- A 2022 investigation by Mongabay, the BBC and The Gecko Project found that hundreds of thousands of hectares of land had not been handed to communities by palm oil companies despite provisions in a 2007 law.
- In 2023, Indonesia’s Directorate-General of Plantations published updated rules stating that companies with licenses issued prior to 2007 would not be required to hand 20% of their concession to local farmers, although companies licensed after 2007 would still be required to do so.
- In Tebing Tinggi Okura on the island of Sumatra, a community is coming to terms with this change after a near two-decade dispute from which they hoped to win rights to farming land for hundreds of families.
PEKANBARU, Indonesia — Almost two years after a joint Mongabay investigation revealed systemic failure by Indonesia’s plantation industry to share gains with community farmers, countless small farmers have yet to benefit from the profit-sharing scheme established almost two decades ago.
“We’re looking for the best solution for the community,” said Jonhor Amin, a neighborhood leader in Tebing Tinggi Okura village on the outskirts of Pekanbaru, the capital of Riau province on the island of Sumatra.
Like thousands of communities living alongside land zoned for oil palm concessions, people in Tebing Tinggi Okura say they haven’t received what was promised when Indonesia made its “plasma” scheme a legal requirement in 2007. The issue has continued to foster bad faith in the Sumatran village.
Smallholdings have formed an integral part of Indonesia’s palm oil sector for decades. Several million individual farmers today account for around 40% of output in the world’s largest producer of palm oil, which is used in everything from consumer goods to fuels.
Beginning around the 1980s, Indonesia’s government accelerated issuance of permits for companies to convert vast tracts of old-growth rainforest for oil palm cultivation at scale. Corporate growers often promised to share proceeds with the communities whose land was zoned for production in order to soothe community relations.
In 2007, the scheme known as plasma became legally mandatory, in which companies were required to allocate 20% of any new plantation to local communities.
However, a 2022 investigation by Mongabay, in partnership with the BBC and The Gecko Project, a London-based journalism nonprofit, found that companies had failed to hand over potentially hundreds of thousands of hectares of legally required plasma land to communities.
In Central Kalimantan province on the island of Borneo, for example, the reporting team estimated communities were losing out on more than $90 million each year.
In Tebing Tinggi Okura, farmers exist alongside PT Surya Intisari Raya, a company founded in 1992 that is part of the First Resources conglomerate of Indonesia’s billionaire Fangiono family.
The company was awarded the rights to develop the land prior to the gazetting of the plasma scheme in 2007, which presented a gray area until the central government in Jakarta clarified the matter last year.
Palms for the poor
Tension in the Tebing Tinggi Okura community prompted Riau Governor Edy Natar Nasution to establish a task force headed by the province’s plantation department lead, Syahrial Abdi, to mediate between the two parties.
However, Syahrial said that because PT Surya Intisari Raya received its operating license before 2007, it was not required to hand over 20% of its concession to the local community as part of its plasma obligations, and that “this was perhaps the message that has not reached the public.”
This position reflects new rules published in July 2023 by the Directorate-General of Plantations in Jakarta.
The regulation stipulates that plantation companies that received licenses before Feb. 28, 2007, could, in lieu of establishing a community oil palm plantation, support the community in other ways under an agreement with the local government.
This “community partnership” can involve credit lines, grants or profit sharing — although “the first model is most widely applied,” Syahrial explained.
Companies awarded permits after the 2007 law are still required by law to allocate a fifth of their concession for cultivation by the community — but the 2007 law would not retroactively take land from company operation to give to the community.
After years spent fighting for access to a fifth of PT Surya Intisari Raya’s concession, the Tebing Tinggi Okura farmers have been told they are not entitled to what they assumed was their due.
Syahrial identified two commonly held complaints among the community: ineffective communication with PT Surya Intisari Raya, and that some farmers felt frozen out of a local cooperative that has begun to work with the company.
“The community’s understanding of the 20% [plasma allocation] was initially that the company was obliged to release some of the land to the community,” Syahrial said, adding that the case highlighted the need for improved outreach to communities.
