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Green Deserts: The Palm Oil Conflict

by Melody KempSpecial to CorpWatch
February 16th, 2012

Central Kalimantan newly cleared and planted oil palm estate. Photo by Wakx/Flickr. Used with permission

A team of Indonesia’s elite special mobile brigade national police unit (BRIMOB) evicted people from three settlements in the rural outpost of Batin Sembilan in Sumatra, Indonesia, in August 2011. The police fired guns to scare them off, and then deployed heavy machinery to destroy their dwellings and bulldoze them into the nearby creeks, according to a report published by a team from U.K.-based Forest Peoples Programme, U.S.-based Rainforest Action Network along with Sawitwatch in Indonesia.

The incident took place at the 20,000-hectare oil palm concession of PT Asiatic Persada, a 51 percent-owned subsidiary of the Wilmar Group. A major owner of plantations and producer of a wide range of edible oils, the largest percentage of which is palm oil, Wilmar aims to be Asia’s largest agribusiness group.

“BRIMOB have been actively persuading the people to leave, and have frequently fired their guns to frighten the people,” emailed Indonesian activist Uki.  “They were contracted by the company in July 2011 to assist [the removal of people]. As well as chasing the people from their homes, they have been daily patrolling near the remnant settlements and discharging their weapons. The local government wants the people to accept the joint venture. They do not recognize people’s customary rights.”

Indeed, this correspondent saw Indonesian police displaying a badge for POLDA (Polisi Daerah or district police) on one shoulder and on the other, the logo of a commercial security organization owned by the police.

The Palm Oil Debate

The conflict over land is merely one example of the controversy generated by palm oil plantations. Globally, the palm oil industry is thriving – the 50 million tons or so produced each year now accounts for 55 percent of the global trade in edible oils, despite strong opposition from soy and other vegetable oils used for foods and biofuels. Prices hit a high of $1,400 per ton in 2007 and although it is trading at closer to $1,000 today, palm oil production is still a lucrative business for the two countries that grow 85 percent of the crop – Indonesia and Malaysia.

The plantation companies make money in two ways: First they clear cut and sell the existing high-value trees, burning the residue. The haze from those forest fires has interrupted regional air traffic and caused severe respiratory illnesses in Indonesia, Malaysia as well as Singapore. Then the companies plant the spiky oil palms trees, creating vast, eerily silent monoculture plantations.

Activists have sparked a raging debate over the industry, faulting palm oil for contributing significantly to carbon dioxide and methane emissions, the loss of biodiversity and precious carbon sequestering forests, land subsidence, poverty, and for exacerbating starvation resulting from land appropriation, as a German filmmakers Inge Altemeir and Reinhard Hornung  documented in Biofuels the Myths.

The new plantations create what Jakarta based ecologist consultant to the Ministry of Forestry Dr. Sean Foley called “green deserts.” From the air it is easy to see why: the plantations stretch over the horizon, dark and uniform, with only the clay access roads breaking the monotony. “Being an introduced species, they are not friendly with local ecology; very little lives inside.” Foley added.

Environmental groups consistently raise issues about the impact of palm oil production at international environmental gatherings, such as at the United Nations Climate Change Conference in Durban in November 2011. In reaction, the industry has set up an international forum of its own – the Round Table on Sustainable Palm Oil (RSPO), which has signed up 779 members and associates, including almost every major industry player in the world. RSPO also includes a few non-government organizations such as the World Wildlife Fund which helped set up the organization in 2004 .

Critics such as WALHI, the Indonesian member of the Friends of the Earth environmental federation, argue that the RSPO is a contradiction in terms because the industry is inherently unsustainable. The fires and land conversion, they say, are particularly the destruction of peat lands and forests that precede palm oil planting, and are a major preventable sources of greenhouse gases.

“The scientists don’t understand the power of greed and corruption in Indonesia. That’s the trouble,” said Rivani Noor of Indonesian’s Environmental Justice for People organization (CAPPA) and Sawit Watch during a meeting in Jambi two years ago. “The government smiles, and takes their money while provincial authorities allocate new concessions on peat and primary forest.”

Wilmar

Wilmar International Ltd. is the world’s biggest global processor and merchandiser of palm and lauric oils. Established in 1991 by Kuok Khoon Hong of Malaysia and Martua Sitorus from Indonesia, Wilmar now owns some of the largest oil palm plantation companies in the world; it is the largest palm biodiesel manufacturer in the world; and is also a leading source of edible oils and specialty fats and oleochemicals to China, India and the Ukraine, east and southeast Africa.

