban economies.

The increase in exports of palm oil to the world market will drive palm oil production from oil palm plantations in rural areas over 200 districts. The increase in palm oil production then moves the rural and urban economic sectors. In other words, the development of oil palm plantations stimulates rural and urban economies simultaneously.

Overall, the benefits of developing oil palm plantations not only can be seen in the increasing palm oil production and exports, but also significantly in the economic benefits created in rural and urban economic sectors.

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