Fostering Economic Resilience in Berau through Smallholder Crop Diversification

This executive summary from the Climate Policy Initiative examines the economic risks of palm oil monocropping for independent smallholders in the Berau regency of Eastern Kalimantan, Indonesia. It argues that while palm oil is a popular livelihood, it is insufficient to cover minimum living costs and increases food security risks. The report recommends crop diversification—specifically with maize and cocoa—as a more profitable and resilient alternative that aligns with sustainability goals.

• Palm oil monocropping in Berau is insufficient for meeting minimum living costs and creates economic vulnerability. While estate crops account for 84.7% of Berau's total GDP, a financial model of a two-hectare palm oil plot shows net returns are 439% lower than the region's minimum wage and GDP per capita over 25 years. Additionally, the expansion of palm oil is displacing food crops, transitioning Berau from a food-secure region to one increasingly reliant on food imports.
• Diversifying palm oil plantations with maize or cocoa offers significantly higher revenue potential than monocropping. Diversification with maize can generate up to 825% more income, while cocoa can generate up to 495% more. Maize is identified as the most recommended crop due to its high-income potential, lower knowledge gap, and existing infrastructure preparedness.
• Crop diversification is the most efficient strategy for improving smallholder resilience compared to expansion or intensification. Expansion is discouraged because it promotes deforestation, and intensification via replanting is hindered by a lack of capital and technical knowledge. Diversification reduces sensitivity to market price volatility and provides revenue during the non-productive periods of the palm oil life cycle.
• The timing of diversification depends on land availability and the productivity cycle of existing palm oil trees. For smallholders with vacant land, diversification should begin immediately. For those with fully planted lands, diversification is most financially viable when palm oil is at peak productivity (approximately year 10) to ensure positive cash flow and bankability for financing. However, a lack of proper licenses, such as the STDB (Surat Tanda Daftar Budidaya), remains a significant barrier to accessing finance.

APA

Climate Policy Initiative (2020). Fostering Economic Resilience in Berau through Smallholder Crop Diversification. https://www.climatepolicyinitiative.org/publication/fostering-economic-resilience-in-berau-through-smallholder-crop-diversification/

Chicago

Climate Policy Initiative. Fostering Economic Resilience in Berau through Smallholder Crop Diversification. 2020. https://www.climatepolicyinitiative.org/publication/fostering-economic-resilience-in-berau-through-smallholder-crop-diversification/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Fostering Economic Resilience in Berau through Smallholder Crop Diversification |date=26 November 2020 |url=https://www.climatepolicyinitiative.org/publication/fostering-economic-resilience-in-berau-through-smallholder-crop-diversification/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2020fostering, author = {{Climate Policy Initiative}}, title = {{Fostering Economic Resilience in Berau through Smallholder Crop Diversification}}, institution = {Climate Policy Initiative}, year = {2020}, month = nov, url = {https://www.climatepolicyinitiative.org/publication/fostering-economic-resilience-in-berau-through-smallholder-crop-diversification/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }