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The Jakarta Post
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EDITORIAL: Inequality in asset ownership


    The Jakarta Post

Jakarta | Thu, March 16, 2017 | 08:11 am
EDITORIAL: Inequality in asset ownership An aerial picture of a palm-oil plantation in Dumai, Riau, on Aug. 9. (Antara Photo/Rony Muharrman)

We fully support the latest initiatives of the government to accelerate the reduction of inequality in asset ownership and income distribution through land distribution, free land titles and the nucleus estate-smallholder (NES) scheme.

The more concerted programs seem to have been warranted by the finding of the latest economic surveys, including one by the World Bank in 2014, showing the widening inequality in the ownership of financial and physical assets as the richest 10 percent of Indonesians own an estimated 77 percent of the country’s wealth. This means that income from financial and physical assets (such as land) benefits far fewer households in Indonesia than in many other countries.

The Agrarian and Spatial Planning Ministry has set itself a target of granting 5 million land titles this year at a cost of Rp 2 trillion (US$148 million), which will be fully financed by the state budget. Land titles will empower the poor to take maximum benefit from their physical assets, such access to bank loans. Usually, registering a property can be an arduous and costly procedure. Ministry data shows that of the 136 million plots of private land across the country, only 46 million plots have legal titles.

Encouraged by the smooth implementation of a land reform pilot project last year, the ministry will also speed up the redistribution of neglected land, estimated at 12.7 million hectares across the country, to landless people around forests through local customary communities.

The NES scheme, which is mandated by the 2014 Plantation Law, will empower smallholders because plantation companies will serve as agents of development, providing the farmers with certified seedling, agricultural extension services, marketing assistance and access to bank loans.

What should still be improved though are the rules to strengthen the bargaining power of smallholders as regards the terms and conditions in the partnership scheme, including the price of fresh oil palm fruit bunches the smallholders are obliged to refine at the big companies’ mills.

The NES concept is good for plantation development and for enhancing equitable development and good relations with local communities. We still believe harmonious and mutually beneficial cooperation between big plantation companies and smallholders is the most effective way of expanding tree-crop plantations, such as oil palm and rubber, without widening inequality in land holding.

Many plantation companies hold land concessions of more than 500,000 ha, or more than six times the land area of Singapore. We are afraid that if the expansion of plantations, especially oil palm, by big companies remains at its current rate of more than 100,000 ha per year, mounting problems of inequality of income, wealth and land conflicts could threaten the long-term sustainability of the plantation industry, even the macroeconomic stability.

We can take great lessons from our rubber industry, the world’s second-largest after Thailand’s, with an annual output of over 3.1 million tons. Smallholders who control farms and big companies that control the processing industry live together harmoniously, depending on each other for their survival.

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