Indonesia: palm oil expansion drives massive illegal logging

Log yard operated by plantation company PT Kahayan, October 2014. Photo: EIA.
Log yard operated by plantation company PT Kahayan, October 2014. Photo: EIA.
Indonesia appears to brought rainforest logging under control - but it's all a huge illusion, according to a new EIA report. Traditional logging has been replaced by the mass clearance of rainforest for oil palm plantations, creating massive supplies of hugely profitable but often illegal timber. And lurking beneath the surface is a pervasive network of criminality and corruption.
The importance of traditional logging is declining. In its place, the conversion of rich forests to plantations for palm oil and other products is generating a vast and poorly regulated stream of timber.

In November 2014, the newly inaugurated President Joko Widodo acknowledged the threat unregulated plantation expansion poses to Indonesia's natural heritage, stating:

"It must be stopped. We mustn't allow our tropical rainforest to disappear because of monoculture plantations like oil palm."

Yet the criminal justice response to this epidemic of forest crime has been extremely limited. This is not because the government has not recognised or acknowledged the problem.

Far from it: over the years, a succession of studies by various agencies and ministries have produced empirical evidence of the breadth and depth of illegality.

The outcome of the studies is predictable and repetitive: pledges of enforcement, commonly against a small set of the most obvious test cases.

Yet there is no evidence this has led to tangible action. "The track record of Indonesia in terms of law enforcement is not good", Heru Prasetyo, the head of the REDD+ Agency, told journalists in August last year while announcing another audit of dubious plantation licences.

'Logging' is down - but 'conversion' for plantations is through the roof

The Environmental Investigation Agency (EIA) has been documenting and exposing the illicit trade in stolen timber in Indonesia for more than 15 years. In that time there has been a remarkable transformation in the forestry sector.

Rates of illegal logging have been slashed in half and the Indonesian government has committed to an ambitious reform agenda. It has thrown open its doors to civil society and displayed genuine intent to halt the ransacking of the rainforests.

But the importance of the traditional, selective logging forestry model is declining. In its place, the conversion of rich forests to plantations for palm oil and other products is generating a vast and poorly regulated stream of timber.

Although the rule of law has increasingly been brought to bear on the old selective logging system, Indonesia's plantation sector remains in abject chaos.

The unprecedented growth of plantations has been characterised by illegality. Successive attempts to bring some semblance of order to land acquisition practices and deforestation have been undermined by a combination of corruption and incompetence, resulting in the exploitation of forest dwellers and driving rates of deforestation to the highest in the world.

Over the past two years, EIA has conducted investigations into the palm oil sector and its increasing role in the supply of timber from natural forests. This report exposes the criminality driving forest conversion and makes clear the urgent need for both enforcement and reform.

High-sounding phrases, while the chainsaws rip

The importance of traditional logging is declining. In its place, the conversion of rich forests to plantations for palm oil and other products is generating a vast and poorly regulated stream of timber.

In June 2013, the Government of Central Kalimantan, Indonesia, announced the latest in a long line of attempts to rein in hundreds of oil palm plantation companies operating in violation of the law.

Teras Narang, the provincial Governor, released a list of the companies whose operations were illegitimate and declared solemnly that they must all cease operating.

The same month, in one of the richest tracts of rainforest left in the province, the chainsaws fired up. An opaque oil palm company linked to a coterie of prominent figures in Central Kalimantan's plantation sector and a Jakarta-based investment bank began clear-cutting.

The returns were lucrative but the looting of millions of dollars of timber was just one of many criminal offences committed by the firm. This is the face of illegal logging in Indonesia today.

Corruption is a key obstacle to enforcement, as a 2009 document by the MoF itself acknowledged: "The prevention, detection and suppression of forest crimes continue to be hampered by corruption in the justice system at each step from criminal detection and investigation, through case preparation and prosecution, to adjudication and appeal."

The government and NGOs have acknowledged that a key issue underpinning this crime wave is the corruption and collusion between companies and regency officials, resulting in the issuance of 'unprocedural' permits. Prasetyo, while commenting on this problem, observed that a third of all regents were under investigation for corruption.

Law enforcers must step out of sectoral boundaries

NGOs and progressive government figures have emphasised the need to look beyond sectoral legislation and to corruption laws in order to address this.

