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Smallholders represent a significant portion (38%) of oil palm cultivation in Indonesia, and represent a critical component of the palm oil industry, as well as constitute a significant opportunity to improve livelihoods in resource-poor settings. Smallholders’ engagement in oil palm cultivation began as part of Indonesian government to promote tree plantation crops in the late 1970s. The initial programme consisted basically of direct state investments through state-owned companies (PTPN) and was integrated with government-sponsored transmigration programmes to provide a labor force for the new plantations. This integration was embryonic for smallholder engagement in state-led agribusiness. The emergence of smallholder oil palm planters constituted a spread effect of plantation development led by the government. The state agribusiness-driven policy has transformed rural areas and settlement development was started in the surrounding of large-scale oil palm plantation.