Based in Singapore, Wilmar now operates in more than 20 countries, employing 88,000 people and more than 300 processing plants, according to its website. With its products sold in 50-plus countries, and palm oil present in a vast array of products from fast food, and gourmet ice cream, to cosmetics, it would be a rare global consumer who didn’t help the company boost its bottom line.

Singapore Business and Bloomberg estimated that Wilmar’s profits soared by 157 percent to US$ 442.4 million in the third quarter of 2011. The company’s own reckonings are more modest:  a 24% increase in earnings to US$321 million for 3Q2011.

Malaysia and Indonesia are key components of the Wilmar empire. An Indonesian language blog by Rudy Rusanto lists a staggering 433 companies owned by Wilmar just in North Sumatra. According to Bloomberg, Wilmar has also made significant inroads into the sugar, soybean, and real estate markets. By November 2011, one-third of Wilmar’s total crude palm oil refining capacity was in Indonesia.

Moreover, Wilmar is creating an expanding network of farms, food processors, and shipping companies in China. Operations on the resource-voracious mainland account for more than 44 percent of Wilmar’s assets, and with China’s introduction of import limitations on palm oil from Argentina, the company’s profits are set to skyrocket.

Wilmar is linked to a complex international network of controversial corporations. The International Labor Rights Forum has accused Cargill, one of Wilmar’s major buyers, of using slave labor. Wilmar’s wholly owned subsidiary, PGEO Edible Oils, supplies Cargill.  ADM, which owns 16% in  Wilmar  has been the subject of previous CorpWatch investigations.

Round Table on “Sustainable” Palm Oil


With the market of palm oil estimated by InvestoPedia to grow by 54 percent until 2020, the cheap oil is increasingly showing up in consumer products—including companies that aggressively market the idea that they use only eco-friendly and sustainable products, such as Ben and Jerry’s ice cream and the Body Shop beauty products.

Not surprisingly, industry giants including ADM, L’Oreal (which owns the Body Shop), Nestle, Unilever (which now owns Ben and Jerry’s), even the Cheyenne Zoo, along with Wilmar are major supporters of the RSPO initiative, and are eager to work with global NGOs such as the World Wide Fund for Nature (WWF). The U.S. Agency for International Development, Washington’s principal aid agency, funded a WWF publication on financing palm oil, and AID’s 2007 report asserts that oil palm is a sustainable biofuel.

For its part WWF offers performance scorecards to industry. “The implications for companies are clear- they need to shift gears immediately and accelerate their use of RSPO - certified palm oil.”

But the whole effort is really just a corporate sleight of hand, says Lafcadio Cortesi of the Rainforest Action Network. “WWF, Nestle, and Unilever were amongst the founders of the RSPO,” he says. “So it’s in their interests to talk up sustainability.”

“While the so-called responsible companies have dealings with firms that ostensibly trade in “sustainable palm oil,” they really have no idea where it comes from,” Cortesi said over lunch in Jakarta. “To fill the order, a company like Wilmar, even if it did comply [with sustainability guidelines], may get additional oil from trees planted on peat swamps or from plantations taken after protracted disputation. Villages, food sources, and all the local biodiversity might have been destroyed.”

“There is no real traceability,” says Cortesi.

And even if companies were committed to transparent sourcing, the logistics involved in tracking the estimated 130 million tons traded annually would be a nightmare; and open to manipulation, according to Sawit Watch and WALHI.

A major RSPO argument echoed by the business-friendly NGO World Growth, is that palm oil makes the best use of small areas of land, and thus assists in poverty alleviation. However, Sean Foley calculates that to be economically viable, a plantation must be 20,00 hectares—large enough to warrant a processing mill since the nuts start to degrade after 24 hours. And while small holders are gaining ground in production, they are still beholden to the large companies who set the terms.

At a meeting with this reporter in east Kalimantan, Dayak men reported that they collected harvests twice a month and were paid an average of $1 per 20 kg bunch. “If the roads or bridges are washed out in the rainy season or the transport system fails, we lose money and we have no land to grow food.” The work, they said, was tiring and unpleasant. Women plantation workers complained of fatigue and the effects of agricultural chemicals. When asked what chemicals were used, the local manager said, “I don’t know.”

