A deeper look into major palm oil groups operating in Indonesia
Home to one of the largest tropical rainforests and most biodiverse rich regions found on Earth, Papua is widely known as the last frontier of intact tropical forest in Indonesia. The rugged, wild terrain and limited infrastructure initially protected Papua and West Papua from the levels of deforestation seen in Kalimantan and Sumatra, but that has changed in recent years due to investment in multiple development projects.
Papua is comprised of two provinces, Papua and West Papua*, which make up about 41 percent of the island of New Guinea. Papua and West Papua lost about 1.7 percent of tree cover between 2001 and 2018, compared to a 9.9 percent decrease throughout the whole of Indonesia. As of 2016, the region was home to almost 47 percent of all remaining intact forest in Indonesia, amounting to about 14.2 million hectares. Indonesia’s government has plans to develop the largely untouched region with over USD 400 billion in infrastructure development investments Nearly 60 percent of the investments are allocated for transportation projects and 17 percent for building out Papua’s electric infrastructure. Key projects in the region aim for full electrification for the population and connecting remote areas. The most notable connectivity projects include building airports and over 4,000 kilometers of road stretching from Sorong to Merauke, known as the Trans-Papua Highway.
Over a quarter of residents in Papua live below the poverty line, over twice the national average, creating an incentive for the region’s economic development. However, relying on resource extraction as a primary means of growing the economy leaves out many indigenous groups that live communally and do not have clear land ownership. Under the Indonesian constitution and environmental laws, the land, forest, and water are owned by the state. The Indonesian government is, thus, awarded significant decision-making power over land use. Although the central government has the ultimate authority, the regional government can award licenses to communities for use of the forest based on traditional rights (IPKMA = Izin Pemanfaatan Kaya berbasis Masyarakat Adat) through the Special Autonomy Law.
Since the rich resources in Papua are intrinsically tied to the land, ownership has become a major source of economic mobility. Potential expansion of the palm oil industry in Papua, and conversely, possible financial gains though holding land for carbon offsets, has fueled a spike in investment applications in Papua. This competition heightens the risk that external interests and international corporations will influence decision-making to receive disproportionate benefits and make Papua more accessible for trade in natural resources.
The indigenous people of Papua are of Melanesian descent, similar to people in Papua New Guinea, Vanuatu, Fiji, the Solomon Islands, and New Caledonia. On the island of New Guinea, indigenous communities speak over 800 languages and have developed diverse customs and cultures. Since the forest is ingrained in their way of life, the destruction of ecosystems has been met with longstanding resistance. Deforestation and land use change threaten food sources, medicinal treatments, and clean water in forests that indigenous groups have sustainably managed and relied on for generations.
Deforestation peaked in Papua and West Papua in 2015 with nearly 81,000 hectares of tree cover lost primarily because of plans for agriculture and other development through concessions. Legal deforestation highlights the central role the Indonesian government plays in granting large-scale concessions for timber, paper, and plantations. Production forest concessions allow for selective tree loss, while conversion forest concessions allow clearcutting. Clearcutting is generally closely linked with palm oil plantations because all forest residue and tree roots must be removed before beginning production. Currently, there are an estimated 166 oil palm concessions, 15 pulpwood concessions, 73 logging concessions, and 125 mining concessions in Papua.
Some districts have become hotspots for deforestation, as planned development in concession territory begins. Kota Jayapura, Biak Numfor, and Jayawijaya were among the first hotspots for deforestation in Papua, while Merauke, Keerom, and Nabire emerged in the past ten years. In Merauke, for example, over one million hectares have been allocated by the Merauke Integrated Food and Energy Estate for agricultural land. In West Papua, development linked to deforestation began in Kota Sorong, Manokwari, and Maybrat before extending to Sorong Selatan, Fafak, and Raja Ampat over the past decade.
The newly accessible untitled, indigenous land along the Trans-Papua Highway may be at risk of becoming a hotspot for deforestation in the future. Similar risks have been highlighted with regards to Lorentz National Park, a World Heritage Site directly in the path of the highway .
2018 marked Indonesia’s lowest rate of primary forest loss since 2003. The decline was significantly less pronounced in Papua as a relatively recent deforestation hotspot. Even so, Papua’s reduction was notable after significant spikes in 2015 and 2016. The deceleration of tree cover loss is likely a result of a combination of natural forces, government intervention, and international incentives.
Natural Forces: The illegal practice of using fire to clear forest debris is commonly used to make way for palm oil plantations, but a recent string of ‘wet’ years likely impeded these efforts and limited the extent of the annual fire season. In years that Indonesia experiences dry conditions, the fire season is generally much more prolonged.
Government Intervention: A few key pieces of legislation have gone a long way to reduce deforestation both in Papua and in Indonesia as a whole. A moratorium on primary natural forest and peatland conversion for concessions was extended in 2017 and eventually made permanent in 2019 . The moratorium area spanned over 66 million hectares nationally. A 2016 Presidential regulation specifically aimed to restore 2.4 million hectares of degraded peatlands through legally prohibiting development on peatlands deeper than three meters. Peatland preservation likely has a reverberating effect on preventing deforestation because of the connection between draining peatlands and extensive forest fires. The parliament in West Papua also designated the region as a Conservation Province in 2019 to protect significant biodiversity and indigenous rights.
