1. Introduction: What Is Economic Inclusivity?
Inclusive Economic development is a fundamental concept aimed at providing equal economic access, opportunities, and benefits to all segments of society. In simple terms, it’s the idea that economic development must be fair and sustainable, ensuring everyone has a chance to participate and prosper. The goal is to create a system where economic benefits are not confined to a select few but are widely distributed from the local to the global level.
This concept aligns with the core principle of the United Nations’ Sustainable Development Goals (SDGs): “no one left behind.” To understand how this principle works in the real world, Indonesia’s palm oil industry presents a highly relevant and insightful case study.
2. Direct Impact: Palm Oil’s Benefits at the Local and Village Level
At the most fundamental level—in the villages—the palm oil industry is a direct source of primary income for millions of people, both as smallholder farmers and as employees in plantation companies. For farmers, cultivating oil palms offers a higher and more stable income compared to other agricultural commodities, enabling them to meet basic family needs such as food, education, and healthcare.
Farmer Income Comparison (per Hectare per Year)
The data reveals a dramatic difference: in 2021, the income of a palm oil farmer (IDR 25.66 million per hectare) was more than five times that of a non-palm oil farmer (IDR 4.39 million per hectare), underscoring palm oil’s role as a pillar of economic stability for rural families.
Furthermore, the presence of palm oil plantations creates a multiplier effect that drives other economic sectors in the village. As plantations grow, Micro, Small, and Medium Enterprises (MSMEs) involved in trade, production input supply, and transportation services also flourish. This boosts the village economy as a whole, even for those not directly employed in the palm oil sector. Ultimately, the industry helps transform marginalized villages into new economic hubs.
3. Expanding to the Region: Palm Oil as a Regional Economic Driver
At the regional level, the palm oil industry stimulates the economy through two main channels. First, through backward linkages, it creates demand for upstream industries such as producers of fertilizers, superior seeds, and agricultural equipment. Second, through forward linkages, it supplies raw materials for downstream industries like cooking oil factories, margarine, soap, and even biodiesel. These linkages build a robust regional ecosystem, a key component of an inclusive economic system.
GRDP Growth in Palm Oil vs. Non-Palm Oil Districts (in Billion IDR)
The Gross Regional Domestic Product (GRDP) data shows a massive economic impact. Between 2010 and 2021, the GRDP in palm oil-centric districts increased by IDR 14,057 billion. This figure far surpasses the growth in non-palm oil districts, which only grew by IDR 3,952 billion during the same period. This proves that the palm oil industry not only drives growth but also creates a substantially larger absolute economic value for a region.
4. Supporting the Nation: Palm Oil’s Contribution to the National Economy
On the national stage, oil palm plantations and their processing industries are among the main contributors to Indonesia’s Gross Domestic Product (GDP). Data from 2000 to 2021 shows extraordinary growth in output value (total production) and value-added (contribution to GDP).
5. Global Benefits: When the World Enjoys the Palm Oil “Economic Pie”
The “economic pie” created by the palm oil industry is not only enjoyed by Indonesia as the producer. Importing countries also experience significant income generation through the import and downstream processing of palm oil products. The scale of this income varies, depending on the volume of palm oil imported by each country.
Percentage of Income Generated in Major Palm Oil Importing Countries
This demonstrates that the economic benefits of palm oil are global and are felt widely across the international supply chain. Seeing how these benefits spread from an Indonesian village to the global market, we can draw a comprehensive conclusion about its central role in achieving an equitable economy.
6. Conclusion: Palm Oil as a Model for Inclusive Economic Growth
The analysis above clearly shows how the palm oil industry creates an inclusive economic ‘pie’ that is enjoyed equitably. From smallholder farmers in remote villages, to regional economies, the national GDP, and even communities in importing nations, everyone feels the positive impact. This data effectively refutes the narrative that the profits from the palm oil industry are exclusively enjoyed by its business players.
In reality, this industry acts as a driver that creates opportunities and income for various levels of society across different parts of the world. Thus, the palm oil industry stands as a concrete example of how an economic sector can contribute to achieving the main principle of the SDGs: ensuring “no one is left behind.”