In May 2012, the NGOs Save Our Borneo and Indonesia Corruption Watch warned that if enforcement agencies only focused on sectoral laws such as the Forestry Law or Plantation Law, "then it is almost certain forestry crimes, specifically the illegal granting of concessions, will be difficult to uncover."

Indonesia's REDD+ National Strategy, a government blueprint for reducing deforestation, emphasises the need to use administrative, civil and criminal laws to address "improper issuance of permits".

The Anti-Corruption and Anti-Money Laundering Laws provide scope to look at the corruption, collusion and money politics underpinning the plantation sector. Indonesia boasts an effective anti-corruption agency, in the Corruption Eradication Commission (KPK), that is capable of carrying out such investigations.

Indeed, one of the few successful, high profile convictions relating to the plantation sector concerned corruption in the issuance of IPK permits by the Governor of East Kalimantan to a logging firm. But the KPK's interest in forestry is perceived to be limited, despite the fact that the sector accounts for most of the US$100m it has recovered in assets.

Two movements have emerged in recent years that are intended to reduce deforestation from plantation development. An analysis of their implementation and scope, however, suggests that they alone may not prevent widespread timber production from deforestation - whether legal or illegal.

REDD to the rescue?

REDD+ Reducing Emissions from Deforestation and Forest Degradation (REDD+) is an initiative that seeks to create financial incentives to stem greenhouse gas emissions from forest loss. It has been developed during negotiations to create a global, legally-binding agreement to tackle climate change.

The Government of Indonesia was an early mover under the scheme and in May 2010 signed a bilateral agreement with Norway, outlined in a Letter of Intent (LoI), under which Norway would provide up to US$1 billion to support reductions in deforestation.

A cornerstone of the LoI was a two year suspension, or moratorium, on new concessions for conversion of peatlands and natural forests, though Indonesia limited the latter to 'primary' forest. During this period Indonesia was supposed to develop a database of 'degraded' land and direct economic activity to these areas and away from forests.

Under the LoI Kalteng was chosen as a REDD+ Pilot Province, in which reforms intended to reduce deforestation could be first implemented. In September 2012 the MoF approved a revised spatial plan that is now being used to govern forest and land use in Kalteng.

That spatial plan, however still directs oil palm expansion towards some of the richest forests or peatlands left in the province. All of the case studies in this report, for example, are located on areas slated for conversion to agricultural use and are being cleared now.

A raft of policy developments, legal instruments and even a national Agency have been constructed under the umbrella of REDD+ in Indonesia. The reality is that forests are still wide open for conversion and spatial plans provide a legal basis for companies to destroy them for years to come.

Zero deforestation commitments an exercise in wishful thinking

Over the past two years a series of impressive commitments have been made by major companies to cease producing, trading or buying palm oil linked to deforestation and exploitative practices.

In 2013 alone, 21 major consumer goods firms adopted 'zero deforestation' sourcing policies, mainly for palm oil. The three major traders of palm oil - Wilmar International, Golden Agri Resources and Cargill - adopted zero deforestation policies that collectively cover about 60% of all global trade in the commodity.

While these commitments are laudable, as long as the government is making forests available for conversion there will be companies willing to clear them. Heru Prasetyo, the head of the REDD+ Agency, has suggested that there may be about 1,000 mid-sized oil palm companies "operating under the radar of international organisations".

Companies like those included in this report display limited concern for legal procedure or environmental damage, a disregard for the rights of rural communities and may be collectively responsible for the destruction of hundreds-of-thousands of hectares of forest.

The willingness of such companies to step in when larger firms decline to develop sensitive areas has been well documented. For example, areas of high conservation value set-aside by members of the Roundtable on Sustainable Palm Oil (RSPO) are being reallocated by the government to non-RSPO members and cleared.

Aspiring 'zero-deforestation' companies now report these realities fundamentally threaten their ability to meaningfully protect their forests.

Ultimately, forest friendly downstream sourcing policies and commitments by the largest growers must be built into Indonesian law in ways that spread these progressive ideas across the palm oil industry.

Until then, neither these voluntary measures nor REDD+ will stop the flow of timber from Indonesia's plantation sector.



This article is based on an extracts from the report 'Permitting crime: How palm oil expansion drives illegal logging in Indonesia' by the Environmental Investigation Agency.

Please refer to the original report for full references, etc.

Oliver Tickell edits The Ecologist.

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