World Bank and IFC, ISPO, IECs, MIFEE, and Moratorium Deforestation favour palm oil

Neoliberal Economics: World Bank and IFC, ISPO, IECs, MIFEE, and Moratorium Deforestation favour palm oil

Norman Jiwan, July 2011

1. According to World Bank the per capita consumption of oils and fats during 2008–09 in the EU-27 and the United States was 59.3 kg and 51.7 kg, respectively, the consumption in developing countries such as India, Pakistan, and Nigeria was 13.4 kg, 19.9 kg, and 12.5 kg, respectively. Moreover, World Bank's world population projection of 7.58 billion in 2020 and a 5 percent increase in per capita consumption will need an additional 27.7 million tons vegetable oils will have to be produced annually by 2020.
2. There are key national, bilateral and international policies adopted during the first semester 2011 that all relevant with the Indonesian palm oil industry issues, relevant factors and drivers in the imposed massive project developments and mega industrial expansion. Firstly, a controversial Merauke Integrated Food and Energy Estates (MIFEE) grand launching. Second, official released the Indonesia Sustainable Palm Oil (ISPO) by the Ministry of Agriculture (MoA). Third, in May government released presidential instruction on the implementation of moratorium commitment with Norway. The fourth, the Indonesian Economic Corridors (EIC) which focuses on mining, natural exploitation and extractive activities, large-scale agro-industry for foods and energy plantations. And lastly, in April the World Bank Group launched its framework and strategy for engagement in the palm oil sector.
3. The Indonesian Economic Corridors (IEC) mentions that MIFEE project is one of the key economic corridors that will massively produce commodities like palm oil for biodiesel, sugar cane for bioethanol, pulp and paper, sago, rice, timber, etc. attracts food and energy both foreign and domestic investors as well as agro-industries. The project will require 1.6 to 2 million hectares forests and land in Merauke district, Papua province. Merauke population is 195,716 (2010)1 whilst MIFEE project claims that it will mobilise up 4.8 million workers from outside Merauke. Migrants definitely do outnumber the indigenous peoples population in terms of economic and political affairs.
4. ISPO is driven by weak governance and business as usual factors, increasing call for sustainable palm oil from national and international markets. Adopted as Ministry of Agriculture (MoA) regulation No. 19/Permentan/OT.140/3/2011, the ISPO standard is developed exclusively by government and major oil palm growers, research institutes and universities in an undisclosed process and minimal CSO participation. The draft standard tested by 17 companies in the field levels in both state-owned and private oil palm plantation operations in Sumatra and Kalimantan. On the other hand, SPKS, an independent oil palm smallholder farmers union realises some substantial weaknesses of the ISPO and its business as usual mode of operations. Union members deeply concern that the ISPO will leave smallholders with unfair practices, flawed terms of smallholding agreement, and unequal relationship with owners of mills and plantations.
5. Climate change bilateral deals on moratorium deforestation finally adopted for a two-year effective implementation. Despite a long waited promising implementation, five-month late than expected effective moratorium implementation, the presidential instruction released in May 2011, but concerns and controversies remain over its effectiveness and vague commitment in reducing deforestation of tropical rainforest and deep peat land forest. The presidential instruction was being broken on day one in Central Kalimantan, recently a released investigation report says Malaysian oil palm plantation subsidiary KLK continues clearing forest and areas of peatland ecosystems.2 It is even creating significant gap on how the government will achieve 41% emissions reduction from its international support moving from 26% own emissions reduction target.
6. The moratorium commitment and indicative moratorium map is vague and has lack of meaningful strategy and definitive measures to protect high carbon values, landscapes, livelihoods, and agricultural conservations. Moreover critics say that even without the presidential instruction protected forest and conservation areas already secured under extant forestry law and conservation regulations.
7. The government of Indonesia recently launched Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI) called Koridor Ekonomi Indonesia (the Indonesian Economic Corridors) earmarks the country's 2011-2025 economic growth scenarios through transformation of economics by providing synergy in connectivities of the economic centres in Sumatera as centre for producing and processing products of natural resources and national energy bank, Kalimantan centre for production and processing materials of mines and national energy bank, Java for drivers of national industries and services, Sulawesi-North Maluku (producing and processing products of agriculture, plantations, and fisheries, Bali-Nusa Tenggara Barat (gate of tourism and national food supporting), and Papua-Maluku corridor for managing rich natural resources and prosperous human resources.3
8. The Indonesian Economic Corridors (IEC) comprises of five key economic national sites namely mega economic centres, special economic zones (KEK), and free trade zones (FTZ) will largely depend on state and public private partnership financing and investment schemes. With these ambitious economic development targets in place the government is very optimism to achieve income per capita from US$ 4.803 in 2014 up to 12.885 – 16.160 in 2025, increase up to US$ 20.600-25.900 in 2030, respectively up US$ 78.478 in 2050.4
9. The national economic growth master plan target largely depend on mega industrial natural resources extraction and exploitation. The IECs sets the economic growth is expected to increase from 3.4% in $139 billion in 2010 to 6.3% in $473 billion in 2030 in Sumatra, 2.6% from $59 billion in 2008 to US$152 billion in 2030 with 3.6% in Kalimantan, 4.2% from US$304 billion in 2008 to $1,282 billion in 2030 or 7.5% in Java, in Sulawes-North Maluku growth reaches US$94 billion in 2030 equal to 7.7% compare to US$21 billion in 2008, growth in 7.6% from $18 billion in 2008 to $76 billion in 2030 in Bali-Nusatenggara,and in Papua-Maluku estimated 9.6 growth from US$13 billion in to $83 billion in 2030.5
