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Curtin University
Humanities: Research and Graduate Studies

IMPROVING THE PRODUCTIVITY OF THE SMALLHOLDER OIL PALM SECTOR IN PAPUA NEW GUINEA: A STUDY OF THE BIO-PHYSICAL AND SOCIO-ECONOMIC INTERACTIONS


Smallholder oil palm fruit is weighed before being transported to the mill for processing.

The oil palm industry is one of the more successful rural developments in Papua New Guinea. A major issue confronting the viability of the industry is that smallholders control 45% of the planted area under oil palm but account for only 25% of the production.

In 2000/2001 Gina Koczberski and George Curry, in collaboration with the ANU and the PNG Oil Palm Research Association (OPRA) undertook an ACIAR (Australian Centre for International Agricultural Research) funded research project to study the biophysical and socioeconomic interactions influencing smallholder productivity. The Oil Palm Industry Corporation � the body that offers agricultural extension to the smallholders � also took great interest in and supported the research.

The project surveyed growers in two of the largest and most established oil palm project areas at Hoskins (West New Britain Province) and Popondetta (Oro Province). In both places the corporations (New Britain Palm Oil Ltd and Higaturu Oil Palm) offered cooperation with the project. At Hoskins, New Britain Palm Oil Ltd has already acted upon initial findings of the research project.

The research employed semi-structured interviews, case-studies, questionnaire surveys, workshops, focus groups, analysis of industry smallholder databases and the review of relevant reports and published literature. The main initial effort was focused upon in-depth qualitative interviews with 21 smallholder families. Repeated visits were made to each family over an 8 week period. Based upon this qualitative data a more extensive survey of 100 growers, block conditions and soil quality was designed to be conducted in each of the two project areas. The multi-method approach provided for a comprehensive understanding of the factors influencing smallholder production from the perspective of smallholders themselves.

Key stakeholder groups that participated in the research included:

Most data were collected from August 2000 to the end of January 2001. The study identified the following factors affecting smallholder productivity:

1. Oil Palm is one of many economic activities smallholders pursue

2. Population growth is creating economic and social pressures on the LSSs

4. Land disputes and tenure insecurity undermining smallholder commitment to oil palm and the long-term viability of the industry

Mama Lus Frut Scheme


Women collect the "loose fruit" dislodged from the main bunches during harvesting

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Poor accessibility, especially during the wet season, means that trucks are sometimes unable to reach smallholder blocks to collect the harvested fruit

Copies of the full report are available for $20. Details below:

Koczberski, G., Curry, G.N. and Gibson, K. (2001). Improving Productivity of the Smallholder Oil Palm Sector in Papua New Guinea: a Socio-economic Study of the Hoskins and Popondetta Schemes. Research School of Pacific and Asian Studies, Australian National University, Canberra. ISBN 0-9580165-0-X. 260pp.

Order from:
Pandanus Books
Research School of Pacific and Asian Studies
The Australian National University
Canberra
ACT 0200

Tel: +61 2 6125 3269; Fax: +61 2 6125 9975
Email: Thelma.sims@anu.edu.au

MONITORING INTERVENTIONS DERIVING FROM THE STUDY ON IMPROVING PRODUCTIVITY IN THE SMALLHOLDER OIL PALM SECTOR OF PAPUA NEW GUINEA.

The ACIAR-funded smallholder study examining socio-economic factors affecting productivity among LSS and VOP smallholders ended in December 2001. The project received strong support from the oil palm companies, Oil Palm Industry Corporation (OPIC) and the smallholders. The results of the study have been disseminated at several seminars/workshops both in PNG and in Australia and a report from the study was completed in January 2002.

At the beginning of 2002 ACIAR extended funding of the smallholder project for a further 12 months to help implement some of the recommendations of the study. It is a collaborative project between Curtin University (Gina Koczberski and George Curry) the ANU and the PNG Oil Palm Research Association (OPRA).

The project has the following objectives:

Alternative Payment Systems for Smallholders � the Mobile Card
A major finding of the research to date is that incomplete harvesting is a primary determinant of low yields from smallholdings. The research traced underharvesting, among other factors, to both labour shortages and under-utilisation of labour.

Labour shortages can be ongoing as in the case of young families, elderly settlers without sons living on the block, or blockowners with multiple blocks or off-block employment. Labour shortages can also be temporary, the result of illness, or, as in the case of coastal village oil palm growers, a seasonal abundance of fish or better returns on other cash crops.

However, underharvesting also results from complex social forces and structural barriers that prevent labour from being deployed and adequately remunerated. For example, because of incomplete, deferred or non-payment of family labour (e.g., to brothers, wives, children), or of hired labour (e.g., youth groups), the supply of labour for oil palm harvesting and block maintenance is constrained as people withdraw their labour. This results in a great deal of under-utilised labour, particularly among the under-employed youth on the more heavily populated blocks on the LSS schemes. Thus, one solution to underharvesting is to find a way to tap this under-utilised labour on the smallholder blocks.

Our research in 2000-01 into the reasons for the success of the Mama Lus Frut Scheme provided ideas about how an alternative smallholder payment system should be designed to encourage full harvesting. The study identified the following three key principles underpinning the success of the Lus Frut Mama Card. These included:

Direct payment for labour by the company. Low rates of loose fruit collection by women prior to the mama card were the result of limited remuneration for their labour and lack of payment certainty for their labour spent in loose fruit collection. Women relied on their husbands to give them some of the oil palm income on paydays, but the social pressures on men to redistribute this income and engage in beer drinking meant that wives, who received less priority in this redistribution than other claimants, often missed out or received an amount less than the value of their labour contribution.

The under-utilisation of women's labour was correctly identified by OPIC as resulting from an ineffective payment mechanism for their labour. OPIC saw that this problem could be overcome by a payment system that guaranteed direct payment to women. By paying women directly for loose fruit collection, NBPOL removed much of the uncertainty surrounding payment to women when they relied on their husbands to remunerate them for their labour. Because loose fruit collection is a separate process from harvesting fresh fruit bunches (FFB) and loose fruit can be easily distinguished from FFB, it was relatively easy for the loose fruit to be stacked and weighed separately from the FFB, thereby making it possible to guarantee payments to women. Thus, a "labour contract" between the company and women was able to fulfilled.

The separate payment card for women also means that it is easier for men to remunerate women's labour for other forms of work such as block maintenance (and also to contribute to the upkeep of the household). Payment for work in fruit by placing FFB on the mama net means that men are able to circumvent the often considerable social pressures on them to redistribute income when this income is in the form of cash. In this way, payment in fruit rather than cash is more likely to lead to the "labour contract" being fulfilled between husband and wife.

Cashless transactions are attractive forms of payment for blockholders. For the reasons outlined above, many blockowners are reluctant or unable to pay cash for labour. Yet, most men are willing to place FFB bunches on the mama card which they see as their financial contribution to the upkeep of the household. Prior to the introduction of the mama card many men were reluctant or unable to hand over a share of the oil palm income to their wives and this was the cause of many domestic disputes. It is much easier for men to give FFB to their wives rather than cash because competing claims on fruit are virtually absent. So, the cashless transaction of placing FFB on the mama card circumvents the excessive demands on cash, and women are effectively guaranteed a contribution to the household from their husbands.

Allowed for flexible labour practices and new payment arrangements to emerge . Because of the absence of loan deductions on the mama card when it was initially introduced, it has enabled more flexible labour practices and payment systems to emerge both within and between blocks. Some examples of the labour flexibility afforded by the mama card are lending the card to children to pay school fees, to visitors for the purchase of travel tickets home, or to help relatives out of financial difficulties or to fulfil customary obligations. It has also become an important avenue for women to organise their own cash and labour transactions. This not only raises women's social status, but increases oil palm productivity as inter-block co-operation in oil palm production rises. The enhanced labour flexibility provided by the scheme has increased smallholders' motivation to produce oil palm as they are now more able to meet their socio-economic needs and obligations.

Also, the existence of two payment cards on the one block has opened up multiple ways of allocating oil palm income within and between households. This has enabled smallholders to tailor their labour and income strategies to their own particular situations on the blocks. This is especially useful to smallholders given the complexity and diversity of family situations and needs now characterising Hoskins LSS. In essence, the mama card has broadened the range of options and choices open to families and has given them greater flexibility in how work and income are allocated, usually in ways that have tended to raise smallholder productivity.

In reviewing the reasons for the success of the Mama Card we identified how a new payment system that guarantees payment for labour and allows for greater labour and payment flexibility might work. The idea here was to trial an initiative to facilitate across-block labour flexibility to encourage more complete harvesting and thus raise productivity. The trial entails a payment card that differs from the existing mama and papa cards in that it is not tied to a particular block. The new card is mobile in the sense that it can be used to pay labour for harvesting and block maintenance on any LSS or VOP block which requests labour. The mobile card has the potential to facilitate labour mobility across blocks and sections, and even subdivisions.

Payment for the labour of the mobile card worker/team is in oil palm fruit with a specified proportion of the harvested fruit being used to remunerate the mobile cardholder. In this way the reluctance or inability of blockholders to pay cash for labour is circumvented, and the work team is guaranteed timely payment. Also, because the transaction is cashless, this labour arrangement will probably be much more attractive to blockholders because they are not required to outlay any cash in advance, and nor is it necessary for them to retain a portion of their monthly oil palm cheque for the payment of hired labour. Thus the probability of the blockholder not complying with the labour contract is greatly reduced.

