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....

Peat regulation (update 5): 40cm minimum water level rule to be adjusted for 1.7 million peatlands with palm and eucalyptus

10 January 2015: 40cm minimum water level rule to be adjusted for 1.7 million peatlands with palm and eucalyptus

Govt to mend peatland ruling amid protests Tama Salim, The Jakarta Post, Jakarta | Business | Wed, December 31 2014, 1:36 PM; The government will revise the government’s newly issued regulation on the protection and management of peatland amid growing protests from the business community, which said that the new ruling hurt plantation activities. Environment and Forestry Minister Siti Nurbaya Bakar has confirmed that the state will revise Government Regulation No. 71/2014 on the protection and management of peatland, which would be implemented in May 2015 to replace the outdated Law No. 31/2009 on environmental protection and conservation. Siti said that the government would consider the demands of the business community, which heavily criticized the rule for being unaccommodating to most commercial interests. The regulation stipulates that the minimum water level in peatland must be maintained at 40 centimeters. Water levels in the country’s 1.7 million peatlands are mostly below the required level to grow oil palm and eucalyptus trees.

11 December 2014: Commentary on Jokowi's call for ecosystem approach and concern about monoculture

RSIS Commentary No. 243/2014 dated 9 December 2014 - Haze Pollution and Peatlands: Can ASEAN Finally Breathe Easy? By Raman Letchumanan; Synopsis: President Jokowi’s visit to Riau Province recently and his comments on fires and smoke haze have raised hopes across the region. But the mere act of blocking canals on peatlands is, but one, of many interrelated and multifaceted issues he has to tackle.... "THE PEOPLE of ASEAN have been enduring choking haze - primarily smoke from wild fires - for the past two decades. Despite numerous efforts, promises, and actions, the haze pollution has only gotten worse. However, the publicity surrounding newly-elected Indonesian President Joko Widodo’s recent visit to Riau Province, where most of the transboundary haze originates, hopefully points to a change for the better.... The President said: “For the past 17 years, forest fires are due to the practice of negligence and complacency. This is simply just an issue of whether we want to or not, whether we intend to or not … to solve the problem.” But if it was that simple, why were his predecessors not able to pull it off?..........Peatlands are the least understood, unrecognised, and the first to be exploited among all of the natural ecosystems. But it is the most damaging as far as fires and haze are concerned. Peatlands contribute about 90% of the haze, therefore reducing peatland fires will substantially reduce or even eliminate transboundary haze pollution. The ASEAN region has about 25 million hectares of tropical peatlands, about 60% of the world total...........President Jokowi’s visit to Riau included a personal demonstration of canal blocking to a crowd of local people. Canal blocking is done to rewet the peatlands to make them less prone to fires. But what comes to mind is who built the canals in the first place. The abandoned maze of well-planned deep canals suggest that they must have been the work of deep-pocket investors carried out with heavy machinery. But no one was made responsible to block the canals after they had left............It is refreshing to hear President Jokowi frequently mention the ecosystem approach and his concern for widespread monoculture – dependence on a single species of commercial value - during the visit. Being trained in forestry, he knows what he is talking about, and that his symbolic act of canal blocking is not going to solve the problem....While the people of ASEAN may have to hold their breath a while longer, things are moving in the right direction in Indonesia as far as addressing forest fires and smoke haze is concerned....

10 December 2014: Jokowi orders review of licenses of all plantations on peatland; Read here:

11 November 2014

There was a fascinating presentation by Faisal Parish (a key consultant at Asean on peat and also active at the RSPO) at OFIC 2014 conference organised by MOSTA. He reminds us of key statistics and issues: a) just over 20 percent of all oil palm is estimated to be planted on peat; b) peat is a wetland zone; c) 50-70 cm water level can better be maintained with numerous weirs; d) he attributes many peat fires to oil palm (contrary to much recent research analysis of remote sensing imagery by even the technical NGOs?) as drainage and/or subsidence will impact 1-2km from the edge of an estate, thus nearby fires are associated with adjacent estates and e) the latest RSPO rules only allow replanting on peat if a 40-year geomorphology forecast shows that water table maintenance is not compromised (there is concern of significant peat compression resulting in loss of drainage control). 

It will be useful to get other perspectives on this key enviro policy issue. Clearly, the new RSPO rule will eventually be impactful on peat regions. The views about peat dome collapses and images of man-height subsidence sent a stark warning to the audience. There are clearly some strong worries about the viability of replanting out there. Together with Compensation Liability this sets stiff new policies for oil palm.

