Linking Agricultural Trade, Land Demand and Environmental Externalities: Case of Oil Palm in South East Asia

Author

Jamal Othman (jortman@ukm.edu.my)

MPRA Paper from  University Library of Munich, Germany

Abstract: Reduction of support measures affecting soybean oil in the major soybean producing countries, as a consequence of WTO rules, coupled with rising demand for palm oil in non-traditional palm oil importing countries may lead to pronounced increases in agricultural land demand for oil palm expansion in Malaysia and Indonesia – two main palm oil producing and exporting countries. However, it is expected that the effects on agricultural land demand and consequently impact upon the environment will depend much on existing governance affecting environmental and forestry management in the two countries. Given the relatively more prevalent policy and institutional failures in Indonesia, it is anticipated that deforestation consequences and open burnings in the country will be stronger, inevitably giving rise to recurring haze externalities in the region. This study employed single and multi-country output supply exogenous policy models with explicit factor markets to examine agricultural land demand-trade linkages in the world vegetable oil markets. Shifts in export demand for palm oil and reductions of support measures affecting soybean production were simulated and effects on land use in Malaysia and Indonesia were observed under varying assumptions of environmental and forestry policy regimes in the two countries. Inferences on environmental effects are also provided.

Keywords: Agricultural trade and environment; Oil palm economy in Malaysia and Indonesia; Oil palm expansion and haze; Transboundary pollution; Policy failures and environmental impacts (search for similar items in EconPapers)
JEL-codes: Q17 Q56 Q01 (search for similar items in EconPapers)
Date: 2003
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Published in ASEAN Economic Bulletin 3.20(2003): pp. 244-255

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