- Indonesian prosecutors are investigating suspected corruption in the environment and forestry ministry’s management of oil palm plantations.
- Experts suspect the investigation targets a government program aimed at legalizing illegal oil palm plantations within forest areas and the potential underpayment of fines by companies that operate illegal plantations.
- A combined 3.37 million hectares (8.33 million acres) of oil palm plantations are considered illegal under Indonesian law because they were established on land zoned as forest areas.
- In 2020, the government introduced an amnesty scheme through a hugely controversial law that did away with criminal punishment for illegal plantations and their operators, and instead gave them a grace period of three years to obtain proper permits and official rezoning of their operational areas to non-forest areas; operators were also required to pay fines before they could resume operations, but the calculation used to determine those fines is under scrutiny.
JAKARTA — Indonesian prosecutors have launched an investigation into the Ministry of Environment and Forestry, as there are indications of corruption related to the palm oil industry.
The attorney general’s office said the case relates to the management of oil palm plantations within forest areas from 2005-24.
The suspected corruption case has resulted in loss to the state’s economy, the office’s spokesman, Harli Siregar, said.
As part of the investigation, the office carried out search and seizure at the environment ministry’s building in Jakarta on Oct. 3, 2024.
During the operation, investigators searched five rooms at the ministry and confiscated four boxes of documents. They also seized electronic evidence related to the rezoning of forest areas, which falls under the authority of the environment ministry.
Harli said the office is analyzing all these documents and summoning the ministry officials for questioning.
Based on this, experts suspect the investigation targets a government program aimed at legalizing illegal oil palm plantations within forest areas. More specifically, the investigation might focus on the potential underpayment of fines by companies that operate illegal plantations, the experts added.
There are a combined 3.37 million hectares (8.33 million acres) of oil palm plantations considered illegal under Indonesian law because they were established on land zoned as forest areas.
That’s an area larger than Belgium, accounting for a significant portion of the palm oil output in Indonesia, the world’s biggest producer of the commodity.
To address this issue, the government introduced the amnesty scheme through the so-called omnibus law on job creation in 2020.
The hugely controversial law, deemed unconstitutional in a court challenge yet somehow still in force, did away with criminal punishment for illegal plantations and their operators, and instead gave them a grace period of three years to obtain the proper permits, including the official rezoning of their operational areas to non-forest areas.
These operators were also required to pay fines before they could resume their operations.
This aspect of the program is where experts believe the suspected corruption lies, as the method used to determine the fines allows companies to avoid substantial fines for their illegal activities.
Too low
To determine the amount of fines that illegal plantation operators should pay, the environment ministry issued a decree in 2023. The decree states that the fines will come in the form of forest resource provisions and reforestation funds, and they’re calculated based on plantation area and potential of timber volume in the plantation area.
However, instead of considering the specific types of trees in the forest being cleared, the calculation of the fines uses a simplified calculation formula, with a base timber potential uniformly set at 25.7 cubic meters (883 cubic feet) per hectare (2.5 acres).
This basically means that in Indonesia, a country with the world’s third-largest tropical rainforest, a hectare of all forests has only 25 trees, according to Grahat Nagara, a lecturer at the Jentera School of Law in Jakarta.
This is an oversimplification, as Indonesia is home to at least 19 different forest types, including tidal forests such as mangroves; and peat, swamp, wetland, evergreen, bamboo, savanna and montane forests.
Applying a blanket figure does not account for this variability, Grahat said.
Furthermore, the 25.7 m³ (908 ft³) per hectare average is likely to underestimate actual timber potential of Indonesia’s forests, especially primary forests that are still intact, and thus results in fines that do not reflect the environmental damage caused, he said.
A 2015 report by a coalition of NGOs noted there’s no publicly available inventory of the forests cleared for oil palm and timber plantations, nor are there reports of standing timber volumes prior to clearing in Indonesia.
However, the report estimates there’s an average timber potential of 106 m³ (3,743 ft³) per hectare in “primary production forests,” 72 m³ (2,543 ft³) per hectare for “secondary production forests” and 38 m³ (1,342 ft³) per hectare for secondary “convertible production” forests.
A study in 2022 found that secondary tropical rainforest in the Indonesian part of Borneo, Kalimantan, has timber yields ranging from 45.5 m³ (1,607 ft³) per hectare to 68.3 m³ (2,412 ft³) per hectare.
Grahat called the environment ministry’s decision to use the 25.7 m³ per hectare average as “making no sense.”
“Some ecosystems, like savannas in Papua, might have low timber yield, but the mountainous area there should have high [timber yield], and primary forests typically go above 80 m³ [2,825 ft³] per hectare,” he said. “There’s no primary forests that go as low as 25.7 m³ per hectare. This means all deforestation [by illegal palm oil] are deemed [by the environment ministry] to occur in non-productive forests.”
In the calculation of the fines, the environment ministry also labeled all timber that is lost to make way for illegal plantations as mixed tropical hardwoods, which refers to a category of timber comprising various species of non-premium hardwoods, which are less commercially valuable than premium hardwoods like teak or meranti.
