Dependency Theory:

Indonesian Palm Oil Export and

2015 Southeast Asian Smog Crisis
Final assignment for
2017 Political Economy of Development class

Lecturer:
Dr. Maharani Hapsari

Written by:
Ignatius Adiasa Giovanco
15/384141/SP/26853

DEPARTEMENT OF INTERNATIONAL RELATIONS

FACULTY OF SOCIAL AND POLITICAL SCIENCE
UNIVERSITAS GADJAH MADA
YOGYAKARTA
2017
Introduction

As of today, countries in the world can be generally divided into two development
category, developed and developing states. The relation between the developed and the
developing states is usually asymmetrical, where the developing country is relying on the
developed country’s help in terms of technology and investment to achieve development. In
turn, the developing country gave their resource to the developed country. Dependency theory
basically talks about this relation. The theory concludes that the resources flowing from the
dependent/periphery developing states to the dominant/core states is more beneficial to the
latter at the expense of the former. In other words, the way the poor/developing countries are
integrated to the world system makes is disadvantageous to them, yet prosper the developed
countries.

Palm oil has been one of the biggest export commodity for Indonesia. In 2015,
Indonesia’s palm oil export is worth US$12,3 billion dollars and accounts for about 7.63% of
the country’s total export.1 Although the palm oil export seems profitable for Indonesian
economy, environment impact of the industry is quite large. Palm tree Palm tree plantation
companies in Indonesia is infamous for using fire as a tool to open a new land to expand their
palm tree plantation. In 2015, this method of opening new land cause a smog crisis in Southeast
Asia. This essay is intended to explain why Indonesian palm tree industries is using slash-and-
burn method to open new lands by using dependency theory and surplus value theory.

2015 Southeast Asian Smog Crisis

The 2015 Southeast Asian smog crisis is one of the biggest air pollution crisis ever
happened in Southeast Asia. The smog is affecting millions of people across approximately
seven countries in Southeast Asia from June to October 2015. 2 In Indonesia alone, more than 28
million people is affected and more than 136,000 people reports respiratory illness related to the
smog.3 Indonesian government estimated that the smog crisis would need at least US$35 billion
to mitigate.4 Independent source from Center for International Forestry Research (CIFOR)

1 Indonesia. (n.d.). Retrieved May 29, 2017, from http://atlas.media.mit.edu/en/profile/country/idn/

2Cochrane, J. (2015, October 28). Rain in Indonesia Dampens Forest Fires That Spread Toxic Haze. Retrieved
May 29, 2017, from https://www.nytimes.com/2015/10/29/world/asia/indonesia-forest-fire-toxic-haze.html?_r=0
3Chan, F. (2016, January 19). $47b? Indonesia counts costs of haze. Retrieved May 29, 2017, from http://
www.straitstimes.com/asia/47b-indonesia-counts-costs-of-haze
4 Ibid.

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estimate the total damage from Indonesia, Singapore, and Malaysia cost approximately 200
trillion rupiah combined.5 The crisis cause some school closure in some countries and affects
four million students in Malaysia alone.6

The smog crisis is caused by forest fire that happens in Sumatra and Kalimantan, both in
Indonesia. Approximately two million hectare of peatlands and forest is burning. The fire itself
is caused by palm tree plantation companies and farmer that using the illegal slash-and-burn
practice as a method to clear and open some new land for their palm tree plantation. There are
some reasons on why many palm tree plantation generally prefer burning method than any other
conventional method to clear new land. The first reason is that burning method requires less
time when compared to the conventional method. Based from a report from Indonesian
Ministry of Agriculture, conventional land-clearing method require six different steps to
complete which is time and resource consuming. On the other hand, burning method obviously
only requires one step and the land-clearing process can be done in a matter of days or weeks,
depending on size of the land.

The second and most important reason is that the burning method requires significantly
less cost compared to any other conventional method. If a company or farmer wants to open a
land using conventional methods, they must first ask for a forest utilization permission from the
government, a process that consumes lots of time and money for bribery. If they choose to use
the burning method, they only need to prepare some used tires, kerosine, matches, and a group
of people to execute the burning. Based on Indonesian Police findings, conventional land-
clearing method cost at least 3,4 million rupiah for each hectare of former forest land, and 5
million rupiah for land that still counts as a forest. On the contrary, burning method cost the
plantation company less than a million rupiah to clear approximately ten hectare of forest land.7
This significant different in cost is why most palm tree plantation company and farmer choose
burning the land as their land-clearing method, instead of using the conventional non-burning
method.