Thanks to a reader, the following details: 
...with regards to peat in the Malaysia National Interpretation of RSO P&C 2014, note that companies need to do drainability assessment prior to replanting on peat.
4.3.4 Subsidence of peat soils shall be minimised and monitored. A documented water and ground cover management programme shall be in place.
Major Compliance
4.3.5 Drainability assessments where necessary will be conducted prior to replanting on peat to determine the long-term viability of the necessary drainage for oil palm growing.
Minor Compliance
For 4.3.4: For existing plantings on peat, the water table should be maintained at an annual average of 50cm (between 40 - 60cm) below ground surface measured with groundwater piezometer readings, or an annual average of 60cm (between 50 -70cm) below ground surface as measured in water collection drains, through a network of appropriate water control structures e.g. weirs, sandbags, etc. in fields, and water gates at the discharge points of main drains (Criteria 4.4 and 7.4).
For 4.3.5: Where drainability assessments have identified areas unsuitable for oil palm replanting, plans should be in place for appropriate rehabilitation or alternative use of such areas. If the assessment indicates high risk of serious flooding and/or salt water intrusion within two crop cycles, growers and planters should consider ceasing replanting and implementing rehabilitation.

2 November 2014

Last week, on the sidelines of MPOC POTS KL conference, we caught up with the Dr Lulie Melling of the Tropical Peat Research Laboratory, Sarawak. Some citations here: She has shared with us the following graphic for peat land management:
source: Dr Lulie Melling

It is notable that she has found that the compaction of peat land will significantly improve production and environmental impacts. As for the water level, 60cm is suggested. 40cm would wet the roots of the oil palm and be unsuitable.

7 October 2014

The provenance of the new peat regulation is thought to be peatland and other ngos to the Ministry of Environment.

6 October 2014

Khor Reports: Just a few weeks ago, we were discussing with a Singapore think tank, why there should be more attention on peatland rehabilitation (and not just on fire blame making). Interestingly, new regultations for 40cm minimum water level was just put in place. Industry was apparently not consulted. They point out that this level is incompatible with planting oil palm and eucalyptus - 40 cm would submerge their roots.IPB / Bogor Institute of Agri expert says that developed peatland areas should be managed by ecohydro technology. Will keep an eye on this topic.

Peatland rule sparks protests by Ridwan Max Sijabat, The Jakarta Post, Jakarta | Business | Mon, October 06 2014, 10:35 AM; "Palm oil and forestry-based industries strongly protested the newly issued government regulation on peatland protection and management, saying that it would hurt investment in oil palm plantations totaling Rp 136 trillion (US$11.17 billion) and 340,000 workers in the plantation sector.... Indonesian Palm Oil Producer Association (Gapki) and Pulp and Paper Producers Association said during a roundtable discussion organized by Indonesian Journalists Association (PJI) in Jakarta on Friday that the government regulation should be annulled or revised.
The association claimed that the regulation was formulated and signed by President Susilo Bambang Yudhoyono recently without any discussion with relevant stakeholders. The regulation stipulates that the minimum water level in peatland must be maintained at 40 centimeters. Peatland where the water level is below 40 cm will be categorized as damaged and will have to undergo rehabilitation.... Water levels in the country’s 1.7 million peatlands are mostly below the required level to grow oil palm and eucalyptus trees. Therefore, most peatland areas accommodating oil palm plantations will have to be rehabilitated. According to the association, if water levels surpass 40 cm, oil palm and eucalyptus trees will be unable to grow due as their roots will be submerged in water.... The regulation would affect not only oil palm plantations but also the hundreds of thousands of workers, he said, adding that the new regulation would certainly affect planned investment in new oil palm plantations, mostly located in peatland areas in Sumatra, Kalimantan and Papua.... Pulp and Paper Producers Association deputy chairman Rusli concurred and said the new regulation would hit five pulp sawmills and cause the layoff of hundreds of thousands of workers and farmers in the industrial forestry subsector. “We fear that the new government regulation has been issued at the order of Indonesian pulp and paper producers’ competitors overseas and it is part of their global campaign to fight against Indonesian pulp and paper producers and the country’s booming palm oil production.... Basuki Sumawinata, land expert from the Bogor Institute of Agriculture (IPB), said the downgraded peatland areas should not be rehabilitated but should be managed by applying ecohydro technology for peatland..."

Other postings on Indonesia peat fires and related matters

End product news & views (update 3a): A junk food free world? Italy campaign against palm oil in food products.