This, despite Indonesia’s forests being home to a wide variety of tree species, including teak and meranti, which have higher timber potential than forests with smaller and softer wood species.
Uli Arta Siagian, plantations lead at the Indonesian Forum for the Environment (Walhi), a prominent national pressure group, questioned the single timber classification, as it further undervalues Indonesia’s forests and gives even more discounts for companies.
“Why does it have to be generalized? Is there no expert who can calculate [the value of different types of timbers]?” she said to Mongabay.
Grahat also questioned the issuance of the 2023 decree that serves as a basis to calculate the fines.
The decree was issued solely by Environment and Forestry Minister Siti Nurbaya Bakar, even though it usually involves at least three ministries to set a single tariff for state revenue, he said.
The involvement of at least three ministries is crucial to prevent a single ministry from having too much power in determining the amount of fines that a company has to pay to the state, Grahat said.
Therefore, a tariff is usually stipulated in a government regulation, not a ministerial decree, he said.
“When there’s a state power [involved in decision-making], there needs to be a legitimacy, it shouldn’t be used by only an individual. That’s why there should be deliberation and involvement of other parties so that there’s a collective legitimacy,” Grahat said.
Progress of the amnesty program
There are two types of plantations that qualify for exemption: those with the relevant licenses from local authorities but not from the national government, known under the program as 110a applicants, and those without permits from either the local or national governments, known as 110b.
110a plantations can win permanent legalization by paying fines and applying for and obtaining a rezoning license, also known as a forest release decree, from the Ministry of Environment and Forestry. However, 110b companies, which must also pay fines, can only continue operating for one more crop cycle, or up to 15 years. Plantations located in protected or conservation forest areas can’t be amnestied and the land will be immediately taken over by the ministry.
The environment ministry estimated there were 2,130 illegal plantations spanning 2.1 million hectares (5.2 million acres) that were eligible for the amnesty program.
As of May 2024, the ministry had identified 365 of 110a plantations and 51 of 110b plantations. The rest of 1,714 illegal plantations are still being identified to determine who the owners are.
The ministry estimates that it stands to collect at least 1.7 trillion rupiah ($109 million) from 365 companies under the 110a scheme. As of May 2024, however, it had collected just 822 billion rupiah ($53 million) from 241 companies.
As the 1.7 trillion rupiah calculation is based on the simplified method, it likely underestimates the true value of the forests that have been lost.
To find out how much the simplified method reduces the fines, Mongabay Indonesia and news outlet Betahita.id did an analysis in 2023 using the forest resource balance sheet, a government tool used to provide an overview of the condition and changes in forest resources, both in physical terms (area and volume) and monetary terms.
Using the balance sheet, Mongabay Indonesia found that each company could pay tens to hundreds of billions of rupiah less if the fines are determined with the simplified method.
An example is palm oil company PT Bumitama Gunajaya Abadi, which operates illegal plantation in Central Kalimantan.
Using the simplified method, the company would have to pay 57 billion rupiah ($3.6 million). But if the fines are calculated using the balance sheet, with the assumption that the plantation used to be covered by trees more than 20 cm (8 inches) in diameter, then the fines would be around 258 billion rupiah ($16.6 million), more than four times the original fines.
Another plantation company, PT Palma Satu in Riau, is required to pay 85 billion rupiah ($5.5 million) in fines based on the simplified method. Its fines could reach up to 499 billion rupiah ($32 million) if calculated based on the balance sheet, nearly six times the original fines.
Data disparity
Besides the potential underpayment of fines caused by the use of the simplified method, another potential loss of state revenue might also come from data inaccuracy, experts pointed out.
Walhi questioned the plantation data (the location, the size and the owners of the illegal plantations) used by the environment ministry to calculate the fines, as the amnesty process has been highly secretive.
“Information on the extent of forests planted with palm oil, as well as the forest cover before conversion, is not disclosed, nor is the source of this data,” Walhi said. “It is unclear whether the environment ministry relies on its own data or independent reports from companies.”
The environment ministry reportedly uses data submitted by companies in measuring the fines.
However, it’s unclear if these self-reported data undergo verification by the environment ministry or not.
Without verification, companies can deliberately underestimate their illegal plantation size to significantly reduce fine payments.
The use of self-reporting data might also result in disparity between data used by the environment ministry and that in the government’s one-map policy.
The policy unifies all land use data from a host of disparate sources in an effort to resolve overlapping claims that have led to conflict, human rights abuses and environmental damage.
To support the one-map policy and use it for corruption prevention, the government established another initiative called the National Strategy for Corruption Prevention, or Stranas PK, in 2018.
The Stranas PK aimed to coordinate and implement comprehensive anti-corruption measures across various sectors, with a focus on preventing corruption in critical areas such as state revenue and law enforcement.
Under the Stranas PK, government agencies like the anti-graft agency, KPK, is working with NGOs and academics to collect maps and field data from local governments for palm oil and mining to support the one-map policy.
These maps and data include those illegal plantations located within forest areas.
When the Stranas PK compared the illegal plantation data it had compiled with that possessed by the environment ministry, the Stranas PK revealed significant discrepancies.