5 Lestari, S. (2015, October 26). Dampak kabut asap diperkirakan capai Rp 200 trilliun. Retrieved May 29, 2017,
from http://www.bbc.com/indonesia/berita_indonesia/2015/10/151026_indonesia_kabutasap
6 H. (2016, January 19). Schools closed in Malaysia as haze reaches hazardous levels. Retrieved May 29, 2017,
from http://www.straitstimes.com/asia/se-asia/schools-closed-in-malaysia-as-haze-reaches-hazardous-levels
7Wahyuni, T. (2015, July 29). BNPB Bongkar Motif dan Modus Kebakaran Hutan dan Lahan. Retrieved May 29,
2017, from http://www.cnnindonesia.com/nasional/20150729182700-20-68935/bnpb-bongkar-motif-dan-modus-
kebakaran-hutan-dan-lahan/

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 While burning method itself is bad for the environment since it burns the forest, using
burning as a land-clearing method in Sumatra and Kalimantan is much much worse because of
the structure of land where the burning is occurred mostly consist of peatlands. Peatlands is a
wood-like organic layer that has imperfectly decomposed. This layer is commonly several
meters thick.8 In Sumatra, the peatlands layer usually has been dried by creating lots of canals
for the water to stream. Because the peatlands has been dried, burning them is pretty much the
same as burning a land full of haystack. Of course, when you burn a haystack, lots of smoke
will rise from it. The smoke then scattered by the strong wind. Because of the characteristic of
the burned material, fire mitigation becomes tricky, since the fire is constantly spreading with
help from the wind. Sometimes, the fire spot itself is located below the surface.

Indonesian authorities is trying to find the suspects on the smog crisis. Some plantation
companies has been accused as the one who uses the illegal burning method. Interestingly,
some of the companies being accused is originated from China and Malaysia.9 Those
companies has been fined by the cops. Some other companies owned by Singaporean is also
under investigation.

Analysis

The main reason on why the palm tree plantation companies and farmers are burning the
land and forest as a land-clearing method is obviously to maximize their profit by reducing the
expense to open new plantation lands. Thus, the company as the capital holder is trying to gain
more surplus value at the expense of environmental condition. Peatlands is known to hold a
massive amount of CO2. When almost two million hectare of peatlands and forest is burned, the
environmental effect is quite large since it release a lot of carbon that used to be held by the
peatlands to the atmosphere. This cause an increase in global greenhouse gas emissions that
correlated with the global warming. The fact that the plantation company still trying to gain
some surplus value by destroying the environment is quite ridiculous, considering that the
plantation company has already got their surplus value from their labor (farmers) exploitation

8 Subiksa, I., & W. (n.d.). Genesis Lahan Gambut di Indonesia . Retrieved May 29, 2017, from http://
balittanah.litbang.pertanian.go.id/document.php?
folder=ind%2Fdokumentasi%2Flainnya&filename=subiksagambut&ext=pdf
9Firdaus, F. (2015, October 12). Perusahaan Malaysia dan Tiongkok jadi tersangka pembakaran hutan. Retrieved
May 29, 2017, from http://www.rappler.com/indonesia/berita/108995-perusahaan-malaysia-tiongkok-tersangka-
pembakaran-hutan

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and land (palm tree plantation) exploitation. This also shows how exploitation by the capitalist
happens in Indonesia.

Another interesting facts is that Indonesian government still trying to push the
production of palm oil industry since it is the second biggest export commodity of Indonesia.
Since 2006, Indonesia successfully surpass Malaysia as the biggest palm oil exporter in the
world. Plantation in Sumatra and Kalimantan accounts for 96% of Indonesia’s palm oil
production.10 Yet, condition of the plantations in both Sumatra and Kalimantan has drawn
scrutiny from environmental and human right activists around the world. One of the biggest
criticism is that the palm tree plantation expansion is destroying the rainforest, which threatens
the natural habitat of many endangered species. The plantation also allegedly using some child
labor as part of their workforce.11 While using child labor itself is inherently problematic, hiring
children to work on palm tree fields is very inhuman because of the high workload and risk of
working there. Some of the workers also being trapped by debt bondage and received below
national standard payment. The reason on why palm tree industry still using child labor and
didn’t improve the working condition in their plantation is because the company face little
pressure from their consumer to change, and that their commodity still sells well.12

