CAUSE AND EFFECT ANALYSIS OF THE INCREASING CRUDE PALM OIL EXPORT VALUE TOWARD DEFORESTATION AND FOREST DAMAGE IN INDONESIA (1977-2007)

Abstract

Indonesia is the biggest producer of crude palm oil in the world. In 2007 it accounted for US$ 8.8 billion of export or 10% of non oil and gas export of the country, it is the main reason why palm oil sector has become an increasingly important business in Indonesia. However, palm oil business is also an increasingly important driver of forest conversion in Indonesia. This can be seen from the decrease of tropical forest area in Indonesia, the increase of deforestation and forest damage rate caused by forest conversion into palm oil plantation. Despite all forces behind forest loss for palm oil business, the Indonesian palm oil industry also makes a significant contribution to the local communities in providing working opportunity for them. The company also seeks to meet the needs of the employees and the people living near the operations. In this thesis, the researcher would like to shift the focus to palm oil export value that related to its business development which contributes to deforestation, forest damage and absorption of employment in Indonesia. Therefore, the course of this thesis would be dedicated to identify the results that caused by the increasing crude palm oil export in Indonesia, whether it will beneficial or unbeneficial; has to be improved or removed as a recommendation in formulating the business policy in the future. The researcher use quantitative research and secondary data in order to elaborate the subjects of this thesis. The finding of this research has been done by applying simple linear regression and path analysis with the entire assumptions and hypotheses being proven. As the result, there is relation between crude palm oil export value with deforestation and forest damage; however there is also relation between crude palm oil and the number of palm oil employees. Therefore, more fundamental changes are needed, including changes in government policy.