Indonesia policy & regulations (update 7): The Indonesian National Carbon Accounting System (INCAS); mood for provincial autonomy grows in PNG ; RSPO-Guardian - Local and national interests clash in Indonesia's palm oil industry, "bupatis... take decision in best interest of (Singapore or Jakarta) companies.. rather than communities... there is low level oppressions and sometimes’s a simmering human rights issue" says EIA and “There are rogue operators who are playing the corruption game with the local authorities.... A big problem is the overlapping land rights, which causes a lot of conflict... there is an increasingly wealthy middle class who see land as an investment for the future..." says CIFOR

26 April 2015: The Indonesian National Carbon Accounting System (INCAS); mood for provincial autonomy grows in PNG

Indonesia has a new tool against climate change  13 Apr 2015 BY Center for International Forestry Research; JAKARTA, Indonesia—It has one of the world’s largest forest estates …. and one of the highest rates of deforestation and degradation. The government of Indonesia has a serious target: reducing greenhouse gas (GHG) emissions by 26 percent by 2020, and – if international assistance is forthcoming – by 41 percent during that same period. To assist in that aim, a monitoring system to track the country’s GHG emissions has been developed by the Indonesian government.
The Indonesian National Carbon Accounting System (INCAS) will serve as the basis for the country’s measurement, reporting, and verification (MRV) system for the land sector.
MRV is required under the UN Framework Convention on Climate Change  (UNFCC).
The Minister of Environment and Forestry, Siti Nurbaya formally endorsed INCAS, at a recent public seminar in Jakarta. .........INCAS uses a Tier 3 approach for forestland that includes a carbon mass balance model, and a Tier 2 type approach for peatlands. Both tiers use nationally specific data.... "The INCAS is an open, transparent, and continually improving framework, which is designed to incorporate new data, and technology as it becomes available,” says Harvey. ........Central Kalimantan province was the first to demonstrate the use of INCAS before it extends nationally. The data – gathered between 2000 and 2011 – showed significant annual variations in GHG emissions and removals in Central Kalimantan, which are indicative of issues around historical land management, current practices, and weather patterns – like dry years and high incidents of fire. The year with greatest GHG emissions was 2006 with 195 million t CO2 –e. The lowest year was 2010 with 74 million t CO2 -e. Biological oxidation of peatlands was generally the largest single source of emissions, although peat fires in 2006 and 2009 greatly contributed to the elevated emissions in those years.......The interim results are the first time that a GHG emissions profile has been broken down into its “constituent elements of forest carbon stock change, non-CO2 emissions from biomass burning, CO2 and non-CO2 emissions from mineral soil, as well as biological oxidation and direct N2 O, dissolved organic carbon and CH4 emissions from disturbed peat, and CO2 and non-CO2 emissions from peat fire”.....

Mood for provincial autonomy grows in PNG by Johnny Blades, Radio New Zealand International - Updated at 1:06 pm on 20 April 2015;  While the call for more devolution of powers from central government to the provinces is not new, PNG's continued development struggles mean more provinces are talking about autonomy. And throwing a cat among the pigeons, PNG's opposition leader has now proposed the idea that PNG's four main regions could be given autonomy The growing skyline of the capital Port Moresby reflects PNG's unprecedented economic growth of the past decade. It's been forged mainly through a boom in the mining, oil and gas sectors. But the majority of people in the country have seen few tangible benefits, and PNG is languishing near the bottom in the United Nations Human Development Index world rankings.
The governor of New Ireland province claimed that PNG risks breaking up if it continued with the inefficiency of central government machinery. Sir Julius Chan, who is a former Prime Minister, said Waigani takes 90% of provincial revenues yet had failed to adequately manage basic service delivery to provinces......... "Everything comes from Port Moresby and Port Moresby is the worst, most inefficient organisation in PNG today," he said. "If we continue to allow a very disorganised group or people running the rest of the country, it's sure to break up."...... Sir Julius said the time is right for provinces to take on more powers of taxation, over natural resources, education, health and other sectors. This feeling was echoed at a recent summit of PNG's 22 provincial governors, many of whom were frustrated at the lack of control their administratrions have over development in their provinces....... Meanwhile, the autonomous Bougainville government has started laying the groundwork for a referendum to be held on possible independence from PNG. As provided for in the peace agreement negotiated after the Bougainville civil war, that vote has to occur by 2020 at the latest. As the former president of the autonomous Bougainville government James Tanis explained, this lead-up was a key focus for the new parliament to be elected next month........ To date, PNG's national government has shown little appetite for granting more autonomy to the provinces. However, increased discussion about the issue among the nation's leaders shows that momentum is gathering for change on this front.,,,,,

