A bitter harvest

Published : Jun 06, 2003 00:00 IST

A private oil palm plantation around the land of a small farmer. - MUKUL SHARMA

A private oil palm plantation around the land of a small farmer. - MUKUL SHARMA

Indonesia's huge oil palm plantations, mostly owned by corporate houses or multinational companies, violate the rights of indigenous peoples and cause the destruction of tropical forests.

JAMBI province in Sumatra, Indonesia, is well-known for its oil palm plantations. In 2000, it had oil palms on around 2,85,000 hectares and 15 processing plants with a total capacity of 670 tonnes an hour, and produced about 3,40,000 tonnes of crude palm oil. The provincial Governor has unveiled a plan to develop another one million hectares of plantations in the province by 2005. An ambitious development programme will be launched in Jambi, with a United States-British-Swiss venture capital consortium, Asian Jade Venture Ltd., investing $500 million in oil palm plantations, downstream processing industries, a port, a new town, tourism, fisheries and so on.

However, the people of Lubok Ingau village, whose land and forest were taken over by the government for the development of the plantation, tell a different story - one of dispossession and deforestation, encroachment of their rights over land and community resources, physical violence, intimidation and terror. For instance, during the course of the land acquisition by the company, the people of the village held a meeting to discuss the issue. More than 150 of them had got involved in cases of land dispute with the company and wanted a negotiated settlement. They wanted their land back if the company could not solve the conflict. However, the armed police intervened, attacking the participants and arresting 12 of them.

Individual voices of protest have now come together as a movement against the plantation programme, which is aggressively promoted and subsidised by the government and is open to foreign investment. Various movements of the indigenous people are now demanding the reinstatement of their rights to natural resources, which have been robbed or bought over from them by oil palm companies. They are trying to stop the expansion and development of large oil palm plantations in areas inhabited by indigenous people. Their demands include the cancellation of foreign debt relating to large oil palm plantations and the enforcement of labour laws in the plantations.

Sawit Watch (oil palm is known as sawit in Indonesia), a network of trade unions, mass organisations, non-governmental organisations (NGOs), and research institutes and individuals, came into being in 1998. It is taking several initiatives to support local struggles against plantation companies and campaigning against International Monetary Fund/World Bank structural adjustment loans for liberalising the oil palm sector. Sawit Watch will observe September 24 as Agrarian Day in Indonesia, when rallies will be organised in all the regions of the country.

Oil palm plantations cover over 2.5 million hectares in Indonesia. More plantations are being developed in almost all possible areas of the country, such as West Papua, Maluku, Sumatra, Kalimantan, Sulawesi, Bali and Nusa Tenggare. State-run companies own 4,43,000 hectares of plantations, smallholders 8,24,000 hectares and private companies the rest. In 1997, the government had released some 6.8 million hectares to develop plantations and the next year it invited applications to develop plantations on another nine million hectares.

Over the past few decades, oil palm plantations have spread rapidly across the countries of the South. These poor, debt-ridden countries see oil palm as a `miracle crop' that will help them overcome their external debt. Agencies such as the World Bank, the IMF and the United Nations Development Programme (UNDP) support plans for oil palm development. The demand for palm oil is increasing, especially in the North. While palm oil's share of the global trade in edible oil is more than 40 per cent, soya's share is 22 per cent.

A report entitled "The bitter fruit of palm oil", published in August 2001 by the World Rainforest Movement, profiles the oil palm plantations around the world. The report says that oil palm plantations are being established principally in tropical regions where, by 1997, they had occupied 6.5 million hectares and produced 17.5 million tonnes of palm oil and 2.1 million tonnes of palm kernel oil.

In Asia, the two main palm oil producing countries are Malaysia and Indonesia, both with more than two million hectares of plantations each. While Malaysia accounts for 50 per cent of the global production of palm oil (of which 85 per cent is exported), Indonesia is the next largest producer, accounting for almost 30 per cent (of which 40 per cent is exported). Thailand (with more than 2,00,000 hectares of plantations) and Papua New Guinea (the world's third largest palm oil exporter) are rapidly joining them in large-scale oil production. India, the Philippines, Cambodia and the Soloman Islands too have ambitious plans.

The oil palm crop itself is not the problem, as is the case with other monoculture plantations such as pine and eucalyptus. The problem lies in the way it is raised - as mega industrial plantations, mostly managed by corporate houses, multinational companies and financial institutions. Such plantations cause environmental degradation, social injustice and human rights violations. While claiming to improve the economic situation of the country and address poverty, unemployment and infrastructural problems of the local population, the present growth of palm oil plantations is mainly serving the local elites and transnational companies. Profits assured by short growth cycles and the easy availability of finance, cheap labour and low-priced land - all these available in the South - make it attractive for domestic and foreign investors. Hence transnational companies such as Unilever, Procter & Gamble, Henkel, Cognis and Cargil now play important roles in palm oil production and trade.

THE oil palm (Elaeis uineensis) is native to West Africa, where local populations have used it to make foodstuffs, medicines, woven material and wine. In several African countries, even today the growing and harvesting of oil palm is done in small-scale, traditional ways.

Plantations of specially selected and cloned varieties of palm trees produce fruit after four or five years and reach maturity and the highest productivity when the trees are 20 to 30 years old. The fruit bunches, each weighing between 15 and 25 kg, are made up of 1,000 to 4,000 oval-shaped fruits, each 3 to 5 cm in length. Once harvested, the fleshy part of the fruit is converted into oil through a series of processes, while kernel oil is extracted from the nut. The processing of the crude oil yields palm stearin and palm olein. While the stearin is used almost entirely for industrial purposes, such as in the production of cosmetics, soaps, detergents, candles and lubricating oils, the olein is used as cooking oil and to make foodstuff such as margarine, creams, cakes and pastries.