22 December: A junk food free world? Italy campaign against palm oil in food products.

Hold the Cookies, Save the Climate - Everyone knows meat is bad for the environment. But so is an ingredient commonly found in junk food. By Ruth DeFries; Imagine if eating packaged cookies and crackers were as socially unacceptable as smoking a cigarette. People would sneak to the balcony to tear open packages of Oreos. Travelers would slink into designated rooms to scarf down candy bars. “No junk food” signs would adorn the halls of public buildings. Waistlines, nutrition, and health care costs would all by improved by a junk food–free world. So would the climate, the rain forests, and the dwindling populations of wild orangutans in Southeast Asia...... The protests against palm oil have raised awareness about the damage that may be wrought by the world’s voracious appetite for cheap fat. They also bring up many thorny questions about the right path to a more equitable world, that has economic opportunities for all, and won’t destroy the planet in the process. Do the environmental costs of palm oil from Southeast Asia outweigh the damage from industrial farming of soybeans in the prairies of the Midwest? Should those countries with remaining stocks of rich, lush rain forests be obliged to forgo the benefits of developing their agriculture? With the push toward certification of sustainably produced palm oil, how can the millions of poor oil palm farmers afford to go through the expensive process to get certified? These knotty questions have no obvious answers. But one fact is clear. Whether it’s squeezed from soybeans or from the fruits of palm trees, oil in processed food is a losing proposition.... proposition

A Comedian vs 14,000 Italian Jobs & 4 Million Small Farmers b IPPA, 15 December 2014
The latest anti-palm oil campaign (and anti-poor people) campaign to emerge from Fortress Europe has come from Beppe Grillo and his Movimento 5 Stelle, also known as M5S, an Italian political party (party in the literal sense, not political sense). M5S is calling for the outright banning of palm oil from food products in Italy.... People’s livelihoods are at stake....

15 December: ‘Free-from’ campaigns are illegal or deceptive and also unnecessary as of 13 December 2014

In Trade Perspectives by FratiniVergano - European Lawyers, Issue No. 23 of 12 December 2014 on Mandatory declaration of specific vegetable oils in food as of 13 December 2014: ..... By making it compulsory that the oil origin be specified (so that a consumer can make an informed choice in the selection of food products), a mere look at the list of ingredients will tell consumers whether a product contains a specific vegetable oil or not. ‘Free-from’ campaigns directly on the products packaging should, therefore, be seen not only as illegal or deceptive (as argued above), but also unnecessary as of 13 December 2014, since any consumer will be able to tell what vegetable oil is present or not in any food product. There will be no need to use these dubious ‘free-from’ campaigns in order to ‘help’ consumers make informed choices. Food producers remain entitled to make positive claims about the presence of specific products on in their products, if they believe that such label has marketing value and will be appealing to consumers, but negative labels must be better regulated and not allowed, unless they are permitted nutrition claims under the NHCR.... The growing use of these damaging negative labels in countries like France and Belgium must be brought to an end.  Authorities and commercial operators need to closely scrutinise the market and challenge these anti-competitive practices, when they contravene EU and Member States’ laws. The expectation is that EU authorities and EU Member States, while they impose costly new rules on producers, also ensure that consumers are not misled by astute marketing techniques that have no informative agenda, but simply aim at denigrating certain vegetable oils in order to promote others or to convince consumers that what is ‘free’ from a certain oil is a better product....

12 December 2014 evening: EU labelling campaign wanted to encourage sustainability, but a poll of Guardian readers points to many wanting to avoid palm oil?

EU labelling changes force industry action on palm oil, a new law is predicted to benefit the sustainable palm oil industry, but the question is whether consumers will care; From Saturday, 500 million consumers in Europe will become aware that palm oil is in their food. The EU law on food information to consumers (otherwise known as FIC) means that food stuffs can no longer get away with hiding ingredients under generic titles. Now ingredients will have to be exactly what it says on the tin, and sustainable palm oil could be a major beneficiary.... The palm oil debate is funded by the Roundtable on Sustainable Palm Oil. All content is editorially independent except for pieces labelled advertisement feature. Find out more here.

Will new EU food labelling rules change your purchasing decisions on palm oil?
Poll: will seeing palm oil in a product's ingredients list change your decision to buy it?
by Jenny Purt, Friday 12 December 2014 12.41 GMT; comment: Michelle Desilets 12 December 2014 1:03pm: The motivation for the campaign to clearly label the kind of oil used in products had a great deal to do with encouraging manufacturers to ensure that the palm oil they use is sustainably sourced. Perhaps the poll could have been improved with an option of something along the lines of "I will seek products that use palm oil and are certified sustainable."

source: Guardian poll, 12 Dec 2014, 11pm Singapore time; but number of respondents not indicated

12 December 2014: health & sustainability link, reformulate petition, Iran reduces palm oil, "palm oil free" illegal?

Palm oil: Health and sustainability are linked in consumers' minds by  - ‎Dec 4, 2014‎; "Palm oil is subject to several consumer concerns - its sustainability and health impacts in particular - but these need to be addressed together rather than separately, according to the European Palm Oil Alliance (EPOA)...."