24 April 2015: RSPO-Guardian - Local and national interests clash in Indonesia's palm oil industry, "bupatis... take decision in best interest of (Singapore or Jakarta) companies.. rather than communities... there is low level oppressions and sometimes’s a simmering human rights issue" says EIA and “There are rogue operators who are playing the corruption game with the local authorities.... A big problem is the overlapping land rights, which causes a lot of conflict... there is an increasingly wealthy middle class who see land as an investment for the future..." says CIFOR

Local and national interests clash in Indonesia's palm oil industry - Political unrest intensifies as largely autonomous district authorities put the interests of palm oil developers and investors first
Sponsored by: RSPO, by Oliver Milman @olliemilman Thursday 23 April 2015 15.43 BST
The industry of palm oil, the product found in everything from chocolate to lipstick that is habitually reviled by environmentalists, is facing new challenges due to unrest in key producing regions.
It was reported by the Cameroonian Association of Oil Refineries this month that the export of refined products including palm oil from several African nations, including Nigeria and Cameroon, has been “virtually at a standstill” for several months due to a spate of murders and kidnappings committed by Islamic militant group Boko Haram. The unexpected slowdown in palm oil production in Africa, seen as a key growth area for the product, comes as political tensions are heightening in Indonesia, the world’s leading producer of palm oil............Following the end of Suharto’s 31-year dictatorship in 1998, Indonesia went through a process of decentralising power. Much of the power over land allocation flowed to bupatis (little kings) who preside over districts and have been accused of widespread corruption in the way they hand out logging concessions. “They take decisions in best interest of companies, often from Singapore or Jakarta, rather than communities,” said Tomasz Johnson, forests campaigner at the Environmental Investigation Agency (EIA). The EIA conducted an in-depth investigation into the palm oil industry last year and found multiple instances of corruption and lax law enforcement. Violations included the flouting of plantation licensing laws, attempts by a palm oil firm to bribe police to drop an investigation into its activities and regional governments transferring community resources to private firms. “When companies come up against opposition from communities, bupatis will mobilise state forces against them,” says Johnson, whose research has focused on the central Kalimantan area. “There is low level oppression and sometimes violence. In Kalimantan it’s rare that you go into community where there’s conflict. Often, communities have given up hope of holding onto their land. “We went to see one concession where the community believes someone was killed by security forces that were employed by a palm oil company. These people just can’t win, it’s a simmering human rights issue.” ..........President Joko Widodo has warned: “We mustn’t allow our tropical rainforest to disappear because of monoculture plantations like oil palm.”.... David Gaveau, a scientist at the Center for International Forestry Research, said: “The central government is now trying to pull back that power and recentralise things. They realised it all went too far. It’s uncertain which way things will go, but there’s certainly a lot of tension around it............. “There are rogue operators who are playing the corruption game with the local authorities,” said Gaveau. “They get land through dodgy deals and they are totally under the radar, they basically do what they want while the big companies are trying to clean up their acts.
“A big problem is the overlapping land rights, which causes a lot of conflict
. When you don’t have any power, someone can come in and clear your land, even though that goes against the country’s constitution. While Indonesia is largely an agrarian society, there is an increasingly wealthy middle class who see land as an investment for the future.”

