"The situation of biofuels in Indonesia"

Written on 23 September 2007

Palm oil for biodiesel market and implications for social and environmental degradations[1]

The republic of Indonesia is a tropical country which situated between two Asia and Australia continents along equatorial line. In 2004, Indonesia has 33 administrative provincial with 222 million populations, of which 30-60 million are forest-dependent peoples where around 30 million are indigenous peoples.

Indonesia is country of 192.197.000 ha in land size with 5 big of 17,000 small islands. It is home to 10% per cent of the remaining tropical forests in the world exists which hosts vast biodiversity resources with 10% of all the plants species, 12% of all the mammal species, 16% of all the reptiles, and 17% of all birds.

Those natural resources now have long been optimally utilised for national developments trough massive exploitation of primary and natural forests for logging concessions and timber industries, mines of minerals, fossil fuels, natural gases, and conversion of forest and land for industrial tree and other corps plantations lead to deforestation and lost of biodiversity.

These natural resources have almost been depleting running out particularly fossil fuels due to market liberalisation and raising fuel prices in the World’s market. Minister of Energy and Mineral Resources estimates Indonesia’s fuels stock probably last until 11 years, gasses stock 30 years, and coals 50 years (Republika, 20/1/05). It does mean that Indonesia has to find alternative sources of energy to replace conventional fuels and at lest to anticipate the fuels from running out.

Basically Indonesia has abundant local crops raw materials for biofuel production. Forum of experts have identified that about 60 local crops may be converted and processed further for production of biofuels. Those crops can be extracted to produce both straight vegetable oil (SVO) and crude vegetable oil (CVO) which are both materials for producing biofuels.

Considering its strategic role and potential development in the future, both land banks and energy crops, the government of Republic of Indonesia is keen to move seriously in biofuel development and production. Moreover, the Indonesian Presidential Decree No. 1 Year 2006 was issued in proliferating procurement and production of biofuel as alternative fuels.

Under the decree, the President takes strategic policy by mobilising and instructing all relevant ministers and their departments led by Coordinating Minister of Economic Affairs in synergic collaboration with 12 ministers including Energy and Mineral Resources, Agriculture, Forestry, Industry, Trades, Transportation, Research and Technology, Cooperatives and Small and Medium Enterprises, State-owned Enterprises, Home Affairs, Finances, and Environment including provincial governors and heads of district administrations.

Experts and government authorities say that sourcing biofuels from small-scale cultivations will not profitable because supplying biofeuls to the emerging market needs stable and sustained production. On other words, palm oil is the potential biofeuls because it is an established industry and ready for biodiesel production compare to other different crops such cassava, coconut, sugar cane, and jatrhopa.

What is oil palm? Oil palm (Elais guineensis) plantations and palm oil industry have already become mainstream economic for Indonesia. Actually, oil palm is non-native plant. It was imported from West Africa by the Dutch Colonial in 1848 and 4 seedlings grown in Bogor botanical garden. It had not been developed significantly before it was first large-scale and commercial plantation established in 1911 in North Sumatra. It has now been tremendous business controlled by more than 30 national and multinational big groups those are managing more than 600 subsidiaries in 19 provinces where oil palm is being developed.

Oil palm is the highest yield produce 15 to 20 tonnes fresh fruit bunch (FFB) per hectare annually. Until June 2007, approximately 7.2 million hectares of land planted with oil palm within only five years (1999-2004) the annual planting rate to have reached 400,100 ha. What is more, the government planning further slating approximately 21 million ha land for palm plantings (Sawit Watch, 2006).

Biodiesel from palm oil requires intensive capital investment to make it profitable. If an oil palm plantation and one mill are developed to produce crude palm oil on an economic scale, it only needs 20,000 hectares, whereas the development of an economically viable and profitable oil palm plantation for biodiesel requires a minimum of 50,000 hectares. Such huge land for biodiesel production is really big problem to achieve, however, the government of Indonesia and the Association of Indonesian Palm Oil Growers (GAPKI), seeking to also ensure continued supplies for existing European food markets, have mutually agreed to allot 3 million hectares of land for oil palm plantations for biodiesel production in Indonesia. Furthermore, in 2007 the government of Indonesia and Malaysia have formally signed an agreement to allocate 12 million ton or 40% of crude palm oil (CPO) production of both countries to be allocated for biodiesel production.

Is it blessing or curse? The government sees it is blessing because commodities are exported, earn foreign currencies, in return to buy machinery, technology and other capital goods, and support economic and social development. On the other hand, it plantation development has resulted deforestation and destruction of ecosystems, biodiversity lost, abuses of land rights, deprival of local communities and indigenous peoples of means of living, corruption and repression.

Moreover, until July 2007, Sawit Watch recorded more than 500 conflicts related to land issues against oil palm plantation developments in Indonesia. These unresolved conflicts, will get worse if the current biofuels policy is put in place. They will deprive further local communities and indigenous peoples from their lands and livelihoods. Many misleading premises about oil palm plantations provide employment opportunity and better job, in fact, only 36 workers per 100 ha of oil palm annually, inadequate health and safety training, strikes more than three days leading to laying off, regional minimum wages vary and below than daily expanses, child labour as past of culture to help parents, unequal and lack recognition working value, and lack of proper health and safety measures in handling and applying agrochemicals, and abuses reproductive rights of female workers biologically sensitive exposures spraying works of agrochemicals application.

Sawit Watch in collaboration with Forest Peoples Programme (UK), HuMA, and World Agroforestry Centre (ICRAF) carried out research on land acquisition for oil palm plantation developments in three provinces[2]. The research intensely assessed Indonesian legal framework and policy for land acquisition. The case studies revealed practices on the grounds where existing contradictory laws, which fail to secure indigenous rights while encouraging land expropriation for commercial projects in the ‘national interest’; absence of regulations, as a result of which procedures for the recognition of the collective land rights of customary law communities are unclear; weak institutional capacity, both in the national land agencies and in the district bureaucracies, which makes recognition of customary rights difficult; and national and regional policies and spatial planning processes which favour the conversion of customary land and forests into oil palm plantations to increase national and district revenues.

If the government would have to continue sourcing biofuel from palm oil for biodiesel production, indeed the government of Indonesia must have to ensure that the future development of biofuels must incorporate environmentally friendly measures and sufficiently take into account that the development must respect for ratified international laws, respect for customary rights, adherence to the principles of free, prior and informed consent, minimise violence and avoid state’s violence in dealing with local communities around the plantations, effective monitor burning and enforce mandatory zero burning policy, stop conversion of primary forests and other high value ecosystems, evaluate and withdraw certificates where for oil palm where land is legitimately contested by local communities, formulate stricter provisions in favour of workers’ rights and respect for gender equity.

[1] Prepared by Norman Jiwan Staff of Research and Database Division, Sawit Watch is Indonesian Non-Government Organisation, group of individuals concern with adverse negative social and environmental impacts of oil palm plantation development in Indonesia has individual members work in 17 provinces where oil palm plantations are being developed. Sawit Watch seeks to promote social justice through rights based approaches

[2] The book is aavailable at http://www.sawitwatch.or.id/images/Publikasi/Land%20Acquisition%20(English).pdf