Oil Palm Expansion Churn Out Illegal Timber in Central Kalimantan

TEMPO.CO, Jakarta - The pandemic of illegality afflicting Indonesia's forestry sector was brought into sharper focus today by a new report detailing how the archipelago's rapidly expanding oil palm plantations churn out large volumes of illicit timber under a loophole in the country's anti-illegal logging regime.

The report, produced by London-based NGO Environmental Investigation Agency (EIA), hones in on a blind spot in Indonesia's Timber Legality Verification System (SVLK), which has cracked down on traditional forms of illegal logging but let plantation companies harvest timber virtually without scrutiny.

The crux of the report is an expose of the SVLK's weak oversight of timber utilization permits (IPK), which most plantation firms must acquire before clearing their concessions. The companies either never obtain an IPK – one forestry official is quoted as saying that in 2011 that not one of the 52 oil palm firms in his regency had the permit – or taint it by breaking the law during the land acquisition process in other ways.

Focusing on Central Kalimantan, the authors conclude from provincial data that many oil palm companies acquire a location permit and plantation business permit (IUP) just weeks or days apart, a mathematical impossibility given how long the Environmental Impact Assessment (AMDAL) between them is supposed to take.

The authors cite a conversation with the head of one regency official who, when EIA asked about the phenomenon, "smiled and said such instances would be 'political decisions' by the regent."

Analyzing a random sample of companies shows that half are operating without an AMDAL – a criminal offense – and that many others secured it retroactively.

"Even when AMDAL assessments are carried out, there is evidence that they are cursory," the report says. "It is reportedly an open secret among officials that companies pay (AMDAL) commission members for favorable decisions."

Chief among the cases featured are a series of plantations in Central Kalimantan's relatively untouched Gunung Mas regency, whose regent Hambit Bintih was jailed in March for trying to bribe then Constitutional Court Chief Justice Akil Mochtar to rule against his opponent in an election dispute.

The EIA is the first to shine light on Hambit's irregular permits, four of which went to companies owned by his campaign finance manager, Cornelis Antun, also arrested in the Akil scandal.

The report details how Cornelis, who is also Hambit's nephew, quickly flipped the concessions to a larger player, making millions of dollars in transactions that required next to nothing of him and his associates. He dealt each time with a Malaysian firm called CB Industrial Product Holdings (CBIP).

CBIP has apparently continued to do business with Cornelis even after his imprisonment. According to an announcement on the Malaysian stock exchange, which is not discussed in the report, in June of this year CBIP paid Cornelis US$2.2 million for a fifth company, Manyangan Jaya. Cornelis had been imprisoned three months earlier.

Another company featured in the report, Nusantara Sawit Persada, which obtained key early- and late-stage permits within an improbable two days of each other, employs as its managing director the vice chairman for plantations at the Indonesian Chamber of Commerce and Industry (Kadin), Teguh Patriawan. That company is also linked to a director of a subsidiary of Jakarta-based investment bank Samuel Group, Thomas Tampi.

To fix the problem, the EIA recommends that the Environment and Forestry Ministry both close the SVLK's loopholes and enforce existing regulations more consistently. It also urges an audit of all IPK holders, the formation of an anticorruption task force to examine permit allocation and that no more forests are allocated for conversion to oil palm.

The report, titled "Permitting Crime: How Palm Oil Expansion Drives Illegal Logging in Indonesia," is available in both English and Indonesian on the EIA's website. (*)