3 April 2015: Conditional suspension for 1 April 2015 mandatory L/C rule

Govt provides conditional suspension for mandatory use of L/C Linda Yulisman, The Jakarta Post, Jakarta | Business | Wed, April 01 2015, 8:55 PM .box-profile {font-size:12px;font-face:verdana;background-color:#000;color:#fff;padding:1px 5px;float:left;margin:2px;} .box-profile:hover {background-color:#ff0000;} Business News Streak of strong US hiring likely extended into March Govt to build new port in Subang or Indramayu Rupiah rises 70 points to Rp 12,978 at opening The government has offered flexibility for exporters who still cannot comply with the obligatory use of letters of credit (L/C), which took effect starting from Wednesday.The L/C rule governs four primary commodities: coal; palm oil and palm-kernel oil; oil and gas; and minerals, including tin.Trade Minister Rachmat Gobel said that the suspension could apply to exporters who obtained exclusions from either the Energy and Mineral Resources Ministry or the Agriculture Ministry.“This is intended to give time for exporters to adjust and revise contracts made and signed before the Trade Ministry Regulation No. 04/2015 [on mandatory L/C use] was issued so that it will not hamper their exports,” he said in a statement. Following the suspension, an audit will be carried out to decide whether the exporters are eligible to be excluded temporarily from the obligation, according to Trade Ministry Regulation No. 26/2015 that specifies the suspension.Apart from that, the L/C term can be carried out later through export financing institutions to be set up by the government in addition to foreign-currency banks. - See more at:

14 March 2015: BI to take action to halt bond sell-off, push for development of more agro-industrial estates, biogas facilities and rural electrification

BI to take action to halt bond sell-off Satria Sambijantoro, The Jakarta Post, Jakarta | Headlines | Fri, March 13 2015, 7:09 AM; Bank Indonesia (BI) promised on Thursday to conduct market operations to protect government bonds and the rupiah following a massive withdrawal of foreign funds from the bonds market, totalling to Rp 10 trillion (US$759 million), over the past two weeks.BI Senior Deputy Governor Mirza Adityaswara said Thursday that the central bank would intervene to stabilize yields of government bonds to prevent further sell-off in the bond market.....Massive foreign fund outflows have recently hit Indonesia as indicated by the sharp drop in foreign investors’ ownership of Indonesian bonds. The foreign investors’ ownership was roughly 40 percent of the total tradable bonds at Rp 509.3 trillion earlier this month, but this figure shrunk by about Rp 10 trillion to Rp 499.3 trillion as of March 10, according to Finance Ministry data.In the same period, total government bonds held by BI declined slightly from Rp 53 trillion to Rp 52.7 trillion, suggesting that the central bank has not yet bought enough bonds to counteract the outflow.Renewed concerns of interest-rate hikes in the US have drained assets stashed in emerging markets, including Indonesia, with both the rupiah and Indonesian bonds suffering the hardest hits.This month, the rupiah led losses in Asia as it depreciated by more than 2 percent to hit 13,176 per dollar on Thursday, according to the Jakarta Interbank Spot Dollar Rate (JISDOR).Meanwhile, the yields for the benchmark 10-year rupiah bonds have risen 78.4 basis points month-to-date to 7.84 percent. Yields move in the opposite direction of prices such that bonds with higher yields are rated as cheaper assets among investors. - See more at:

Agro-industrial estates outside Java in pipeline Linda Yulisman, The Jakarta Post, Jakarta | Business | Thu, March 12 2015, 5:57 AM..... The government is set to start construction on three agro-based industrial estates outside Java to bolster industrial growth in Southeast Asia’s largest economy.Development of two estates, to be located in Palu, Central Sulawesi, and in Bitung, North Sulawesi, may begin by mid-year, to serve as centers of coconut and fishery processing and the manufacturing of cocoa derivatives and rattan-based products, respectively.Another estate, to be situated in Kuala Tanjung, North Sumatra, and concentrate on palm-oil-based industries, will be built next year, according to industry officials.... The government’s minor stake in industrial zones has contributed to uncontrollable land prices and rents nationwide.“Right now it is hard for us to control the price of land in industrial estates owned and run by the private sector. Land issues are often a major deterrent to new investment,” he told reporters on the sidelines of an agro-industry meeting. The central government would cooperate with regional administrations to execute the projects with a possibility of jointly managing the zones once they were operating, Heru added. The Indonesian government is involved in 6 percent of existing industrial estates in the country, a far cry from the 78 percent engagement by the Malaysian government and 48 percent by the Thai government.The three new agro-based industrial estates are among 14 planned to be established by 2019 outside Java — where most industrial estates are located — with the majority of finance coming from private investors.....