The industry, not surprisingly, denies unsustainable practices. A Wilmar official who preferred not to give his name, responded to telephone questions about environmental issues by quoting the company’s sustainability policy: “Wilmar upholds a policy of enhancing and maintaining species, and uses a flexible menu of conservation practices to protect natural habitats that are found to be rich in biodiversity. We believe it’s sustainable and our company has support from NGOs.” The spokesman later emailed over Wilmar's corporate social responsibility policy which names WWF as conservation and monitoring stewards.

Killing Orangutans

The Center for Orangutan Protection (COP) has carefully documented the deaths of the red-listed iconic species within the boundaries of Wilmar’s producers plantations. “On Sumatra there is now more than four times as much land cultivated with oil palms as there is orangutan habitat remaining,” the Jakarta-based NGO noted.

“We have law, but no enforcement. In 2006, workers from PT Kerry Sawit 2, which is also part of the Wilmar group, killed an orangutan by beating it and cutting off its fingers, so it bled to death. The Ministry of Forestry or police did not follow up our reports, despite it being a crime. The oil palm companies have nothing to fear from the Indonesian government,” says Hardi Baktiantoro, the founder of COP.

While corporate violators go unprosecuted, an oil palm company in Kalimantan, Indonesia, put a $90 bounty on the head of errant orangutans which, in the absence of other food, ate the oil palm nuts, the Jakarta Globe reported. The company - PT Khaleda Agroprima Malindo, a Malaysian subsidiary of Malaysian Metro Kajang Holdings Berhad has been charged with causing the killing of as many as 2,500 of the endangered species.

Carbon Emissions

The palm oil industry also argues that it is sustainable and does not cause forest destruction. Alan Oxley from pro palm oil lobby World Growth argues palm oil is an efficient way to both produce food and capture carbon.

But a 2011 report by international scientists published by the US Proceedings of the National Academy of Sciences (PNAS) questions data from earlier studies of palm oil’s carbon cost. The authors insist that in the complex world of carbon measurements, previous studies had overestimated above-ground emissions but under-estimated below ground, and that these miscalculations distort policy making and land use planning. The PNAS report concludes:

Recent work in Sarawak shows that 65% of peat lands deforested from 2005 to 2010 planted [with] OP … are unavailable for restoration.… [R]rehabilitating deforested tropical peat lands is far more difficult and costly than appreciated.


Such findings are even making it inside RPSO’s industry forums. PNAS’s conclusions were echoed by Arina Schrier, a Dutch soil scientist and wetlands consultant, who presented results of studies of effect of the plantations on peat swamps, at the 2011 RSPO meeting.

This debate has led a few RSPO members to question the idea that palm oil is sustainable. For example, the European Union’s early and enthusiastic embrace of palm as a “sustainable” biofuel, has become more reflective. “We need to spend more time in the field seeing what is really going on,” said Pieter Jansen of Both ENDS, a Netherland based NGO and RSPO member.

Conflict Continues

While the debate plays out between the experts in international meetings, Indonesian villagers are continuing a daily battle on the ground.

In 2008, in the village of Giri Sako on the island of Sumatra, a group of angry villagers gathered in the village hall to talk about their lengthy dispute with Wilmar. The kepala desa (village head) spoke at length about the destruction of surrounding forests and desecration of graves, while the 30 or so villagers--men, women, and children in worn, faded clothes--nodded in agreement. They were not the only ones. The neighboring town of Kuantan Sako are also embroiled in a similar fight.

“We don’t want to work on the oil palm plantation. We did not agree” when Wilmar was granted a vast concession of land, including his own small farm, said a village elder wearing an Adidas cap and batik shirt.  “We want to grow food. We cannot eat oil palm, and the land is disappearing so food is more expensive. If we grow oil palm, our income will go to buy the food we can grow now.”

Faced with police intimidation and threats, the villagers of Giri Sako eventually took their case to the World Bank International Finance Corporation’s (IFC) Compliance Ombudsman who ordered mediation. The IFC concluded that although Wilmar did not deserve “a clean bill of health…. [it] was seeking to achieve certified supplier status, and was demonstrating genuine commitment and actions to meet the now in place RSPO standards.”

Meanwhile Wilmar is aggressively expanding on Indonesia’s far flung islands, forcing yet more rural communities to choose between the industry and massive disruption. “Wilmar are pressuring us to give up our ancestral land and work for them,” 84 year old Bapak Mojos, of East Kalimantan’s Agabag clan in Nunaken district, told this correspondent in November 2011. “We were forced to move here. The government and police support the companies. All around the forest is gone. My daughters used to weave rattan, now it’s also gone. What will be left for our grandchildren?”