Petition to limit palm oil attracts more than 50000 signatures;  - ‎Dec 2, 2014‎  The petition, published on , says it opposes the use of palm oil on ethical, environmental and health grounds, and invites companies to reformulate using other non-hydrogenated vegetable oils or butter.

Iran decreases palm oil imports due to health concerns by  - ‎Dec 9, 2014‎; "Iran has decreased the importation of palm oil due to health concerns, ISNA news agency reported on Dec. 9. The country imported 7.415 million metric tons of palm oil in the first eight months of the current Iranian calendar year (March 21-November 21 ..."

'Palm oil free' products could face legal challenge, say lawyers by  - ‎Dec 3, 2014‎ 
“However, in the absence of evidence that a specific oil represents a risk to consumer health, inclusion of “no palm oil” claim front of label unjustly singles palm oil out and places emphasis on the absence of palm oil in the product in a manner that ..."

Nash: Belgium's label against palm oil illegal by Yahoo Malaysia News  - ‎Dec 3, 2014‎ 
“We acknowledge this FIC regulation, but we reject the 'No Palm Oil' defamatory connotation in front-of-pack labels,” said Zulkifli..."

10 December: EU FIC regulation boost sustainability but not mass reformulation

"Food Information for Consumers (FIC) regulation is due to come into force across the EU on December 13, and with its requirement to identify specific vegetable oils on ingredient lists.... The palm oil industry had feared that the rules would lead to mass reformulation, as manufacturers responded to perceived consumer concerns about palm oil's sustainability and health effects. However this has not happened, the EPOA (European Palm Oil Alliance) says..."There has sure been a stagnation of palm oil use over the past three or four years, but it's not been the big drop that some had feared" (EPOA's Margaret Logman) said..... (FEDOIL's Nathalie Lecocq) pointed out that oils have a specific function that can't always be replicated. "It would be a mistake to think we need to get rid of one oil because it is imported," she said.... some palm oil producers have also said that the FIC regulations have spurred manufacturers to source more sustainable palm oil...."

Indonesia's new Plantation Bill (update 9): Sime Darby Indonesia plantation listing / spin off?

2 November 2014: Sime Darby Indonesia plantation listing / spin off?

It will not be surprising under Indonesia regulatory and economic nationalistic climate to see several foreign-owned plantations interested in domestic listings / spin offs.

Sime Darby may spin off Indonesian plantation assets Posted on 27 October 2014 - 05:39am; PETALING JAYA: "Sime Darby Bhd, which in the midst of talking to investment bankers to list its motor division in Malaysia, is considering listing or spinning off its Indonesian plantation assets in Indonesia next.... "This move could come in the form of an initial public offering (IPO) or a reverse takeover (RTO)," said RHB Research analyst Hoe Lee Leng...  Sime Darby told investors at Invest Malaysia Hong Kong (IMHK) recently that it is the group's strategy to continue to contemplate various options, including spinning off/listing its core divisions.... How said the listing or spin off of the Indonesian plantation division could potentially be in the form of a tie-up with an Indonesian partner which has a sizeable plantation landbank, which would be injected into a listed entity.... "This would help the company, as the Indonesian government has limited ownership by foreign companies to no more than 100,000ha of plantation landbank per company, as this ruling is not applicable to listed entities (presumably listed in Indonesia).... "A listing on the Indonesian exchange would also bode well for Sime should the Indonesian Government tighten regulations with regards to the foreign ownership of land," Hoe said...".

6 October 2014. Likely facing pressure for future Indonesia-listings, plantation interests point to problem of domestic funding - higher capital costs
Businesses breathe sigh of relief on new law by The Jakarta Post, Jakarta | Business | Fri, October 03 2014, 8:31 AM; "Plantation industry players breathed a sigh of relief as the House of Representatives canceled a plan to cap foreign ownership in local plantation firms at 30 percent.,,, Indonesian Palm Oil Producers Association (Gapki) executive director Fadhil Hasan also welcomed the new law as it handed over the determination of the cap level to the government.“We expect the government regulations to also [limit foreign ownership based on] the type of commodities or crops,” he told The Jakarta Post....... Understanding the government and the House’s intention to protect local and smaller companies, Togar Sitanggang, chairman of the Indonesian Oleochemical Manufacturers Association (Apolin), said most domestic plantation firms were either owned by foreign-listed companies or controlled by one or more foreign shareholders.Expensive financing from domestic banks was the main reason that forced local plantation firms to be listed abroad or to find foreign suitors, said Togar, who is also a senior manager at biofuel maker PT Musim Mas, citing Golden Agri-Resources Ltd., which owned Sinar Mas Agro Resources and Technology (SMART) and Bumitama Gunajaya Agro of the Singaporean-listed Bumijaya Agri Ltd. as examples...."