New rules
A notable dynamic of the plasma dispute between the Tebing Tinggi Okura community and PT Surya Intisari Raya is that the company’s permit to operate on the land expires at the end of 2024. The company is understood to be currently applying for an extension.
That has prompted some in civil society to suggest officials should link authorization of corporate permit extensions to provision of plasma under the 2007 law.
However, Umar Fathoni, the head of Riau’s land agency, told Mongabay Indonesia his office no longer held the authority to compel companies to provide plasma plantations. The agency processes paperwork, but documentation of facts on the ground is the domain of the provincial plantation office, he said.
Edy, the Riau governor, said in January that only 63 out of 273 oil palm firms in the province had provided local communities with plasma land. This equates to 298,000 hectares out of around 1.7 million hectares (736,000 out of 4.2 million acres) in which plasma should be applicable.
Edy said he had written to district and municipal governments in his provice, instructing them to pursue the matter with plantation companies operating in their jurisdiction.
Achmad Surambo, executive director of palm oil civil society group Sawit Watch, said the government should side with low-income communities in disputes with companies over plasma.
“In terms of regulations, we follow and are guided by policies from the director-general of plantations,” Syahrial said. “We in the provinces follow what the central [government] directs.
“Whatever the rules, we follow them — even though these regulations may change,” he added.
Read more: Sumatra Indigenous community displaced by Samsung palm oil unit await justice
In Riau’s Siak district, which extends over muggy plains of industrial plantations from the outskirts of Pekanbaru to Sumatra’s northern coastline, only one out of 11 palm oil companies had enabled a community plantation, an area of 3,741 hectares out of 71,939 hectares (9,244 out of 177,765 acres) of plantation concession.
M. Ihsan, the plantation desk lead at Siak district’s agriculture department, said a majority of permit holders in Siak began operating before Feb. 28, 2007, the day the plasma law was signed.
The Siak district government has written to companies urging them to boost collaboration with the community. Companies have been responsive to this, Ihsan said, adding that civil servants will communicate the new rules on forming local partnerships.
“We will also listen to the community’s requests,” Ihsan told Mongabay Indonesia.
Prayudi Syamsuri, plantation director at the Ministry of Agriculture in Jakarta, said the 2023 regulation had been sent directly to elected district heads, city mayors and executives at plantation companies.
“Companies must disclose information to permit providers and the public so as not to cause conflict,” Prayudi said.
Sawit Watch’s Surambo said companies should be motivated by self-interest because more prosperous farmers meant improved community relations.
“That’s part of the picture, how to enjoy the economic cake together for prosperity,” he said.
Difa Shafira, head of the forestry and land section at the Indonesian Center for Environmental Law (ICEL), a civil society organization, called on the government to enforce rules requiring companies to support community land development.
Difa pointed to legal options that include levying fines, suspension of permits, and license revocation for errant companies.
A plasma plantation map open to the public should be established to enable tracking of company progress on extending cultivation rights, she said.
The lie of the land
The mediation between Tebing Tinggi Okura and PT Surya Intisari Raya heard from both the company and villagers.
Heri, a community member in attendance, said the local economy was underdeveloped and that some families were struggling to adequately feed their children, many of whom had dropped out of school.
But company representative Suparman said that because PT Surya Intisari Raya received its license prior to the 2007 cutoff date, the company did not necessarily have to build a community plantation, although it still had to “partner” with the community.
Suparman said the company had entered into collaboration with a local cooperative, the Tuah Okura Madani Cooperative, to meet its responsibilities. The group helps local farmers raise cattle and breed fish, among other activities.
Community representative Ismanto still held out hope that 522 Tebing Tinggi Okura families will receive land from the concession, a plot to call their own and to grow their own fruit.
“The only thing we asked was to provide space for us to exist,” Ismanto said. “Nothing more than that.”
How we built a database of conflicts driven by Indonesia’s palm oil smallholder scheme
This story was reported by Mongabay’s Indonesia team and first published here on our Indonesian site on Feb. 21, 2024.