Regulating access to palm oil-based biogas facilitates rural electrification by Ade Cahyat and Daddy Ruhiyat, Samarinda | Opinion | Mon, March 09 2015, 6:40 AM; The administration of Joko “Jokowi” Widodo has ambitious targets for both the electrification ratio and the renewable energy share in the energy mix. According to the mid-term development plan (RPJMN) 2014-2019 — the official document outlining the president’s development targets — by the end of his tenure the electrification ratio should reach 96.6 to 100 percent while the share of renewable energy of the national energy mix should be 10 to 16 percent.The achievement of these two targets is interdependent when it comes to rural electrification. Most of the households without electricity — between eight and 11 million households — are located in remote rural areas, where renewables are the most efficient resources for small-scale, decentralized power generation....Biogas from palm oil mill effluent (POME) is among the least cost renewable and is available in some remote rural areas in palm oil producing regions. The high organic content effluent — produced alongside with the crude palm oil production, which is mainly located in remote rural areas — results in a high volume of biogas. A palm oil mill processing fresh fruit from 10,000 ha to 15,000 ha of mature oil palm estates can produce biogas that is sufficient to fuel biogas engines with an installed capacity of more than 1 megawatt (MW), enough to electrify 2,000 households with 24 hours of electricity.In the case of East Kalimantan, for example, each of 12 potential — out of the total 62 — mills could generate 1 MW or more, all of which are close to villages with enough inhabitants to absorb the additional produced power. Those villages currently have no electricity or have less than 15 hours of supply per day from diesel generators. The marginal cost to generate a kWh of power from POME biogas is less than half of that from diesel....

5 March 2015: Indonesia to crack down on tax avoidance - transfer pricing in coal, palm oil, cocoa and other commodities a problem, includes some major companies; greater effort to prosecute agroforestry companies

Indonesia to Crack Down on Corporate Tax Avoidance By Gayatri Suroyo & Eveline Danubrata on 09:16 pm Feb 24, 2015; Jakarta. The government plans to crack down on corporate tax avoidance via transfer pricing this year to try and recoup Rp 200 trillion ($15.6 billion) in lost state income, mainly in the commodities sector, the new head of the tax office said.... President Joko Widodo’s administration is planning to double its infrastructure spending this year to build ports, power plants and other projects, and the tax office figure for lost income would cover more than two-thirds of that spending... As a proportion of gross domestic product, Indonesia has one of the lowest tax takes in the region, trailing behind Malaysia, Singapore, Thailand and the Philippines, according to the World Bank.... Sigit Priadi Pramudito, director general of taxes, said in an interview with Reuters late on Monday that many Indonesian firms, particularly those in the coal, palm oil, cocoa and other commodities sectors, were avoiding corporate taxes by using transfer pricing.... He declined to give names, but said some of them were major companies....

Govt ramps up efforts to prosecute agroforestry firms Hans Nicholas Jong, The Jakarta Post, Jakarta | National | Sat, February 21 2015, 7:05 AM; With forest fires in Sumatra challenging the country’s aim to reduce greenhouse gas emissions by 26 percent to 41 percent by 2020, the government has rolled out a plan to boost law-enforcement measures against agroforestry firms.The Environment and Forestry Ministry said on Friday that it would step up its oversight of agroforestry firms as well as monitoring of legal proceedings involving companies that were alleged to have started forest fires. Environment and Forestry Minister Siti Nurbaya Bakar previously expressed her disappointment over the Bengkalis State Court’s decision to declare two executives of PT National Sago Prima (NSP) not guilty of burning forests in Riau.... “The judges did not apply Law No. 18/2013 on the prevention and eradication of forest damage,” she said during a recent visit to Pekanbaru, Riau. “We [also] found that the three judges did not have environmental credentials [on their resumes].”PT NSP was found guilty earlier of burning forested land that had destroyed thousands of hectares of sago plantations in the Meranti Islands regency....