30 September 2014. Foreign limit will be set by regulations.

New plantation law limits foreign ownership by The Jakarta Post, Jakarta | Business | Tue, September 30 2014, 12:01 PM;; "The House of Representatives on Monday passed the plantation bill, which sets stricter rules on foreign ownership in the plantation sector so as to prioritize smaller local investors.... The limitation is to have no specific percentage value, although the House’s Commission IV has previously demanded a 30 percent foreign ownership cap. Instead, the law allows the central government to limit direct foreign investment in Indonesia’s growing plantation sector.... through government regulations (PPs). The limits, according to the new law, are to be based on the type of crop, the size of the producing company and certain geographical conditions.... A strict foreign ownership cap would discourage foreign investment in the upstream plantation sector, but a less stringent one, made general by the new law and specified by a PP, would be acceptable, according to the Agriculture Ministry’s director general for plantations, Gamal Nasir... The existing foreign plantation companies will be required to comply with the new law after their period of licensing of rights to cultivate land (HGU) has ended, the law stipulates....  The new law also regulates the scope of plantation areas and land concessions according to a number of variables, such as the type of crop grown, the company’s factory capacity, the area’s population density and certain geographical conditions. These points too will be detailed in PPs.... The central government will also have the right to turn over state-owned forests and abandoned plots of land to plantation owners. But the law also requires plantation owners to conduct discussions with indigenous residents over plots of lands to be acquired.... In order to develop the sector, the law also encourages cooperation in research and development between foreign and domestic individuals, businesses and universities, as well as between central and regional administrations.... Firms have been given five years to comply with the new law....  While praising some points of the law, such as the foreign ownership restriction, Indonesian Rubber Association (Gapkindo) chairman Daud Husni Bastari said the law did not properly support smallholders and criticized the lack of measures to mainstream the smallholder basis of plantation management...."

"Indonesia passes plantation bill but..." by CIMB September 30, 2014 says that "We are slightly surprised that the bill went through despite the tight deadline. However, we are not too surprised that the 30% foreign limit rule was omitted given that it could significantly hurt future foreign investment in Indonesia. Overall, we view the latest news to be slightly positive for Malaysian- and Singapore-listed plantation companies as they will be able to maintain their existing stakes in plantation assets in Indonesia. However, we expect Malaysian planters to be more cautious about future expansion in Indonesia in view of the foreign ownership risk...."

29 September afternoon. It's the day for the Indonesian Parliament to vote on the new Plantation Bill. As expected, Jakarta sources confirm that the worrying 30% foreign ownership limit article is dropped. We'll have to check out the final version in detail for all the regulatory shifts to come.

16 September afternoon. More reader feedback on Plantation Bill, SGD 1.95 million fines for role in Riau fire, forest boundary 5-year limit for complaints?

Feedback from another senior industry manager in Jakarta on the strike off of the foreign ownership clause from the upcoming Plantation Bill: "Thanks for the (Kontan) newslink. The discussion is on going and not yet decided...."

Malaysia reader points out: Is it off? I am not sure. My sources tell me the only thing changed is that the figure of 30% has been removed and will not be legislated. So, is it then open ended? Who then will have the power to decide the level? This is even worse than before if it stays open ended.
All other changes are still going to go through? 

Another Jakarta reader highlights this news link: Pembatasan Kepemilikan Asing Dicoret; Kontan  | Selasa, 16 September 2014; Hasil rapat dengan pemerintah dan DPR memutuskan mengeluarkan aturan maksimum batas kepemilikan asing di RUU Perkebunan; which talks about Minister of Agriculture Suswono seeking a delay to the Plantation Bill, and noting that policy for palm oil should be distinguished and separate from other crops....

