Indonesia: the biofuel blowback

A boom in palm-oil production in Indonesia is rendering poor farmers landless and triggering social conflict, reports James Painter.

What has the welfare of a remote, dirt-poor hamlet in deepest Borneo got to do with global warming? There is an important connection and it goes like this.

Europe needs to lessen its dependence on fossil fuels in order to reduce carbon emissions. The European Union’s target, set in March 2007, is to replace at least 10% of its transport fossil fuel with biofuels by 2020.

Prices for palm oil have risen sharply since early 2006 largely because of increased demand for food and other products in the booming economies of China and India, but to a significant degree due to the expectation of growing European demand.

Indonesia has embarked on a headlong rush to grow more palm oil. It is set to overtake Malaysia in 2007 and become the world’s largest producer. The two countries aim to supply 20% of Europe’s biofuels by 2009.

One of the best places to grow palm oil is on cleared land that was previously virgin rainforest. West Kalimantan is one such place. It is situated in the Indonesian part of Borneo, and is one of the main boom areas for palm oil. So are international climate- change solutions helping the local indigenous populations there? Or could they if conditions were right?

Masters no more

It’s an odyssey by four-wheel drive or motorbike to get to the village of Aruk, near the Malaysian border. Chatting to the villagers there, the overwhelming sense is of anger tinged with sadness. Alexander, a 36-year-old Dayak Kanayan, had been ill in bed for several days last year.

One morning, feeling better, he walked to his nearby four-hectare plot where he grew rubber and tropical fruits like durian, mangosteen and jackfruit. He was shocked to discover that they had been destroyed by bulldozers belonging to an Indonesian company called Dutapalma.

"I used to feed my family mainly from that land", Alexander complains, still clearly distraught more than a year later. "We had more than enough to eat. Now I have lost my land, I have to go to Malaysia to work as a construction worker so I can feed my three children. But my income is not enough compared to when I had my piece of land."

The company offered him compensation of $0.30 for each of his rubber trees. "The company has to pay me the right price", he says. "Deep in my heart I feel I don’t want to let go of my land. But if I have to, they have to pay me."

About twenty-five families from Aruk have lost their land to the company and are yet to receive compensation. At a rowdy public meeting they show me their drawing of where their small plots have been taken over by palm oil. The company received the concession from the district governor, known as the bupati. The villagers have no legal papers and can only appeal to customary land rights.

In desperation, about 300 of them in April seized the company’s bulldozer and trucks. The police intervened and gave the heavy equipment back.

Some of the villagers are now itching to step up the protests. They feel they are losing land owned by their ancestors without a fight. "Burn down the company offices", some shout. But others are more conciliatory, preferring to do a deal and grow palm oil to supply the company mill. They all agree they want to remain "masters of their own land".

Rich, powerful and secretive

There is a similar story of growing conflict across West Kalimantan, largely driven by the international demand for palm oil. Sawit Watch, an Indonesian NGO, says the number of communities involved in conflicts here has mushroomed to more than fifty since 2005, and to about 400 for the whole of the country.

Indonesian and foreign companies are keen to grab a slice of the commodity boom. The concessions they have received just in West Kalimantan have risen from about 0.5 million hectares in the 1990s to more than 3.2 million now – about six times the size of the tourist island of Bali. More than 20 million hectares have been assigned nationwide.

It’s a similar story of conflict in the Kembayan district near Sanggau. In an arrangement typical of many, in 1997 around 500 villagers gave up about seven hectares of their ancestral land to a company in exchange for being allowed to keep two hectares to grow their own palm oil.

The Salim group conglomerate is now the owner of the original concession of about 35,000 hectares. But the smallholders say they have still not received their two hectares each. In frustration they too have started protests.

In June 2007, about ten of them were arrested and questioned by the local police because they had been harvesting the company’s palm oil on what they said was their land and selling it to another mill. They were released but say they will continue to harvest unless the company agrees to several demands.

"The essential problem is that local people are not told what is going on or about the potential risks and benefits of growing palm oil", says Norsianus, the advocacy coordinator for the SPKS, an NGO supporting the smallholders. "The companies are very rich, very powerful but not transparent."

The clearing game

It’s virtually impossible to tell whether the palm oil harvested in these areas of West Kalimantan will end up in Europe as a biofuel. It’s just as likely to be going to China, India or Pakistan. But NGOs inside and outside Indonesia are getting increasingly worried about the nationwide boom, and whether poor farmers can benefit.

They say the growing number of social conflicts is another, less publicised, downside to palm oil as an alternative to fossil fuels. A series of recent reports have already criticised it for compounding Indonesia’s alarming rate of deforestation.

The United Nations warn that natural forests in Indonesia are being cleared so rapidly that up to 98% may be destroyed by 2022, threatening the habitat of the orang-utan. Wetlands International says many new plantations are allocated on peatlands; when these are dried out, they contribute more Co2 to the atmosphere than the use of fossil fuels.

Indonesian ministers dispute the claims made by NGOs. They have long argued that palm-oil development can reduce fossil-fuel dependency and provide important revenue and jobs. But they add that in their view, illegal logging – not palm oil – is the main driver of deforestation; and that palm oil is mostly planted on degraded or abandoned land.

Critics say many palm-oil plantations are providing cover for illegal timber operations, which clear forests with no intention of planting. However, a lack of reliable statistics makes it difficult to confirm the rate of deforestation and its causes. Even official figures are often contradictory.

Global pressure, local landscape

NGOs are confident that there is momentum in Europe for more company and government action to curb irresponsible palm-oil development. For example, Friends of the Earth Netherlands published a report in July 2007 accusing the Singapore-based company Wilmar of illegal forest clearances in West Kalimantan and making inadequate environmental-impact assessments.

It called on suppliers to revise their relations with Wilmar, which is reputedly the world’s largest palm-oil company. The company denies the allegations. The World Bank, which lends money to Wilmar, is due to make an on-the-spot investigation in September. In July 2007, the Asda supermarket chain told suppliers it would not accept products unless they could guarantee their palm oil is from plantations run in a sustainable manner; and in the same month, the Body Shop said that it wants to source only sustainable palm oil for its soap.

A decisive meeting will take place in Kuala Lumpur on 20-22 November 2007 of the industry-led Roundtable on Sustainable Palm Oil (RSPO), whose members include manufacturers such as Nestlé and L’Oreal, retailers such as Carrefour and Marks & Spencer, and NGOs such as Oxfam and WWF.

The meeting is expected to set out tighter criteria for identifying good practice, separating the responsible companies from the rogues, and certifying certain sustainable plantations. However, the RSPO is not a policing force and its members represent only a third of internationally traded palm-oil production.

The wider issue at stake, common to the debate about other biofuels like maize and ethanol, is who will really benefit – large agro-industrial companies or small producers? In Indonesia, several hundred thousand smallholders grow palm oil alongside large state and private companies.

Development workers fear that they may find it more difficult to meet new standards for sustainable palm oil. "Small producers need more land than two hectares each, no price-fixing by the companies and better credit terms", says Norsianus of the SPKS, "and then palm oil might help alleviate poverty."

Homepage photo by tianyake

James Painter is executive editor for the Americas at the BBC World Service, currently on sabbatical. In 2006-07 he was visiting fellow at the Reuters Institute for the Study of Journalism. He has reported and researched widely on Latin American politics, the global media landscape and climate-change issues.