Indonesian palm oil plan fires controversy

Major development projects often cause intense controversy. This can happen whether they are driven by companies, Governments or private-public partnerships. There are people who feel they will benefit and others who fear they will suffer losses.

A plan, which China may finance, to cut and clear a huge swathe of virgin forest in Indonesia to make way for what could become the world's largest palm oil plantation is arousing just this kind controversy.

Proponents of the plan, including Indonesian President Susilo Bambang Yudhoyono, say it will bring jobs, services and better living standards to people in Kalimantan, Indonesia's part of Borneo Island, enabling the Government to curb illegal logging and protect remaining tropical forest.

Opponents of the scheme, among them environmentalists, the Indonesian Palm Oil Producers Association, and local farmers and fishermen in the affected area, argue that the highland zone initially chosen for planting oil palms is not well suited to their cultivation.

They add that opening the area would see it stripped of commercially valuable trees by logging companies, damaging watersheds, rivers and the region's rich biodiversity. The region is home to countless species of rare birds, plants and mammals, including the largest remaining wild orangutan population in Indonesia.

Some Indonesian officials claim the new project, covering 1.8 million hectares (about two-thirds the size of Belgium), could eventually produce more than 10 million tonnes of crude palm oil a year worth about US$4.6 billion ($7 billion). Palm oil is used in a wide range of daily products, including soaps, chocolate bars, ice cream, ready-to-eat meals and margarine. It is the biggest vegetable oil crop after soybean. Demand for palm oil has almost doubled in the past decade and seems set to rise even faster as more of it is used to make biofuel, an increasingly used additive to make petrol supplies stretch further in an era of high oil prices.

China, the world's third-largest palm oil importer, wants to secure supplies for the future. On a state visit to Beijing last July, Indonesian President Yudhoyono spoke to his Chinese counterpart, Hu Jintao, about helping to develop the new palm oil source as part of an effort to boost bilateral trade and investment.

In August, Jusuf Kalla, Indonesia's businessman vice-president, went to China to sign a US$8 billion financing deal with the state-owned China Development Bank for the investment in Kalimantan.

Since then, opposition to the project has gathered strength. This plan endangers many crucial areas: the forests, the rivers and, especially, the rich biodiversity in Kalimantan, said Purwo Susanto, a conservation official in the Indonesian office of the WWF, the World Wide Fund for Nature.

The WWF has official documents showing that the project would be situated mostly in the highlands along Indonesia's 850km border with the Malaysian state of Sarawak, at heights of between 1000m to 2000m above sea level.

WWF and other critics maintain oil palms don't flourish at such a height. Derom Bangun, chairman of the Indonesian Palm Oil Producers Association, says most successful palm oil plantations are below 400m.

Togu Manurung, of Forest Watch Indonesia, asks why locate the plantation there when Indonesia has huge abandoned, unproductive palm oil plantations and degraded forest areas across the country. Indonesia's Defence Ministry has suggested that the project will improve national security. But NGO activists suspect the military stands to benefit by being paid to guard the development and protecting log smuggling.

One prominent Indonesian economist, Faisal Basri, recently accused the economics ministry, which proposed the Kalimantan plantation plan in mid-2005, of offering timber, including valuable hardwood that is in short supply in China, in exchange for Chinese investment in the infrastructure, while knowing that it is unlikely the area will actually be farmed once it is cleared.

Indonesia is already losing tropical forest equal to half the size of the Netherlands every year, or some two million hectares, the WWF estimates. The Forestry Minister, Malam S Kaban, said in December that he would forbid any new conversion of forests into plantations in Kalimantan border areas to help protect the environment. The move appeared to rule out siting the giant China-linked plantation project in this ecologically sensitive region.

Critics contend that the Government should encourage oil palm expansion in lowland parts of Kalimantan. The Forestry Ministry says nearly 2.4 million hectares of forest in Indonesian Borneo alone have been cleared for palm oil plantations that never materialised. Most of that land is at lower altitudes.

But Indonesia's Agriculture Minister, Anton Apriyanto, indicated that the mega-plantation project was still on when he said in late January that the Government planned to develop three million hectares of palm oil plantations, two-thirds of them in Kalimantan, in the next five years.

The fate of the China-supported project is expected to be decided later this year. Indonesian officials say they will conduct a final study then to weigh environmental, social, economic and security costs and benefits.

* Michael Richardson is a former Asia editor of the International Herald Tribune and a visiting senior research fellow at the Institute of Southeast Asian Studies in Singapore.