Oil palm planters in the line of fire

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  • Saturday, 21 Sep 2019

Nageeb: The zero-burning policy is strictly adopted by all our oil palm planters (members) with operations in Malaysia and abroad.

THE forest fires in Indonesia that have led to the troubling haze crisis in South-East Asia (SEA) have drawn attention to Malaysian oil palm planters. Serious allegations have been levelled against local planters’ negligence and weak anti-fire precautionary measures in their estate holdings in the republic.

The Indonesian authorities last week singled out at least 30 companies, including four high-profile Malaysian planters – Sime Darby Plantation Bhd (SDP), IOI Corp Bhd, Kuala Lumpur Kepong Bhd (KLK) and Terengganu-state owned plantation arm TDM Bhd – as the culprits behind the major forest fires.

Ironically, SDP, KLK, IOI Corp and TDM are all members of the Roundtable on Sustainable Palm Oil (RSPO), which imposes the world’s most stringent certified sustainable palm oil cultivation practices that strictly adhere to the zero-burning policy, as well as the mandatory Indonesian Sustainable Palm Oil (ISPO) standard, among others.

If proven guilty, the accused plantation companies would likely be slapped with severe lawsuits as well as other heavy penalties being proposed by the Indonesian authorities, other SEA countries’ regulating bodies, as well as anti-palm oil campaigners that have been badly affected by the haze in 1997, 2016 and the latest, starting July this year.

At the time of reporting, the CEOs of the affected companies when contacted by StarBizWeek refrained from making new statements, with one plantation conglomerate retracting its prepared statement at the very last minute, given the escalating tension on the haze and forest fires that have now included the full involvement of the Malaysian and Indonesian governments.

It is also believed that more meetings between the affected planters and the regulatory officials from Malaysia and Indonesia are expected to be held in the coming weeks to find an amicable solution to the entire crisis.

Bursa Malaysia chairman Datuk Shireen Ann Zaharah Muhiudeen has come out strong to suggest stricter rules against environmental damage for public-listed companies.

“The unnecessary environmental situation of causing disruption to millions of families, business operations and wildlife is unacceptable. The financial culpability needs to be strengthened.

“I would personally like to see the listing rules of the stock exchanges to look at sanctions against those directors and management who have directly or indirectly engaged the policy of flouting the environmental law.

“The health of current and future generations cannot be marginalised and held hostage due to the weak standards in any sector,” she said.

Primary Industries Minister Teresa Kok has said that the Malaysian government would not protect the four Malaysian companies if such claims are proven true, but also viewed Indonesia’s claims as a serious accusation that could play into the hands of anti-palm oil campaigners.

Prime Minister Tun Dr Mahathir Mohamad has also said that Malaysia might have to pass a law forcing its local planters to tackle fires on land they control abroad.

Lawsuits and penalties Back in August 2016, Indonesian courts slapped oil palm planter Sampoerna Agro Tbk with a record fine of 1.07 trillion rupiah (about US$81.62mil), said to be the biggest ever fine to be handed down to a company linked to the forest fires.

Sampoerna’s unit PT Nasional Sago was found negligent in relation to forest fires on 30,000 hectares of its concessions in Riau.

Another planter, PT Kalista Alam, was also fined 366 billion rupiah in relation to fires in the Aceh province in 2015.

So far, only one US$565mil forest fire lawsuit against pulp and paper firm PT Bumi Mekar Hijau has been rejected by the Indonesian courts.

It is also believed that there are more than 10 lawsuits currently being pursued by the Indonesian courts on similar forest fires and haze charges.

To put it into perspective, Indonesia’s Kalimantan, Sumatra and Riau are the mecca of the oil palm land bank among big plantation companies with deep pockets, especially from Malaysia, since the 1980s.

The annual forest fires in Indonesia, which often occur during the dry spell season, have increasingly become a major risk for oil palm planters operating in the republic.

In recent years, many Malaysian and Indonesian oil palm plantation companies with large estate holdings and concessions have been the most susceptible to the annual forest fires, especially during the dry El Nino season.

Industry experts say that Malaysia has about 5.8 million hectares of total oil palm planted area, while Indonesia is estimated to have 15 million hectares.

Of the total, about 15% of the oil palm plantations are planted on peat land, which has very high carbon content that can continue to burn under low moisture conditions.

Sumatra, to date, has the largest oil palm plantations planted on peat land at about 1.4 million hectares, followed by Sarawak at 476,000ha, Kalimantan at 307,515ha and Peninsular Malaysia at about 215,984ha.

According to industry consultant M.R. Chandran, prior to the Indonesian government taking any legal proceedings against Malaysian planter companies operating in Indonesia, the respective agencies in the republic had better remind themselves of some of the inefficient systems and practices that have been going on in the past.