International Incentives: In a move to increase the financial incentives for conservation, Norway and Indonesia agreed upon independently verified criteria for payments to compensate reduced carbon emissions as a result of deforestation. The partnership began in 2010 when Norway pledged up to USD 1 billion in compensation, but the first payment was triggered in 2019.
Carbon stock is a measure of carbon that has been sequestered from the atmosphere and stored in the soil and biomass within a forest ecosystem. The High Carbon Stock Approach (HCS) uses forest density and soil types to determine which ecosystems sequester the highest amount of carbon, and thus, most positively contribute to combatting climate change. The Nationally Determined Contribution committed by Indonesia under the Paris Agreement involves a 29 percent reduction in carbon emissions by 2030. To meet this target, Indonesia must heavily concentrate concessions in low carbon stock provinces and avoid development in HCS peatlands. With almost half of the primary forest remaining in Indonesia, Papua and West Papua are key components to meeting Indonesia’s Paris Agreement commitments. As such, both provinces are involved in spatial planning meetings with the Ministry of Home Affairs in Indonesia.
Notably, Boven Digoel and Merauke are both in the top three districts with the highest carbon stock levels and are recognized deforestation hotspots, raising concerns as to how important maintaining current levels of HCS ecosystems is to future investment decisions.
Biodiversity conservation and indigenous rights advocates call for also incorporating High Conservation Value (HCV) in spatial planning. Indonesia considers six criteria for HCV in the areas of biodiversity, environmental service, and socio-cultural. However, the Merauke Yawontop forest, home to the Malind and Wambon Tekamerop tribes, was lost to a PT Bio Inti Agrindo (BIA) plantation in 2019, despite its status as HCV. Both HCS and HCV provinces contend with the pro-business image that Indonesia wants to convey in order to attract economic development.
Given the links between palm oil plantations and clearcutting, often through igniting illegal fires, companies are frequently in the spotlight for acting unsustainably or being tied to unsustainable actors through their supply chains. The most common violations, found in a recent government audit, included operating beyond concession borders (sometimes into peatlands or national parks), not upholding Indonesian Sustainable Palm Oil standards, and failing to allocate sufficient land to smallholders. A study by the anti-corruption agency in Indonesia, Komisi Pemberantasan Korupsi, found that the system lacked sufficient accountability mechanisms to prevent violations and corruption in the palm oil sector.
Development projects in Papua intrinsically have a high risk of new deforestation due to the region’s expansive, remaining forest cover. In comparison, more developed regions of Indonesia have a higher proportion of degraded land that can be used for palm oil plantations without contributing to new deforestation.
The largest palm oil company in Papua, Korindo, has been in the spotlight for frequent violations in Merauke. A 2016 report used satellite imagery to link Korindo with an estimated 900 fire hotspots and 300 square kilometers of deforestation over three years.
Allegations of falsified permits were also raised by government officials around the Tanah Merah project in the Boven Digoel district, home to the Auyu indigenous people. Some 2,800 square kilometers were slated for logging and palm oil development, 800 square kilometers over the legal limit allowed per firm. If falsification allegations are true, the 83 square kilometers already cleared, roughly the size of Paris, would constitute criminal activity. However, government officials have instead come to an agreement that the project may continue, provided the company reapplies for relevant permits.
Despite significant deforestation risk for palm oil groups operating in Papua, Blackrock Fund Advisers, The Vanguard Group, Inc., and Dimensional Fund Advisers LP are financiers of more than one groups of the top ten list. Investments in palm oil in Papua exposes financiers to a heightened risk of default due to the potential for stranded assets, reputation damage, legal action, market access, regulation changes, and operational disruptions for palm oil groups involved in deforesting in land with high carbon stock and significant ecological and cultural value.
Connections to Austindo Nusantara Jaya (ANJ)
The Lucida network tool can be used to explore organizational structures and financing connections to palm oil groups in Indonesia. For example, Austindo Nusantara Jaya Agro is has links to a number of influential figures in the palm oil industry and has been in the spotlight for concessions in West Papua.
Austindo Nusantara Jaya Agro is a member of the Roundtable on Sustainable Palm Oil (RSPO), but it has not integrated the High Carbon Stock approach or developed a Free, Prior and Informed Consent policy.
After clearing about 8,000 hectares of forested land in Sorong, West Papua, Austindo Nusantara Jaya Agro faced backlash from both local communities and key industry players Wilmar and Golden Agri Resources in the form of suspended crude palm oil purchases.
Approximately 40% of Austindo Nusantara Jaya Agro customers have No Deforestation, No Peat, No Exploitation policies, which likely played a role in the decision to delay developing Papuan concessions.
To learn about other major palm oil groups operating in Papua, click below to explore Lucida’s network tool: