Despite intense pressure to meet regulations and competition from its neighbours, Malaysia maintains its position as the world's second-largest palm oil producer.
Smallholder farmers form a critical backbone in Malaysia's palm oil industry.
According to the Malaysian Palm Oil Board, in 2023, smallholder farmers dominated 26.4 percent of the total area, a slight increase from 26.2 percent in 2022.
There are more than 300,000 oil palm smallholder farmers in Malaysia. These farmers typically manage less than 40 hectares of plantation and have shown remarkable resilience towards sustainability challenges.
Unlike farms owned by large corporations or the state, smallholder farmers have the opportunity to independently manage, harvest and sell their fresh fruit bunches.
Despite contributing significantly to the palm oil sector, smallholders often operate on the margins.
Research has revealed these farmers often face hurdles such as limited access to finance, technology and markets. Government policies, while aiming to support smallholders, often fall short of addressing their specific needs.
For smallholder farmers, social wellbeing is not just a concept, but a crucial aspect of their lives. It's the ability to lift themselves out of poverty and maintain a stable, long-term source of income.
Their adaptation and survival in the face of social challenges are not just critical factors in shaping the industry's landscape, but also in protecting their wellbeing.
Various factors impact the social wellbeing of oil palm smallholder farmers, including limited access to resources and technology, lack of capital, fluctuating oil palm prices, and small limited plantation areas.
They often rely on assistance such as seeds, fertilisers and agricultural techniques, and require continuous training in good farm management practices to combat environmental challenges such as climate change and disease.
International trade requirements such as the European Deforestation Regulation have posed extra challenges for smallholder farmers. They must fully comply with the traceability requirements which include high compliance costs, administrative burdens and reduced market access.
To navigate globalisation and digitisation challenges, Malaysia needs stronger policies and strategies to revolutionise the industry. It is crucial to prioritise the specific needs of oil palm smallholders to facilitate their successful certification attainment under the Malaysian Sustainable Palm Oil Certification Scheme.
A sustainable future
There have been several successful interventions which have improved the palm oil industry's sustainable development while positively impacting smallholders' livelihoods.
These include tailored support and guidance, the adaptation to mechanisation and technology transfer to enhance efficiency and productivity and the availability of affordable and accessible credit options.
For example, the implementation of the Tunjuk Ajar Nasihat Sawit programme has significantly strengthened the relationship between agencies and smallholder farmers.
The programme is designed to assist farmers in achieving and maintaining the Malaysian Sustainable Palm Oil certification, a crucial step towards sustainability.
Successful farmers who acquire Malaysian Sustainable Palm Oil certification through this programme can benefit from financial assistance, technical support, continuous guidance, safer practices, guaranteed rights, increased income and generated profit.
Extension services from government agencies which offer technical expertise, guidance on selecting suitable alternative crops and support transitioning to diversified agricultural practices also play an important role.
For instance, farmers can benefit from programmes such as the Crop Integration Scheme and the Livestock Integration Scheme, which aim to promote sustainable and diversified farming practices within the oil palm industry.
Mechanisation has significantly advanced agricultural practices by employing specialised machinery for fertilising, spraying, pruning and harvesting in higher yields. However, one of the primary obstacles is the cost of acquiring the necessary agricultural mechanisation and technology.
The Internet-of-Things can efficiently provide real-time data for monitoring environmental parameters such as temperature, soil moisture and precipitation.
Precision farming, a modern approach to agriculture, involves the use of drones equipped with cameras and sensors and digital mapping. This can help farmers monitor and manage their farming practices more effectively, including detecting diseases and implementing short and long-term solutions.
A local plantation company, SD Guthrie invested nearly 100 million Malaysian ringgit ($US21.3 million) into developing robots and machines to take over non-harvesting jobs such as spraying pesticide or monitoring fruit and yields. However, these robots are not fully autonomous and skilled workers are still needed to control and operate the machines.
Mobile applications could enable farmers to easily access and monitor market information, weather forecasts, and the latest updates related to oil palm plantations.
It is essential to introduce additional incentives to change the mindset of oil palm smallholder farmers to become adept technopreneurs who are constantly attuned to the rapid digital advancements in improving their sustainability performance.
As the leading oil palm producer, Indonesia has been using digitisation toolkits to encourage and promote the implementation of sustainable farming practices. This strategy focuses on deforestation-free methods and entails cooperation between large corporations, smallholders and NGOs.
Malaysia has recently introduced more incentives for farmers to enhance production. These incentives are not just financial aids; they recognise farmers' vital role in the palm oil industry.
Studies have shown that the economic incentives offered by affiliated parties depend on the location of oil palm plantations and the attitudes of smallholder farmers towards credit loan offers. Establishing a cooperative can benefit both parties by financing, training, and expanding the market for fresh fruit bunches.
The palm oil sector has the potential to become a promising income source, attracting the younger generation's interest and reducing dependency on foreign labour.
By establishing training centres and institutions and creating opportunities for the younger generation to continue their education, the industry can significantly enhance its appeal and ensure reasonable returns based on their skills or academic qualifications, fostering a sense of growth and renewal.
The palm oil industry offers extensive employment opportunities across the entire production chain, creating an inclusive environment beyond plantation work. Diverse roles are available, including positions in research, farm management, safety and health and downstream activities.
These opportunities are open to women, young people and local communities, providing a broad spectrum of potential employment options within the industry. As 2030 approaches, Malaysia needs a dynamic framework to manage social challenges for oil palm smallholder farmers.
Siti Dina Razman Pahri is a senior lecturer of the Environmental Management Program at the Center for Research in Development, Social and Environment, Faculty of Social Sciences and Humanities, Universiti Kebangsaan Malaysia. Her research interests include environmental life cycle assessment, social life cycle assessment, and environmental management.