To put the entire blame on the oil palm planters is totally unacceptable, as most Malaysian planters in the republic have invested a lot on fire prevention equipment and other precautionary measures against any fire outbreak in their operating estates.

“To begin with, the Malaysian government also has a sizeable stake in many of these plantation companies with sprawling land banks and concession areas in Indonesia,” he points out.

During the forest fires in Indonesia, which lasted for four months in 2016, Malaysian planters had to fork out additional costs from RM10 to RM50 per hectare per year, depending on the size of their respective hectarage in the republic.

This is in addition to the planters’ existing fire-prevention budget estimated at RM110-RM120 per hectare for planting on normal land and 25%-30% higher costs when planting on peat land, he explains.

Trans-Boundary Pollution ActRather than pointing fingers at each other, Indonesia, Malaysia and the Asean nations should embark on the Trans-Boundary Pollution Act, suggests Chandran.

“The haze pollution is not just confined to Malaysia and Indonesia.

“Earlier this year, from February to April, Mekong countries also experienced very polluted haze and the extent of the haze blanket also increased the daily temperatures to 40°C,” he adds.

Chandran points out that all Asean nations should unite and fight for trans-boundary haze and pollution issues.

“Aside from just implementing legal justifications, Asean should also unite and seek assistance from advanced agrarian nations such as Australia and the Netherlands on how to implement civilised and modern methods of farming, instead of the slash-and-burn method periodically to fertilise and rejuvenate land for planting crops.

“This should be a holistic effort by all parties involved,” Chandran points out.

Also bear in mind that the current forest fires in Indonesia are not the first El Nino-induced fires, according to weather climate experts.

It started in 1982-1983, and again in 1997-1998 and in 2015-2016.

“If history is to be relied upon, the current 2019 forest fires may not be the last,” says Chandran, adding that “we must take cognizance of the fact that a new category of El Nino has become far more prevalent in the last few decades than at any time in the past couple of centuries.

“Over the same period, the traditional El Nino events have become more intense as well. What more with the vast expanse of forest around plantation concessions with multiple players of biomass build up is only a recipe for disaster waiting to happen.” For example, the region has been experiencing severe dry weather conditions from July this year and it’s been dry so far almost across the entire Indonesian archipelago.

“The National Forest Reserves, including national parks, are not resourced at any level to handle such dry weather patterns.

“This problem will continue if the diagnosis is wrong, and hence, putting the oil palm plantation CEOs in jail and having political brickbats is not going to solve the trans-boundary haze problem,” adds Chandran.

Meanwhile, the Malaysian Palm Oil Association (MPOA) CEO Datuk Mohamad Nageeb Ahmad Abdul Wahab says SDP, IOI Corp, KLK and TDM are reputable members of the association.

The MPOA represents 118 plantation companies, which account for 1.87 million hectares or 40% of the total planted oil palm area in Malaysia.

“The zero-burning policy is strictly adopted by all our oil palm planters (members) with operations in Malaysia and abroad.

“The slash-and-burn method to clear land for oil palm cultivation has no longer been put into practice for more than three decades in Malaysia,” says Nageeb, adding that Indonesia and anti-palm oil campaigners should stop the blame game, particularly on the four Malaysian companies.

There have been many incidences where the fire actually started outside the boundaries of these plantation companies’ estates, but were later seen spreading back into these plantations.

Hence, big plantation companies do tend to get the bad rap for causing forest fires leading to the haze crisis, explains Nageeb.

During the dry season, it is a common practice for oil palm smallholders from Sumatra and Kalimantan to start slashing and burning, given that it is the fastest and cheapest way to clear up their land, which normally is adjacent to the big plantation land banks.

To date, SDP and IOI Corp have strongly refuted allegations that the Indonesian authorities have sealed off their operational plantation in the republic due to forest fires.

For SDP, the recent fire incident occurred outside the operational area of its subsidiary Minamas Group’s PT Sime Indo Agro, and in fact, it is located in land occupied by local communities there.

IOI Corp has also refuted the accusation levelled at the company’s unit Sukses Karya Sawit, stating that a surveillance system and dedicated resources to put out the fires within its boundaries are well in place.

So far, only TDM has confirmed that Indonesian authorities have sealed off some 1,201ha belonging to its subsidiary, PT Rafi Kamajaya Abadi Tbk, which have been affected by the fires, but that the fires have been extinguished.

The planter maintains that the sealing-off of the affected areas is a normal procedure to ensure the affected areas are secured and investigations can be carried out accordingly.

On Bursa Malaysia yesterday, KLK lost 34 sen to RM23.06, SDP was up five sen to RM4.89, IOI Corp was unchanged at RM4.40 and TDM eased five sen to 17 sen.

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