In some cases, there were companies identified by the Stranas PK as operating illegal plantations, but didn’t exist in the environment ministry’s data.
In other cases, a company was identified by both the Stranas PK and the environment ministry, but the size of its illegal plantation was different.
These discrepancies are because the environment ministry uses self-reported data from companies that apply for the amnesty program, whereas the Stranas PK gets its data from local governments that issue permits to plantation firms.
Multiple sources familiar with the amnesty process said these data discrepancies also resulted in significant differences in fines that should be paid to the state.
A calculation by palm oil civil society group Sawit Watch estimated a potential 105 trillion rupiah ($6.7 billion) in fines that could be collected by the government in the amnesty program, using both 110a and 110b schemes.
This potential amounts to 3.2% of Indonesia’s total state budget in 2024.
An audit by the nation’s audit agency, BPKP, meanwhile, found that there’s 300 trillion rupiah ($19.3 billion) of potential state loss due to mismanagement of the palm oil industry, including tax evasion and discrepancies in fine payments in the palm oil amnesty program.
With such a huge amount of money at stake, law enforcers should thoroughly investigate the amnesty program and disclose the findings to the public, said Sawit Watch executive director Achmad Surambo.
“Hopefully the investigation reveals everything, because if not, then this huge amount of money [will disappear],” he said. “The public needs to know.”
Looking ahead
Besides unrooting all corruption in the amnesty program, the government also needs to shift its focus to recovering the environmental damage caused by illegal activities, experts say.
Grahat said the amnesty program has been misguided since its inception because it took the approach of pardoning all illegal plantations and only punishing their operators with administrative sanctions in the form of fines and, in some cases, taking back control of the plantations.
Therefore, there’s no environmental recovery in the amnesty program, even though the environment ministry has a role as a guardian of the environment, he said.
Among the environmental damages caused by illegal plantations in Indonesia are deforestation, which releases vast amounts of carbon emissions into the atmosphere and thus exacerbates climate change, as well as soil and water pollution and increasing fire risks.
“If the government doesn’t respond [to the environmental damage with environmental recovery], then who bears the cost? It’s the public,” Grahat said. “[The amnesty program] shows that the environment ministry is responding to environmental crimes by becoming collectors of fines, not the guardian of the environment. This is a weird mindset.”
Focusing on environmental recovery is crucial because the palm oil industry has been growing rapidly over the past two decades, so much so that it has exceeded the environmental carrying capacity, Achmad said.
Recent research by Sawit Watch, together with NGOs MADANI Berkelanjutan and Satya Bumi, found that the environmental carrying capacity for the maximum threshold or “cap” on palm oil in Indonesia is only up to 18.15 million hectares (44.8 million acres).
The calculation of environmental capacity was done by assessing human needs on an island and determining how physically suitable the island is for palm oil cultivation using an ecological footprint calculator model, which includes 14 limiting variables such as water availability, peat hydrological units, conservation areas and protected forests, protected wildlife habitats and key biodiversity areas.
This means that new land for palm oil cultivation can only be deemed suitable if it does not overlap with these variables, and there are only 18.15 million hectares of areas suitable for plantations in Indonesia, according to the research.
As there are 17.3 million hectares (42.7 million acres) of planted oil palm plantations in Indonesia, the palm oil industry almost exceeded the country’s environmental capacity, Achmad said.
“So if the government wants [to avoid exceeding the environmental capacity], the 3.3 million hectares [8.2 million acres of illegal plantations] should be recovered and reforested. They should’ve been given to the people [to be managed] using the social forestry program. Don’t legalize them because we almost exceeded the cap,” he said.
Failure to course correct the amnesty program could hinder the Indonesian government’s credibility and effectiveness in enforcing environmental regulations, such as those required under the European Union Deforestation Regulation (EUDR), Uli of Walhi pointed out. The EUDR mandates strict traceability and sustainability for imports of seven forest-related commodities, including palm oil, into the EU, aiming to reduce deforestation. Initially set to take effect in December 2024, the date of application of the EUDR has been postponed by 12 months.
If corruption issues are unresolved, it may compromise Indonesia’s ability to meet these standards, potentially limiting market access and damaging the country’s trade relations with the EU, Uli said.
“In 2022, we had a meeting with the European Parliament in Belgium, and they asked what data will Indonesia use [in ensuring compliance with EUDR], because the EU is using its own data. The Parliament said, ‘The Indonesian government is infamous for being corrupt, so how can we trust the data [used by the Indonesian government].’”
Citation:
Suyanto, S., Nugroho, Y., Harahap, M., Kusumaningrum, L., & Wirabuana, P.Y. (2022). Spatial distribution of vegetation diversity, timber production, and carbon storage in secondary tropical rainforest at South Kalimantan, Indonesia. Biodiversitas Journal of Biological Diversity, 23(12). doi:10.13057/biodiv/d231208
Banner image: Oil palm planation and native tropical rainforest on the island of Sumatra in Indonesia. Photo credit: Rhett Ayers Butler/Mongabay.
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