Plus an alert from a reader based in Singapore: On the issue of fire, have you seen this,; "...The Pelalawan District Court in Riau sentenced ADEI general manager Danesuvaran KR Singam to a year in prison and the option of paying Rp 2 billion (S$210,000) or serving an additional two months in jail for violating Article 99 (1) of the 2009 Environmental Protection and Management Law. "The defendant was negligent in his supervisory role of the estate. He should have actively prevented irresponsible parties from slipping into the estate and setting the fires," presiding judge Donovan Pendapotan said. Danesuvaran, however, was not sent directly to prison after the hearing. "We need to wait for a final and binding verdict from the Supreme Court before sending the defendant to prison," said prosecutor Banu Laksmana, adding that the prosecutors would appeal the sentence. The court found ADEI guilty of violating the same article in the 2009 law and handed down a Rp 1.5 billion fine or see its director, Tan Kei Yoong, serve five months in jail. The court also ordered ADEI to pay an additional Rp 15.1 billion to repair the environmental damage caused by the forest fires...." **Total fines and repair charges for the fire = Rp 2 + 1.5 + 15.1 billion = Rp 18.6 billion or about SG$1.95 million?

Other regulatory news:
  •  TATA BATAS HUTAN - Kuntoro: Jangan Berubah Terus; Kompas | Selasa, 16 September 2014; the process of affirming Indonesia's forest areas is now said to have reached 68% but under current regulations, the boundaries can still be adjusted for complaints without time limitation. Thus, UKP4 (Presidential Working Unit for Supervision and Management of Development) has suggested a time limit for five years to reduce this uncertainty for the public, government and development interests.

16 September morning. Troublesome foreign limit clause cut amidst heavy contestation? The Plantation Bill's worrying foreign ownership clause was strongly opposed by plantation business groups (several very large ones are foreign-listed in Malaysia and Singapore). However, Jakarta news report that others such as rubber producers (dominated by smallholders) point out insufficient smallholder support in the Bill and suggest the need for land reform to favour this group. The divergence between big business and domestic sentiment is increasingly apparent. Interestingly, I had a chat yesterday with an analyst familiar with the Jakarta banking sector; and he also noted the strong support for foreign ownership limits and selldowns among professionals in that sector. This is akin to the sentiment held by domestic Indonesia professionals within the plantations sector too.

Just earlier this morning, I received via a senior Malaysia plantation manager a news alert that reads positively for Indonesia plantation FDI i.e. the removal of the contentious clause: "Parliament and government have agreed on the withdrawal of foreign ownership limitation. In the final discussion of Agriculture law revision No. 18/2014 that was held yesterday, Parliament and government have agreed on the withdrawal of 30% foreign ownership limitation...." (attributed to Kontan, which I could not find online earlier - but since updated for 12 noon by reader (thanks Ibu Y) its location here:; "Plantation business players are now able to breathe - Commission IV decides to eliminate the foreign ownership limit points of at least 30 %.. and quotes Vice Chairman of Commission IV Herman Khoiron on Monday 15 September on worries on foreign exchange, investment and ability of domestic business to replace foreign capital). However, on checking with a Jakarta source closely linked with the Indonesia Parliament this morning, the reply was that the clause has not been removed yet. Thus, the status of this clause has been quite contested?

Obviously, the Bill is an increasingly heated topic as Parliament is reported to have set 29 September 2014 as the date for its ratification at its plenary meeting. There are many clauses that adjust current business regulations - including the wide definition of "group" of companies for the ownership ceiling. Experts also point to a little known land ceiling adjustment in the Land Bill, and also new policies within the Native Customary Rights Bill.

Earlier news headlines:

Business groups oppose plantation bill by Linda Yulisman, The Jakarta Post, Jakarta | Business | Fri, September 12 2014, 7:39 AM, JAKARTA. "Plantation business groups have voiced their criticism toward the plantation bill, which is now in final deliberations at the House of Representatives, saying that it will hurt the business climate for plantation firms as well as growers. The bill, a revision to the 2004 Plantation Law, comprises restrictions on foreign ownership and the scope of plantation areas, stipulates punishment for land burning and encourages more local engagement. The House expects to pass the bill later this month... Indonesian Palm Oil Producers Association (Gapki) executive director Fadhil Hasan said on Thursday that the group strongly opposed the 30 percent foreign ownership cap as it would erode Indonesia’s competitiveness as an investment destination in the sector... Apart from capping foreign ownership shares, the bill also restricts land ownership by a plantation group to a maximum 100,000 ha. It also requires plantation firms to cooperate with growers by allowing them to hold a 20 percent share... The bill also requires local processing industrial firms relying heavily on imported raw material to open plantations to support their operation. For instance, a sugar refiner sourcing raw sugar overseas will have to build its own sugar cane plantations within three years of its operation... It also gets tougher on plantation owners or growers that commit land burning by imposing legal punishment on them... While appreciating some key points of the bill, such as the foreign ownership restriction, Indonesian Rubber Producers Association (Gapkindo) chairman Daud Husni Bastari also raised his objections, particularly with regard to the bill’s weak support for small holders and lack of measures to mainstream the smallholder-based perspective in plantation management. “What we need is land reform, which the bill still lacks. We also don’t see that the bill sufficiently sides with smallholders who should play a dominant role in managing plantations,” he said. Daud further said that the bill should have provided a specific land arrangement for smallholders the way Malaysia did with its authority for smallholders, the Rubber Industry Smallholders Development Authority (RISDA)..."

