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Development of intensive agriculture demonstration plots (demplot) in peatland areas in order to improve local economies and peatland restoration at once are one of the Badan Restorasi Gambut (BRG)’s crown programs. The demplot assumes that people living in peatland areas can develop their agricultural activities better and in line with efforts to protect the peat areas. In reality it is not so. The agricultural economic development program designed and initiated by the state institution, which is the BRG, has not only resulted in no significant changes, but instead became a new burden on the community groups receiving the program if they want to continue this state-initiated program, and this effort will aggravate an already widespread peatland degradation. The failure of this program reflects and repeats many of the failures of development programs initiated by the State (Scott 1998; Li 2007), which ignore a number of important factors related to land tenure including those declared as peatlands by the government, social segregation within the community, and the tendency of local communities to imitate the change of peatland structure as carried out by the large-scale agroindustry activities. This paper will examine and analyse an agriculture-based economic development program in peatland areas in Bumi Agung Village of MUBA District in South Sumatra, which began with the development of an agricultural demplot, where this program was promoted as one of the models of the BRG community development program.