Although palm oil plantations first came to Indonesia in the 1960s under a World Bank-assisted programme, the big industrial plantations came only in the late 1970s. Again, it was a World Bank-funded project on Nucleus Estate and Smallholders (NES), combined with a transmigration scheme for the crop plantation sub-sector, that became the catalyst in this development. Since the 1980s, industrial private plantations have grown at an average annual rate of 24 per cent. In 1996, Indonesia's exports of palm oil products were worth $1 billion.

The ownership pattern of the Indonesian oil palm industry speaks volumes about its beneficiaries. Mia Siscawati of the Indonesian Institute for Forest and Environment, who has researched on this aspect, says: "The industry is controlled by some of Indonesia's most influential business families. In 1997, the Indonesian private oil palm plantation sector was dominated by eight Indonesian conglomerates owned by several Indonesian entrepreneurs, most of them having close links with the Suharto family - the Raja Garuda Mas Group, the Astra International Group, the Sinar Mas Group, the SIPEF Group, the Socfin Group, the Napan Group, the Bakrie Group and the Salim Group. Most of these groups are also involved in logging, in the pulp industry and in other sectors."

The government lifted the restrictions on foreign ownership of plantations in 1998. Even at that time, foreign companies, through joint ventures, were running 93 plantation projects, together worth $3.3 billion. There were 612 joint venture projects worth $23.55 billion. In the new policy era, 50 foreign investors, from the British Virgin Islands, the U.K., Belgium, Netherlands, Hong Kong, South Korea, Singapore and Malaysia, are in the process of developing oil palm plantations.

In the new phase, too, the IMF and the World Bank worked to streamline the entry of foreign companies. The IMF's 50-point package to overcome the economic crisis of Indonesia called for the liberalisation of the oil palm plantation sector. Point 39 of the package asks the government to remove "all formal and informal barriers to investment in oil palm plantations".

The future of tropical forests the world over is an issue of growing concern. Yet, all the big industrial plantations in Indonesia were developed after the destruction of tropical forests. A study done by E. Wakker (1999) under the WWF Indonesia shows that between 80 and 100 per cent of the species of fauna inhabiting tropical rainforests in Malaysia and Indonesia, cannot survive in oil palm monocultures.

People's rights over forest resources have been the main issue of conflict in the past 10 years in Indonesia, a period that witnessed devastating changes in the forest, law and governance policies of the country. The revised forest laws, which proclaim the state as the owner of all forests in Indonesia, were implemented in 1999. Around the same time, the Ministries of Forestry and Plantation were merged in order to facilitate the legal conversion of forest land into plantations.

The government also announced a policy to integrate timber and tree crop plantation development within the forest areas and allowed a single company to obtain concessional rights for logging, timber and tree crop plantations. A new scheme, Ijin Pemanfaatan Kayu (IPK), was introduced in 2000, which allowed logging companies to clear-cut forested areas designated by the Ministry of Forestry and Plantation, for conversion. The government introduced a new regulation to allow plantation companies to establish tree crops, including oil palm and timber, in `non-productive production forests'. Such schemes facilitated the fast conversion of forests into big oil palm plantations.

Abdon Nababan of Forest Watch Indonesia said: "Leave the legal conversion. The domestic and foreign investors have found many other ways as well to subvert the thin laws and legal processes coming in their way." The oil palm and timber plantation companies were mainly responsible for the massive forest fires in Indonesia in 1997. The government, which was friendly to them, had to accept that plantation owners, industrial estates and transmigration land-clearing projects were responsible for 80 per cent of the fires. The government identified 176 companies as the culprits, out of which 133 were oil plantation companies.

PEOPLE are losing their land and forest rights. The Indonesian Legal Aid Foundation (YLBHI) has stated that in 1998 alone, in 14 provinces, people lost 8,27,351 hectares to private companies and investors. In the process, 2,14,356 households lost their sources of income. In one province - South Sumatra - all the 81 oil palm companies operating there are fighting cases of land disputes with the local population.

Several methods are used to make people hand over their land to develop plantations. For example, the World Bank's NES stipulated that small farmers having land surrounding the big plantations should grow the same crop as in the plantations. The company decides the terms and conditions in such deals. The small farmers are virtually forced to come under the NES system and have hardly a chance to say `no'.

Kasan Sukardi, a farmer, who came under the NES in Pasir district, East Kalimantan, says that he accumulated a debt of $2,413 to be paid in 10 years. Ever since he joined the NES two years ago, he has been getting $200 a year, which is not sufficient to meet his needs. In the same district, a study conducted by the Institute of Dayakology Research and Development (IDRD) revealed that under the traditional agro-forestry system, the indigenous people earned more than double what they earn today from two hectares of jungle rubber.

In all probability, the Indonesian government, the IMF and the World Bank will continue to push for the further development of the palm oil sector. The government recently attempted to encourage Chinese and Malaysian investors. The palm oil industry also aims at developing genetically modified oil palm.

Plantations of coffee, cocoa, banana and several other such crops, promoted over large areas in various countries at the expense of environmental balance and the livelihoods of local farmers and workers, have finally ended up with problems of oversupply, blind competition and falling prices. On the other hand, the production and trading companies that promoted them were assured of cheap raw materials and big profits. The slowdown in production and the fall in prices in the last few years show what is in store for the future. Indonesia has gone far ahead, but in several other tropical countries, oil palm plantations are only in their initial stages and it is still possible to stop this new invasion.

Mukul Sharma is Director, Heinrich Boell Foundation, India.

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