In Malaysia, there are about 650 000 oil palm smallholders who rely on the oil palm industry for their livelihoods. The fluctuation in world palm oil prices directly affects the oil palm industry in Malaysia, especially the smallholders. At the moment, the government promotes the integration of oil palm plantation with crops and livestock through MPOB to improve the oil palm smallholders’ income. Nevertheless, some smallholders integrate their oil palm farm with agro-tourism. Smallholders’ involvement in integration involving other crops has long been studied; however, the integration between oil palm smallholdings with agro-tourism has yet to be studied. Therefore, this study aims to examine the extent to which the integration between oil palm smallholdings and agro-tourism would increase the smallholders’ income by using a cost-benefit analysis. This study which focuses in Perak had showed that whether smallholders integrate their farm with agro-tourism or concentrate on oil palm farming alone, both options have the potential to provide smallholders with consistent returns. The cost-benefit analysis conducted showed a positive net present value (NPV) and high internal rate of return (IRR) for both options. This study also revealed that for the oil palm-based agro-tourism model, although the occupancy rate was reduced to between 70% and 50% of the current level, the agro-tourism model was still viable. Nevertheless, if the occupancy rate was reduced to 20% of the current level, this study showed that the NPV and IRR for the model with agro-tourism were lower than that of the model without agro-tourism. Therefore, to ensure the maximisation of their income, the oil palm smallholders should diversify their activities to include other activities, such as agro-tourism.
Keywords: agro-tourism, cost-benefit analysis, smallholder, income, price