24 Feb 2015: Tax amnesty proposed, palm oil businessmen sentenced for bribing Riau governor

Jokowi political and police-KPK tussles? Jokowi adds on tax amnesty offer to commodity export LC requirement to shift money flows and expand Indonesia capital market; Singapore observations. /khorreports-palmoil/2014/11/eye-on-president-jokowi-asks-china-aiib.html

Palm oil businessman gets 3 years for bribing governor Haeril Halim, The Jakarta Post, Jakarta | National | Tue, February 24 2015, 6:57 AM; The judge said Gulat, who is chairman of the Indonesian Oil Palm Farmers Association (Apkasindo) Riau chapter, had violated Article 5 of the 1999 Corruption Law on bribery of state officials, which carries a maximum sentence of five years.... Supriyono said that evidence and witness testimonies during the two month trial had confirmed that Gulat had paid Annas $166,100 for his service obtaining a land conversion permit for a total of 1,188 hectares of land in Kuantan Sengingi regency and 1,214 hectares in Rokan Hilir regency belonging to Gulat and his friends. This was part of the 1,638,249 hectare forest conversion proposed by the Riau administration to the Forestry Ministry last year......
8 Feb 2015: According to Jakarta sources (including bankers), the LC issue is significant. Big volumes leave the country without LC. The issues at hand include transfer pricing, offshore booking centers and tax issues. In recent years, commodity trading has been specifically targeted with lower taxes and declining tax rates on higher volumes by key centers. Producers may also be public listed in other countries. Does this hamper Indonesia's effort to expand and widen it's tax base? Notable too is Jokowi speaking of "dangerous inequality" in this. Tax loyalty of rising interest? Watch out for compliance. Tax issues for multinationals and individuals are increasingly under the microscope in the  USA, Europe and elsewhere.
L/C required for exports of key commodities Linda Yulisman, The Jakarta Post, Jakarta | Business | Fri, January 16 2015, 9:18 AM . A new regulation set to take effect in April will require exporters of the country’s key commodities to use letters of credit (L/C) in their overseas shipments, a move that will help generate a reliable record of export earnings. The rule, issued by the Trade Ministry last week, is set to affect four primary commodities: coal; palm oil and palm-kernel oil; oil and gas; and minerals, including tin. On average these items accounted for 41 percent of overall exports in the five years from 2009 to 2013 with an average of US$71.04 billion a year, according to the ministry’s statistics.“By demanding the application of L/C in exports, we want to increase export earnings and at the same time get accurate records, particularly from sales of natural resources,” Trade Minister Rachmat Gobel said in a press conference on Wednesday evening. Based on the rule, the prices in the L/C should reflect actual transaction value. It also stipulates that without the letters, overseas delivery cannot be executed.
4 Feb: M&A and public listing for 100,000ha limit?
Regulatory loophole, weak prices spur Indonesia palm oil takeovers by Reuters, Wednesday, 4 February 2015; JAKARTA: Some Southeast Asian agri-companies are exploiting a regulatory loophole and turning to takeovers to expand their oil palm acreage in top exporter Indonesia just as weak demand for the edible oil makes smaller producers more open to deals....  Under a 2013 law, companies can only plant up to 100,000 hectares with oil palms, a limit put in place mainly to protect the smallholders that account for about 40 percent of Indonesia's palm oil output....  The restriction, however, exempts listed companies majority owned by the public, which makes some of the 11 palm oil firms listed on the Jakarta stock exchange potential takeover targets for others seeking to expand their land bank. Nine of these listed companies have a market value of less than $1 billion, according to Thomson Reuters data....  "The local regulations do indeed provide strong impetus for private owners to consolidate and list their plantation holdings on the Indonesian stock exchange or inject into a listed company," Le Sa Cheah, head of Indonesia equity capital market for Singapore's DBS Bank, told Reuters.... Malaysian firm Sime Darby Bhd, one of the world's biggest palm oil producers, recently said it may list its palm oil assets in Indonesia or launch a reverse takeover of an Indonesian firm. Smaller local firm PT Sawit Sumbermas Sarana Tbk has also said it plans to acquire two firms for 1.5 trillion rupiah ($119 million) this year....  Some agri-conglomerates that have already reached their acreage limit in Indonesia, however, are unwilling to test the regulations and are looking elsewhere, such as in Africa, where land is still abundant and companies are less restricted in increasing their acreage....