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Oil palm is a valuable economic crop and provides a source of employment. It allows small landholders to participate in the cash economy and often results in improvements to local infrastructure and greater access to services such as schools and health facilities. In some areas, the cultivation of oil palm has replaced traditional practices, often due to the higher income potential of palm oil. The modernisation of cultivation practices has led to issues including food insecurity. This issue stems from the intensive use of land which leads to soil degradation. As a result, the ability for locals to produce their own food has dwindled and they are having to look for food in other areas as they can no longer rely exclusively on their land.

In some cases, land has been developed by oil palm plantations without consultation or compensation of the Indigenous Peoples occupying the land. This has occurred in Papua New Guinea, Colombia, and Indonesia. In the Sarawak state of Malaysian Borneo, there has been debate over whether there was an appropriate level of consultation with the Long Teran Kanan community prior to the development of local land for palm oil plantations. Appropriation of native lands has led to conflict between the plantations and local residents in each of these countries.

According to a 2008 report by NGOs including Friends of the Earth, palm oil companies have also reportedly used force to acquire land from Indigenous communities in Indonesia. Additionally, some Indonesian oil palm plantations are dependent on imported labor or undocumented immigrants, which has raised concerns about the working conditions and social impacts of these practices.

Habitat Loss
The production of palm oil requires intensive deforestation and this has led to a gradual loss of flora and fauna in the areas where land is cleared for the cultivation of palm oil. Tropical rainforests in countries including Malaysia and Indonesia have been the most ideal countries to have large palm oil plantations as they provide the most suitable climate with ample rainfall and sunshine throughout the year. Between the years 1990 and 2005, the total land in Malaysia used for palm oil cultivation increased by 2.4 million ha and reached 4.2 million ha. During that period, over 1.1 million ha of tropical rainforest was lost. The diverse biodiversity that each rainforest possesses has been diminishing at a rapid rate as fauna is often very fragile and easily affected by deforestation. Animal wildlife has been most affected in areas where significant amounts of land, for commercial palm oil purposes, have been cleared to allow the trees to be planted. Animals have been forced to relocate and have increasingly come into contact with humans as they have started to roam around the surrounding villages in search for food. Some animals have not been able to adapt and relocate elsewhere, leading to their populations decreasing significantly and this has disrupted the symbiotic relationships that the flora and fauna have with their habitat. The figure below shows how deforestation negatively affects biodiversity when forests are converted into plantations and depicts the relatively low species richness in primary forests compared to disturbed forests.



Soil Degradation
The process of removing existing flora and planting palm oil trees is detrimental for the quality of the soil in the ground. When the existing flora is removed to make way for the new plants, the soil surrounding it is often eroded away. When palm oil trees are planted, large amounts of fertilisers and pesticides are used to ensure rapid growth and the health of each tree. Younger palm oil trees absorb more valuable nutrients from the soil which degrades the quality of the soil. As the nutrients are absorbed by the young trees, there is a depletion in nutrients and consequently, there is a lower level of remaining nutrients for other trees. This problem is also another cause for the increased use of fertilisers during the palm oil cultivation process. Distances between adjacent palm oil trees in plantations have also been designed to be very close in order to optimise use of the limited space available. This has further impacted soil quality because as the trees grow, they require more minerals and water from the soil. Due to the close distances between trees, there is a limited supply of nutrients that the trees can depend on which leads to the plantation workers shrouding the trees with higher amounts of fertilisers, pesticides and water. This process further harms the state of the soil and makes it challenging for existing flora and fauna to survive in the area.

In tropical countries such as Malaysia and Indonesia, where a majority of palm oil plantations are located, there are continual rain showers and sun exposure throughout the day. Palm oil plantations that are geographically located close to rivers have exacerbated impacts on surrounding local communities. This is due to the increased use of fertilisers and pesticides which has led to higher amounts of both being washed away by the frequent rain into rivers (runoff process). This is an issue because rivers are central to the daily lives of local villagers. They use water from the river for personal consumption and also use the river as a source of food, which makes them vulnerable to the residue from fertilisers and pesticides. The untreated water that the local villagers are exposed to can potentially cause detrimental health effects, including diseases such as cholera and E. coli.

The damage from soil erosion and poor soil quality has also affected the livelihoods of many local villagers that live close to these palm oil plantations as they can no longer depend solely on their land for the cultivation of food and timber. Local villagers are now inclined to find new sources of food and materials for shelter. As a result, local villagers have been indirectly forced to move out and relocate depending on the extent of the loss of the plants and animals native to the area. This has led to economic complications as governments now need to reallocate their resources to support these typically marginalised communities.