For blockholders experiencing labour shortages and village smallholders with a range of cash crops and subsistence options, the mobile card offers a way to significantly increase income without additional inputs of their own labour. Also, for smallholders experiencing temporary disruptions to oil palm production through illness or cultural proscriptions against working during mourning periods, for example, the mobile card offers a means to maintain productivity and income.

In terms of a target group for this intervention, it is important that potential participants in the scheme have the labour capacity to commit fully to the scheme. The Mama Lus Fruit Scheme was successful because a previously unremunerated group of people (women) were brought into oil palm production. Another group currently being identified to participate in the trial is the large number of under-employed young men, many of whom are the sons of settlers living on highly populated blocks.

Introduction and Monitoring of the Mobile Card
In May 2002 Gina Koczberski (GK) and George Curry (GC) began fieldwork (for three months) in PNG and worked in collaboration with OPRA and OPIC (Hoskins) in the design and establishment of the mobile card trial. The trial commenced in mid July. ACIAR project funds have been used to employ an OPIC officer to assist with the introduction of the mobile card and the identification of potential mobile cardholders and blockholders interested in employing mobile card labourers. The officer is assisting with the negotiation of contracts between blockowners and mobile card holders, and is responsible for monitoring the use of the card and dealing with problems that arise.

As OPIC and the company prepared the groundwork for the introduction of the mobile card trial in July, GK and GC together with OPRA and OPIC have been involved in:

Following the introduction of the mobile card by OPIC, GK and GC and OPRA will begin monitoring and evaluating the impacts of the card. Data will be collected over a six-month period and will focus on the impacts (both positive and negative) of the mobile card on mobile cardholders' blocks and on blocks where the Mobile Card is used. Surveys will focus on production, farming practices, inter and intra household income distribution and labour arrangements, debt repayments and family welfare.

Mini Estates
A further objective of the project extension is to make a preliminary exploration of land tenure issues associated with mini-estates and the potential risks of this intervention. In all oil palm schemes, except Bialla, the oil palm companies are establishing mini-estates to expand oil palm production.
Mini-estates are arranged under lease, lease-back regulations in which customary landowning groups register as Incorporated Land Groups (ILGs). The ILG then leases the designated land to the State which then leases it back to the ILG (the lease is registered under the Land Registration Act). The ILG then sub-leases the registered land parcel to the company on a 20 or 40 year lease. The company manages the estate, and the land owning group receives annual land rental fees and royalty payments. At Hoskins, ILGs are also issued with company shares. The shift to mini-estate production is driven largely by the restrictions on private companies obtaining alienated state land for plantation development and in part by the interest of local landowners to enter agricultural sub-lease agreements with the oil palm companies.

Mini-estates are a recent phenomenon and undergoing rapid expansion, yet the long-term socio-economic impacts are little understood and difficult to predict. There are also potential investment risks for the companies given the long lease periods and the experiences of other industries of lease, lease-back models of resource development (e.g., mining and forestry). Of particular concern for landowners is how to ensure that the benefits from mini-estate development flow to all members of the community, especially women and groups holding secondary rights in the resource. GK and GC together with OPRA staff have begun examining the various mini-estate models at each project site, and interviewing the companies and landowners to explore land tenure issues, second-generation issues, economic benefits for communities, and the social impacts of mini-estates. To date, work has been carried out at Hoskins and Popondetta and visits to Milne Bay and New Ireland are scheduled for November 2002.

Bialla Oil Palm Scheme
In May 2002 GK and GC together with OPRA and OPIC began work on a smallholder study in the Bialla scheme. The Bialla scheme was omitted from the earlier ACIAR study in 2000-1 because company support for the study was not guaranteed. With a change of management in mid 2001, Hargy Oil Palm Company requested the team to include Bialla in the smallholder study.

Data were collected over a five week period in May/June, 2002. The study began with a workshop with OPIC officers to identify the main constraints on smallholder productivity and the primary factors explaining variations in productivity between growers. Several research questions emerged from the OPIC workshop which helped shape research design and data collection. The research among smallholders employed semi-structured interviews, case studies, questionnaire surveys and community meetings. The main areas of data collection were:

While in Bialla the research team also looked at the Community Oil Palm Estate Developments (COPED). COPED is an alternative model to the mini-estate. In the COPED model the community develops and manages their own oil palm estate (ranging in size from 20 ha to over 600 ha) with technical and credit support provided by the company. The community estates provide an interesting contrast to the lease, lease-back model and a comparison will be made in terms of the financial returns and risks for landowners and companies.