10. The World Bank Group and its private sector investment arm International Finance Corporation recently launched their framework and strategy for engagement in the palm oil sector. It is confirming the need for accountability and responsibility of the global palm oil industry, but concerns remain over several issues, including the rights of indigenous peoples and how performance standards will be applied across palm oil supply chains. Resistance is emerging both from the government and oil palm plantation companies. Moreover, the government of Indonesia claims that it will not receive the loan offer from the World Bank and the International Finance Corporation (IFC) for palm oil sector and palm oil producers can propose loans alone from other banks.6
11. There are remain challenges and issues on whether the new World Bank Group policy can be better implemented, aligned, and enforced against corporate biases, legal leniencies, discriminatory regulations, conflicting policies, corrupt judicial systems, and ineffective governance regimes. Moreover concerns over past damages require consistent implementation in addressing and find out lasting solutions against social problems, increasing conflicts, violations of rights, alienation and degradation of livelihoods by the engagement of the bank over the last 40-year in the Indonesia's palm oil palm oil industry.
12. The Country and its peoples have the right to sustainable development. However, some estimate that export tax from the sector only contributes to Rp. 12 trillion whilst the state has to spend Rp. 14 trillion from State's budget in 2010 for importing rice making it almost impossible sustain consumption if the sector keeps on expanding plantations in areas of high agricultural values.
13. World Bank claims that an additional 6.3 million hectares to be planted with oil palm, assuming that 10 percent yield improvement in productivity per hectare or 42 million hectares land to be cultivated if the consumption to be satisfied by soybean production. This projection ignores the fact that palm oil is now being utilised for biodiesel feedstock that will need 5 times size of land than normal palm oil for edible consumption thus more expansion on to new landscapes will be inevitable. Yield improvement of existing smallholder farmers is extremely important but diversification of vegetable oil crops and local alternatives will guarantee better future, strong ownership and more environmentally friendly than monoculture of oil palm.
14. Instead of resolving roots of sustainability problem, the Indonesia-Malaysia Palm Oil Group (IMPOG), private sector and their supporters like the World Bank, and government agencies spent monies and resources in maintaining public opinion by 'white and green' washing campaigns, glossy colourful ads, and public relations. One of the prominent lobbyist Alan Oxley and his affiliate World Growth Institute (WGI) and International Trade Strategies Global (ITS) accused poorer people clearing forest areas for commercial and illegal logging.7 Forestry Minister told the media that deforestation in the country still rampant because communities are clearing forest areas to develop their own small oil palm plots, maintain subsistent livelihoods and continue slash-and-burnt framing.
15. However, CSO coalition against plantation mafia (Anti Mafia Perkebunan) revealed that communities were being used to clear forest and encroached in conservation areas, manipulation of forest status, irregularities of procedures and administrations, unpaid taxes and levies, grafts, abuses of power, bribes, etc. In West Kalimantan province, the coalition estimates the State suffers approximately Rp. 70 trillion from clearing of 1.3 million hectares for oil palm plantations allegedly involved bribes, corruptions and grafts.8
16. Despite making contributions, the oil palm operators have to shift unsustainable paths and practices by leaving comfortable business as usual zones by making an improved and imperative impacts, causes, and thrusts towards socially responsible, legally compliant, environmentally sustainable, and culturally acceptable production of, procurement and growth of palm oil and its derivatives in the entire local, national, and international value chains.
17. Early in 2011, Sawit Watch records the increase number of oil palm permits issued have covered an area of 28.9 million hectares in Sumatera, Kalimantan, Sulawesi, and Papua. Furthermore, massive planting and industrial scale of expansion drive land grabbing alienation and appropriation of rights and livelihoods of indigenous peoples and local communities leading to serious human rights abuses and social conflicts violent measures, shooting and killing protesting local communities and smallholder farmers.9
18. During 2009 and 2010, Sawit Watch documented cases of slavery-like conditions in East Kalimantan and Central Kalimantan in 2011. The slavery-like working conditions in the palm oil industry in some cases, among other including physically harsh actions, intimidation, unpaid wages, underage and child exploitation, non-transparent working contracts, inhumane barracks, substandard facilities, improper food, minimal clean and safe drinking water, unpaid overtime, unjustified working targets, dangerous and risky working conditions, etc. amongst identified and recorded prevalent daily conditions.
19. Will the current and expected economic corridors, mega food and energy projects, national standards, and international financial sustainability policies address and resolve internal injustices, discriminating regulations and unsustainable practices of business as usual? How the government is going to control and minimise extractive and exploitative massive and large-scale mining, agro-industry, and corporate crimes? To what extent is the designed economic corridors will respect and protect human rights of indigenous peoples, local communities, labourers, and smallholder farmers?
20. When sustainability standards (RSPO), operational policies (World Bank), performance standards (IFC) are raising the bar over sustainability of the sector. Nonetheless the national business as usual regulation (ISPO), regimes of mega economic and massive agro-industry expansion, extractive and exploitative operations, and the presidential instruction still allow and further clearing forest, deep peat, and conservation areas including agricultural lands and local livelihoods. In their competition and collaboration, ISPO versus RSPO, WBG vis-a-vis RSPO and ISPO, exposing worst cases and outstanding problems of market regimes, and dismantling non-transparent and non-democratic governance processes and approaches are extremely useful in the future.
21. A much needed way forward would have been better, when and only if, recourse to justice and reparations against the past injustices and violations of economic, social, and cultural rights of the affected indigenous peoples and local communities. An end of terror and criminalisations against community leaders, oil palm smallholder farmers, social and environmental activists, human rights defenders, detention of poorer women and children accused of stealing fallen palm fruits.