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New bill could legalize ‘land banking’ by Indonesian plantation firms

An oil palm plantation in Indonesia. Photo by Rhett A. Butler.

  • Under Indonesian law, plantation permit holders must plant all of their land within six years, or risk having the land deemed “abandoned,” seized by the state and given to someone else to develop.
  • Plantation companies have cited the rule as hindering their ability to set aside lands within their concessions for conservation, because the government could simply repossess the lands if they do.
  • Under a bill being deliberated by parliament, the rule could be scrapped — but watchdogs warn that, if anything, this will open up the potential for land banking, where speculators stockpile huge tracts of land they have no intent to immediately put to use.

A little-known provision in a sweeping deregulation package now before the Indonesian parliament could make it easier for plantation firms to preserve forests within the areas they have been licensed to manage — or fuel a new wave of speculative “land banking” by large corporations.

The amendment, part of the “omnibus” bill on job creation, would eliminate an article in the 2014 Plantation Act requiring firms to use 30% of their land concessions within three years and plant 100% within six years, or risk having the land deemed as “abandoned,” seized by the state and given to someone else to develop.

The provision — Article 30 of the omnibus bill would delete Article 16 of the Plantation Act — has been overlooked amid a furor over a wide range of amendments in the bill, including an overhaul of the licensing process for natural resource projects that would loosen environmental safeguards and concentrate power in the hands of Jakarta.

Before the coronavirus outbreak made large gatherings unfeasible, the bill, and similar ones that preceded it, prompted mass protests by student groups, labor unions and indigenous communities. Lawmakers have cited the need to boost the economy amid the pandemic as a justification for moving forward with proceedings on the bill.

Eliminating the rule could have major implications for how palm oil companies manage land. Indonesia is the world’s top producer and exporter of the commodity, used in everything from processed foods and cosmetics to biofuels.

In recent years, many of the industry’s biggest players have made voluntary commitments to break the link between the palm oil they use or produce and the destruction of carbon-rich forests and peatlands. Palm oil giants like Wilmar International and Golden Agri-Resources have cited the abandoned land rule as hindering their ability to set aside lands within their concessions for conservation, because the government could simply repossess the lands if they do.

A factory for processing oil palm fruit bunches into crude palm oil in Indonesia. Image by Rhett A. Butler/Mongabay.

But some observers worry that scrapping the rule will open up the potential for land banking, where speculators stockpile huge tracts of land they have no intent to immediately put to use, threatening local and indigenous efforts to secure rights to their customary forests.

The official justification for eliminating the rule does not mention environmental protections, and lists only that it will “restore the authority of plantation business requirements to the Central Government … ease of business licensing submission processes … [and] simplification of business permits.”

Indonesian Environment and Forestry Minister Siti Nurbaya Bakar recently said the omnibus bill would make it easier for companies to adhere to zero-deforestation pledges by loosening what is allowed under the definition of “business permit” — a more general labeling under which all existing and new plantations would fall. She said that under this new definition, plantations would “be given robust legal room to conduct environmental services business, including carbon trading.” She did not address the abandoned land rule directly.

While a few of the biggest palm oil companies in the past have been vocal about their frustration with the rule, given the heated debate about the omnibus bill, they were unwilling to discuss the matter currently. Wilmar and Golden Agri both declined to comment for this article, each saying only that they would abide by their no-deforestation commitments and adhere to Indonesia’s laws — whatever they may be. Neither would confirm whether they had lobbied the Indonesian government at any time in the past to remove or change the rule.

The Roundtable on Sustainable Palm Oil (RSPO), the world’s largest association for ethical production of the commodity, similarly declined to comment on the omnibus bill, and would not verify whether any company had previously had their land seized under the abandoned land rule. Further, the RSPO declined to comment on whether it or its member companies were consulted by the government during the crafting of the bill.

Mature oil palm trees on a plantation in Indonesia. Image by Rhett A. Butler/Mongabay.

Environmental group Greenpeace suggests that framing the rule as an obstruction to sustainability has been something of a red herring, and that plantations have had several legal paths to set aside land for conservation within their boundaries.

“Companies have used Article 16 as an excuse for them not to conserve forest areas within their license or permit areas, and thus preventing them from meeting their No Deforestation commitments,” Greenpeace Indonesia forest campaigner Asep Komarudin wrote in an email. “However, this is not true as there is a legal basis by which they can conserve High Conservation Value and High Carbon Stock forest within their permit areas — via Kawasan Ecosystem Essential (Essential Ecosystem Areas).”

Asep pointed to Indonesia’s 1990 Conservation Law, which already requires landowners and permit holders to protect buffer zones that support critical ecosystem services. Similarly, the 2011 Natural Conservation Area Law defines any land providing essential ecosystem services — arguably, all HCV forest — as eligible for protection.

While it argued the abandoned land rule does not stand in the way of corporate sustainability pledges, Greenpeace said the rule was useful in preventing firms from engaging in land banking, which can prevent local stakeholders from utilizing the resources for customary use, subsistence living or smallholder plantations.

“The elimination of article 16 of the plantation law could legalize the practice of land banking, allowing companies to get permits over land without making use of them,” Komarudin said. “It will enable speculation, given that they won’t have any time constraints to exploit the land.”

Oil palm fruit in Indonesia’s Aceh province. Image by Rhett A. Butler/Mongabay.

Marcus Colchester, senior policy adviser for the Forest Peoples Programme, an NGO, said he is similarly concerned that the provisions in the omnibus bill will further hurt local and indigenous peoples’ efforts to gain control over their customary lands.

“These amendments, which lengthen the period and extent over which interim permits (ijin lokasi) can be held, are worrying,” Colchester wrote in an email. “They not only re-open the risk of land speculation and ‘land banking’ but they further threaten the security of the tens of thousands of communities whose customary lands are overlapped by these permits.”

Colchester said the people of Indonesia would be better served if the government amended the current law to explicitly allow for non-exploitative activities. “Rather than reducing requirements on companies, it would have been better to explicitly allow set-asides for conservation and community use,” he said.

Expanding beyond the implications of removing the abandoned land rule, Colchester continued, “the amended laws also fail to address the biggest problem that communities face from business use permits [Hak Guna Usaha or HGU], which is that they extinguish in perpetuity communities’ customary rights in land, the underlying cause of thousands of land conflicts across the archipelago.”

He added, “Until the government puts the rights and interests of its citizens — by recognizing the land rights of indigenous peoples and other rural folk — ahead of land speculators and investors by handing out concessions over customary lands, these conflicts will continue, human rights abuses will proliferate and Indonesian palm oil will have a negative reputation in the market.”

Greenpeace’s Asep echoed this concern, pointing out that the bill extends HGU permits — which give the right to work on land owned by the Indonesian government — to 90 years from the current 35.

“While communities have been demanding a more equitable redistribution of land, this extension will concentrate the land even in fewer and richer hands, then lead to land-banking,” he said. “This will likely worsen land-conflict in Indonesia.”

Banner: An oil palm plantation in Indonesia. Image by Rhett A. Butler/Mongabay.

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