Plantation, property firms oppose land bill over expansion plans by The Jakarta Post, Jakarta | Business | Wed, February 26 2014, 12:03 PM; "House Commission II member Budiman Sudjatmiko said that the capping was necessary to help prevent unjust land distribution. “This bill is a breakthrough as it would end land conflicts, which are mostly caused by unjust land distribution.”  Budiman quoted data from the National Land Agency (BPN) showing around 56 percent of national assets — 80 percent of which was land — was controlled by only 0.2 percent of the population."

9 September. SBY wants to crush proposed foreign ownership clause? His view was not known earlier (Jokowi did a slightly discouraging side stepping) and it was highly likely that there would be lobbying on this multi billion dollar matter.

Reuters cited Indonesia’s investment chief as saying that the president is against a draft bill that would retroactively limit foreign ownership of plantations at 30% as it may expose the government to legal action. According to the article, lawmkers and the government are at odds as to whether the law should be retrospective. The Chairman of Indonesian Investment Coordinating Board said that the guidance not to include an ownership limit was under the instruction of the President (summary from Ambank news alert)

Reuters news article:

26 August evening. I had a second high level industry meeting over dinner. I've also spoken to two seniors in the financial sector in the last two days; not surprisingly they are concerned about definitions and impact on foreign investor sentiment.

--------Advert: Indonesia policy platform - crucial key text for business investors. Do you need to better understand the policy platform of the incoming Indonesia Jokowi-JK administration? Get:  i) a full English translation of the Jokowi-JK "visi misi / vision mission" policy platform (original version, 41 pages in Bahasa) and ii) upcoming review (release date to set) of priority Jokowi-JK policy items from the 5 Presidential Debates and statements from Jokowi-JK and key advisors. Please contact Deborah at deborah.segienam[at] for orders and info.--------

The new Plantation Bill has been about two years in the drafting. Today, I have confirmation of yesterday's view that there is broad political consensusï among the legislators for the foreign ownership limit clause. However, there's little time left in this Parliament. This clause and other key revisions of concern to plantations include the land ceiling for a single company or group of companies (the definition of "group" talks about ownership and management relationships; rather than minority or majority stakes), the inclusion of plasma within the HGU and customary rights. The consensus arises from the amendments being made to aid the "rakyat kechil" (the people): apparent concerns over social conflicts and land for rural folk. There are three major bills being handled by Commission #4 - the Plantation Bill, the Land Bill and Customary Rights Bill.

I guess we know for sure by the end of September on the foreign ownership clause (and the rest of the Plantation Bill), or unless there are changes before then. The views from Malaysia are that it is unlikely for the foreign ownership limit ruling to pass, and if it does, there is hope that the new government will reverse it. There is also hope for a fair middle ground with no retrospective element i.e. no sell down for existing foreign owners. However, it is not clear how these hopes are being represented to the Indonesia legislators. It may be up to individual company lobbying among the key 20 legislators involved?

25 August evening. Jokowi side stepping question on proposed foreign ownership limits to Malaysia newspaper (see below)? I'm in Jakarta for three days. Getting some useful updates and political context to Indonesia regulatory changes and Jokowi-JK policy ideas from industry sources and seniors in the financial sector here. The views I'm hearing here seem different from Malaysia sources (even those with work / business here). The key question I'm asking is: what's the political consensus? I'm also getting some feedback on issues from bankers looking at their plantation portfolios.

Note: On Plantations the proposed limit is 30% with a 5 year adjustment (sell down) period and for financial services, it's 40% with a 10 year adjustment period. Jokowi points out that FDI is needed in these sectors: tourism, infra (build ports, airports and railways) and manufacturing.

Jokowi going for moderation by wong chun wai; Updated: Monday August 25, 2014 MYT 8:25:09 AM;

"> Malaysia-Indonesia relations and international trade. During your election campaign, many observers were concerned with the tone of presidential candidates playing the nationalist cards on the economy and Asean.  Can you clarify what are your investment policies, specifically on equity in financial services and plantations?

