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81% of Indonesia’s oil palm plantations flouting regulations, audit finds

Newly established oil palm plantation in Central Kalimantan. Photo by Rhett A. Butler.

Newly established oil palm plantation in Central Kalimantan. Photo by Rhett A. Butler.

  • An Indonesian government audit has found the vast majority of oil palm plantations operating in the country are in breach of a range of regulations.
  • These include a lack of permits, encroachment into protected areas, and non-compliance with national sustainability standards.
  • The findings echo the results of a 2016 audit by the anti-corruption commission that concluded Indonesia lacked a credible and accountable system to prevent violations and corruption in the palm oil industry.
  • Activists say the government needs to be serious about cracking down on plantation companies, some of which are owned by top government officials, and about boosting transparency in the industry.

JAKARTA — More than 80 percent of oil palm plantations in Indonesia, the world’s biggest producer of the crop, are operating in violation of numerous regulations, a government audit has found.

“Roughly 81 percent didn’t meet existing requirements,” Luhut Pandjaitan, the coordinating minister for maritime affairs, who also oversees the palm oil industry, told reporters after a presentation of the audit findings on Aug. 23.

The various violations include plantations that are larger than permitted, non-compliance with the Indonesian Sustainable Palm Oil (ISPO) standard, and failure to allocate sufficient land for smallholder farmers in their operations, Luhut said.

The government audit agency, known as the BPK, also found many plantation companies lacked a right-to-cultivate permit, or HGU, to operate. Another common infringement was an overlap onto mining concessions or protected and conservation areas.

The latter include carbon-rich peatlands, which, when cleared and drained by plantation operators, are rendered highly combustible and contribute to the annual forest fire during the dry season.

“These are damages that have been going on for 20 to 25 years,” said Luhut, who owns several oil palm plantations through his business holdings. “Now we have to fix them. We have to find the solutions and we can’t let them be like this.”

He said he would report the BPK’s findings to President Joko Widodo to decide on follow-up action. Luhut has a stake in a palm oil company that’s embroiled in a long-running land conflict with farmers in the Bornean province of East Kalimantan.

BPK commissioner Rizal Djalil declined to name any of the companies operating in violation of the regulations, saying only that they collectively held concessions to millions of hectares of plantations across the country.

“I saw [violations] in North Sumatra, Riau, Jambi, South Sumatra, Lampung, Central Kalimantan and West Kalimantan,” he said, running off a list of provinces. “Everything’s there, all the big players. I don’t need to name them.”

Deforestation for palm oil and mining in Indonesia. Photo by Rhett A. Butler.
Deforestation for palm oil and mining in Indonesia. Photo by Rhett A. Butler.

Violations and corruption

The BPK’s findings echo the results of a similar audit done by the country’s anti-corruption agency, the KPK, in 2016. In its audit, the KPK concluded that Indonesia lacked a credible and accountable system to prevent violations and corruption in the palm oil industry.

It found corruption rife in the permit-issuance process for plantations, with many companies allowed to clear and plant in forest areas that are ostensibly off-limits for oil palm cultivation. In Sumatra’s Riau province alone, the KPK found 10,000 square kilometers (about 3,900 square miles) of illegal, unpermitted oil palm plantations.

The KPK audit was carried out in response to forest fires in 2015 that were among the most destructive in years. Most of the fires were set to clear land for planting oil palms, including peat forests, with the resultant haze sickening hundreds of thousands of people, shutting down airports, and spreading to neighboring countries, inflaming long-running diplomatic spats.

With two official audits by different agencies pointing to a massive compliance problem in Indonesia’s palm oil industry, the government has no excuse to turn a blind eye, said Teguh Surya, the executive director of the environmental NGO Yayasan Madani Berkelanjutan.

“The findings and courage of the BPK in revealing the ills of our palm oil management that lead to state losses are very much appreciated, considering how the government has been reluctant [in responding] to similar findings” by NGOs and other civil society organizations, he told Mongabay.

Teguh said the government could start addressing the problem simply by enforcing a moratorium, imposed by President Widodo last year, to freeze the issuance of new permits for oil palm plantations. The measure also requires the relevant ministries and local governments to conduct a massive review of plantation permit data.

The review is supposed to be overseen by the office of the coordinating minister for economic affairs and the findings reported to the president every six months. But there’s been no public announcements made about progress on the initiative, with little sign that the moratorium is being enforced, according to a recent report by Sawit Watch, an NGO that monitors the palm oil industry.

“It’s been [almost] one year since the moratorium [was enacted] but we haven’t seen significant progress and the process tends to be closed off [to the public] and exclusive, with little room for public participation,” Teguh said.

Oil palm plantation in Indonesia. Photo by Rhett A. Butler
Oil palm plantation in Indonesia. Photo by Rhett A. Butler

Plantation maps

He also called on the government to share plantation data, including maps, with the public, in the interest of transparency. It’s the prevailing lack of transparency, Teguh said, that’s given rise to the litany of problems in the industry, including deforestation, overlapping concessions, land grabbing, and labor rights abuses.

Yet despite the government’s repeated rhetoric on the importance of transparency, top officials, including Luhut, have balked at making plantation data public, on the ground that the information is proprietary and of strategic national interest. This continued refusal to publish the data goes against a ruling by Indonesia’s top court that detailed maps and related documents on plantation companies operating in the country must be made publicly available.

Activists say bringing that data out into the open will make it clear which companies are responsible for deforestation, fires and land conflicts, and allow for greater accountability for these violations. If the government is serious about cracking down on unruly companies, Teguh said, then it should do so across the board, even if the companies in question are linked to officials like Luhut.

“They can’t cherry-pick,” he said.

Addressing the problems identified by the KPK and BPK audits would also go a long way toward restoring trust in Indonesian palm oil in export markets such as the European Union, Teguh said. The European Commission passed a measure in March to phase out palm oil-based biofuels by 2030, over concerns that production of the crop, often on land cleared of rainforest, contributes to global carbon emissions and thus exacerbates climate change. In August, the commission announced it had started imposing temporary duties ranging from 8 to 18 percent on imports of biodiesel from Indonesia to counter Indonesian government subsidies to producers. The EU is Indonesia’s second-biggest palm oil customer, after India.

A serious effort by the government to fix these problems, Teguh said, would lead to “the recovery of Indonesia’s palm oil market in the world, especially in the EU.”

“We can even claim to be a sustainable palm oil producer,” he added.


Banner image of a newly established oil palm plantation in the Bornean province of Central Kalimantan, by Rhett A. Butler/Mongabay.


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