impacts of LAND FOREST CONVERSION TO OIL PALM PLANTATION ON THE indonesian MACROeconomy AND INCOME DISTRIBUTION
Rina Oktaviani1, Eka Puspitawati2, Noer Azam Achsani3 and Sahara2
[1] Professor at Economics Department and Director of International Trade Analysis and Policy Studies (ITAPS) Faculty of Economics and Management, Bogor Agricultural University (IPB),
2 Lecturer at Economics Department and Researcher of International Trade Analysis and Policy Studies (ITAPS) Faculty of Economics and Management, Bogor Agricultural University (IPB)
3 Professor at Economics Department and Senior Reasercher of International Trade Analysis and Policy Studies (ITAPS) Faculty of Economics and Management, Bogor Agricultural University (IPB)
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ABSTRACT
The deforestation and degradation of tropical forests including land forest conversion result in a range of negative impacts, such as soil erosion, biodiversity loss and climate change. However, the loss of forests also results economic benefits, such as the production of food and estate crops. This paper investigates impacts of land forest conversion particularly to oil palm plantation on the national macroeconomy performance and household income distribution. Using a computable general equilibrium (CGE) model of forest, this study results that although land change increases real GDP and real household consumption, the positive impact is very slight. This study also shows a decresing real income of some rural households. Land forest conversion and productivity improvement in oil palm sector can be slightly better impact on Indonesian economic performance. Real Gross Domestic Product (GDP) will slightly increase because of increasing in investment and some household consumption categories. The policy of improving productivity of oil palm sector wil increase the Rural 2, however it is still almost the same impact with deforestration. It must be considered increasing the palm oil productivity to increase the welfare of poor rural household. The partnership between landless and small scale farmer with and large scale plantation is needed in order to increase the welfare of the rural agricultural household income.
Keywords: forest land conversion, oil palm, income distribution, CGE