Investment in large farms goes against historical trends
In 2008, I co-directed the World Development Report on Agriculture for Development, which strongly argued for a development strategy based on small and medium sized family farms—smallholders for short. Since then, I have been following the surge in investor interest in large farms and plantations. Although much of the attention to ‘land grabs’ is focused on Africa, there has been a parallel rise of investor interest in tropical commodities in Asia. Clearly, the type of agrarian structure employed to produce tropical exports affects many dimensions of land use, such as ownership inequality, overlapping land rights and conflicts, and changes in landscapes. In particular, smallholders are more likely to produce tree crops in agroforestry systems (as in rubber) or in landscape mosaics (as in oil palm) that conserve more of the natural vegetation and associated environmental services than large specialized plantations.
The current rise in large-scale plantations in Asia goes against historical trends. Although the production of tropical commodities was initiated on large plantations in the colonial period, over the course of the 20th century, most transitioned to smallholder systems. A classic example is rubber, which was established in Malaysia and elsewhere in Southeast Asia in the early 1900s through large plantations, but by the end of the century, about 90% of rubber agroforestry systems were operated by smallholders. Yet the boom in rubber prices from 2001–2012, has caused a surge in investment in large rubber plantations in Myanmar, Laos, Cambodia, and to some extent Indonesia.
Attention should be turned to smallholders to promote diverse and sustainable landscapes
In the early years of establishing commodity production, economic fundamentals related to processing methods (e.g. the need for quick processing after harvest in large mills) and pioneering costs and risks (e.g. specialized infrastructure and the search for appropriate technology) sometimes favored large-scale plantations. However, policy biases and development paradigms often strongly favored plantations and discriminated against smallholders in the colonial states. Similarly today, the unlevel playing field of policy incentives explains much of the resurgence of plantations in frontier regions of Asia today. Some policies favor large plantations over smallholders, especially large land concessions carved out of forestland, while other policies neglect basic support to smallholders such as research, extension, and financial services. Thailand is an example of a country that has built its agricultural success on smallholders enabling it to become a global leader in perennial crops such as rubber, sugarcane, cassava, and oil palm. However, crossing the border from Thailand to Myanmar, Laos, or Cambodia, you see a very different agrarian structure emerging not because of agro-climatic conditions but because of policies that favor large investors and large plantations.
The fastest growing crop in the region today is oil palm. Now that the basic technology and infrastructure is in place, smallholder oil palm is on the rise. However, smallholder productivity could be greatly enhanced with stronger support policies. For example, an export or ex-mill levy could be applied to palm oil to support research, extension, replanting costs, and farmer organizations, as was done for rubber in Thailand and tea in Sri Lanka. An even better approach would be the management of such a levy by strong farmer organizations, as was done for coffee in Colombia and tea in Kenya. A stronger focus on smallholder-based approaches to oil palm would spread the huge benefits being generated by the industry and, at the same time, lead to a more diverse and sustainable landscape.