While Indonesia is the biggest palm oil exporter in the world, about 50% of palm oil
exported from the country is still in an unprocessed form, while the rest is processed into
cooking oil before being exported. Although Indonesia gains a lot of capital from its palm oil
export, the fact that about half of its exported palm oil is still in unprocessed form is
disadvantageous, because processed palm oil product is much more worthy than crude one. By
exporting crude palm oil, Indonesia basically gave its resource at a cheap price to the country
who can process the oil into useful product. Ironically, Indonesia would import those products
that was originally from its country. This put Indonesia into the position of a periphery state,
where it supply resources to core states at cheap price, only to rebuy the commodity that
basically is their own resource that has been bought cheaply and processed by the core state at a
higher price. This practice in the end cause a profit loss because Indonesia could actually gain
higher profit if the country process most of the palm oil first before exporting it. Instead, those

10 Skinner, B. (2013, July 20). Indonesia's Palm Oil Industry Rife With Human-Rights Abuses. Retrieved May 29,
2017, from https://www.bloomberg.com/news/articles/2013-07-18/indonesias-palm-oil-industry-rife-with-human-
rights-abuses
11 Ibid.
12 Ibid.

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profit goes to the core country who can process the commodity with its technological
advantage.

The 2015 smog crisis also put Indonesia in more disadvantage, because of the massive
mitigation cost that is basically double the income from palm oil export in one year. The smog
could actually be prevented if Indonesia raise and tightens its standard to the palm oil plantation
company. Instead, Indonesian government, especially the local government is turning a blind
eye to the burning practice and accept bribe from the companies. Should Indonesian central
government didn’t only focus on increasing palm oil production and put more focus on how the
palm oil is produced, the smog crisis could easily be avoided.

Conclusion

Palm oil is and probably will always be an important commodity for Indonesian export.
But as of now, there is still a chance for Indonesia to earn more profit form the palm oil export,
if it export most of the palm oil as a processed product, instead of exporting half of them raw.
Granted, Indonesia still has a technological disadvantage to catch up. But if the government still
satisfied by just exporting most of the palm oil in a raw state, Indonesia will always be a
periphery country in terms of palm oil production.

The 2015 smog crisis could actually be prevented if Indonesian authority is more
serious in regulating the palm oil production. If the government could improve its control on the
palm oil production, there would be no more smog crisis in the future. Controlling the
production of palm oil, including how the workers are being paid, could also lift Indonesian
palm oil production from human rights abuse allegation from the international community, and
could probably increase the demand for Indonesian palm oil. []

Reference

Indonesia. (n.d.). Retrieved May 29, 2017, from http://atlas.media.mit.edu/en/profile/country/

idn/
Cochrane, J. (2015, October 28). Rain in Indonesia Dampens Forest Fires That Spread Toxic
Haze. Retrieved May 29, 2017, from https://www.nytimes.com/2015/10/29/world/asia/
indonesia-forest-fire-toxic-haze.html?_r=0
Chan, F. (2016, January 19). $47b? Indonesia counts costs of haze. Retrieved May 29, 2017,
from http://www.straitstimes.com/asia/47b-indonesia-counts-costs-of-haze

- !5 -
Lestari, S. (2015, October 26). Dampak kabut asap diperkirakan capai Rp 200 trilliun.
Retrieved May 29, 2017, from http://www.bbc.com/indonesia/berita_indonesia/
2015/10/151026_indonesia_kabutasap
H. (2016, January 19). Schools closed in Malaysia as haze reaches hazardous levels. Retrieved
May 29, 2017, from http://www.straitstimes.com/asia/se-asia/schools-closed-in-malaysia-
as-haze-reaches-hazardous-levels
Wahyuni, T. (2015, July 29). BNPB Bongkar Motif dan Modus Kebakaran Hutan dan Lahan.
Retrieved May 29, 2017, from http://www.cnnindonesia.com/nasional/
20150729182700-20-68935/bnpb-bongkar-motif-dan-modus-kebakaran-hutan-dan-lahan/
Subiksa, I., & W. (n.d.). Genesis Lahan Gambut di Indonesia . Retrieved May 29, 2017, from
http://balittanah.litbang.pertanian.go.id/document.php?
folder=ind%2Fdokumentasi%2Flainnya&filename=subiksagambut&ext=pdf
Firdaus, F. (2015, October 12). Perusahaan Malaysia dan Tiongkok jadi tersangka pembakaran
hutan. Retrieved May 29, 2017, from http://www.rappler.com/indonesia/berita/108995-
perusahaan-malaysia-tiongkok-tersangka-pembakaran-hutan
Skinner, B. (2013, July 20). Indonesia's Palm Oil Industry Rife With Human-Rights Abuses.
Retrieved May 29, 2017, from https://www.bloomberg.com/news/articles/2013-07-18/
indonesias-palm-oil-industry-rife-with-human-rights-abuses

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