Palm Oil Production in Malaysia: An Analytical Systems Model for Balancing Economic Prosperity, Forest Conservation and Social Welfare

Since the late 1950’s, the Malaysian human population has nearly quadrupled, increasing pressure on natural resource exploitation to meet domestic needs and to earn foreign exchange from exports. Global demand for Malaysian palm oil in particular had steeply increased since the mid-1970s and by 2013, the commodity was the leading foreign exchange earner. To fulfill and sustain this demand, the country’s economy has steadily shifted bias towards production and associated value addition of palm oil products for export. However, as a consequence, many of Malaysia’s natural tropical forests have been converted to palm oil farming resulting in loss of approximately 10,000 km2 of forest cover over the past twenty-five years, and biodiversity has been displaced or lost. To provide a deeper insight into the interplay amongst key interrelated environmental and socio-economic variables, and a forecast of possible future balance, we used a systems dynamism modeling tool, STELLAR (structural thinking, experiential learning laboratory with animation), to simulate and project how Malaysia could achieve a medium-term sustainable balance or optimization between palm oil production and forest conservation without compromising on human social welfare. The model consisted of four main modules (environmental, economic, social development and human welfare) each with component parameters, and interconnected by input and output loops. Model calibrations, testing and preruns involved existing official 30-year time-series datasets. Subsequently, four scenarios: Environmental conservation; Economic growth under increased global palm oil demand; Economy decline under decreased palm oil demand; and Control condition with little or no change, were selected for simulated projections of future possibilities. Simulation results showed that scenarios and variable interactions that reduce environmental damage would offer the best chance for optimizing the palm oil economy while also minimizing forest loss and promoting citizen social welfare.