I am aware that there are domestic political pressures to limit foreign expansion, including in the financial services and plantations sectors. Still, to ensure future rapid economic growth we need massive investment and if domestic capital is not sufficient, then we will have to look abroad. It is my task as President to balance out these pressures. My commitment to the Indonesian people is to create economic growth and jobs. We need investments for tourism, infrastructure and manufacturing. We need support for the building of ports, airports and railways."

19 August 2014 afternoon. Thanks to several readers for discussing this new proposed bill.

An Indonesia policy analyst notes that the Indonesia media has not ran with this story since Reuters broke it on Friday. This may be regarded as maneuvering by the outgoing legislators as the draft bill (RUU) is apparently not in a format ready to be passed. The RUU corroborates the Reuters report, but conditions for foreign investment appears unrefined and includes a clause allowing foreign investment in the sector only if it involves new technology (Article 70).

There are doubts this can be enacted in the short-term, especially in its current draft. Bloomberg reports that Parliament has not tabled it yet as it hasn’t received a letter from the President. However, there is a rush to table this before the next administration comes in. If not, the new parliament will have to redraft the bill (newslink: Aug. 19 (Bloomberg) -- Bloomberg’s Alia Karenina reports on a draft bill by Indonesia’s government that would limit overseas land investment in the nation to protect small business. She speaks on “On The Move.”

Indonesia business consultants note that Jokowi is generally pro-business and pro-investment, and that his key priority is to lower fuel subsidies and to boost state income with tax reforms. Thus, as economic and fiscal status is the priority, some think that foreign investments limits would not be a priority at this point. A bigger concern for natural resource concessionaires (plantation, forestry and mining) will be stricter environmental regulations, tax compliance and such.

19 August 2014 morning

Khor Reports comment: This has been percolating for a while. I last spoke to friends in Indonesia palm oil about this back in March. We'll have to look into the details, including the schedule for the Indonesia Parliament vote on this bill and understand what discretion the incoming Presidential administration will have if it happens to be passed before the new President is installed (assuming Jokowi-JK have a differing view on this, which remains to be determined). If this is found to be the political consensus*, then as always, implementation and the details are everything. The 2009 changes to the mining bill were fundamental but were only strongly rolled out for implementation in 2013 (much to the surprise of the mining sector!). There are already retrospective foreign ownership limits with 4-year sell downs in place for the Indonesia horticultural sector. Also, many will recall Malaysia's own history and policies on such limits which may prove awkward in counterarguments. Analysts note that many Malaysian plantations** will be badly affected if this policy is put in place.

*We may want to note the wide readership that Thomas Piketty's "Capital" is getting among political economists and policy makers; While it is generally pooh-poohed among international capitalists and mainstream financial media, it offers much grist for the mill of nationalistic policy makers on the fallacies of foreign ownership.
**For a breakdown of foreign plantation group exposure in Indonesia, check out AmBank's 14 August 2014 report.

Our other postings on this topic with some contextual information and recent Malaysia investor sanguine views:
  • At the sidelines of POC 2014: (1) on new Indonesia regulations (update), /khorreports-palmoil/2014/03/at-sidelines-of-poc-2014-1-on-new.html: "The number one producer of palm oil in the world has been making some speedy and decisive changes in policy in the last few years. A key example was the deployment of the new biodiesel policy.... The advancing proposal for a 30% foreign equity ownership limit (revision of Law No. 18 Year 2004 on Plantations) in Indonesia was talked about. Could this happen before the end of the current Presidential term this year?...
  •  Interview #2 Presidential race heats up, foreigners worry? /khorreports-palmoil/2014/07/interview-2-presidential-race-heats-up.html; "...some Malaysia investors seem relatively sanguine about business regulatory changes. They note that while the candidates may sound more nationalistic in campaigning and new regulations may seem tough, the implementation usually ends up more practical and business-friendly...."  


New Indonesian plan to limit foreign ownership will hurt Malaysian firms by yvonne tan, updated: Tuesday August 19, 2014 MYT 7:18:05 AM; "Malaysian planters will be the biggest losers if Indonesia decides to restrict foreign ownership of plantation companies there to not more than 30% from the current 95%... “The proposal will have the biggest impact on Malaysian-listed companies, as most of them have gone into Indonesia in a big way and are highly dependent on Indonesian operations for future growth,” UOB KayHian Research told clients in a report... Some of the local companies with Indonesian operations include Sime Darby Bhd, Kuala Lumpur Kepong Bhd (KLK), Felda Global Ventures Holdings Bhd, IJM Plantations Bhd and Genting Plantations Bhd... Nevertheless, analysts pointed out that it was still early days for the policy, with Indonesian lawmakers still studying the possibility of limiting foreign ownership in the plantation sector.
Affin Investment Bank has maintained its “overweight” call on the sector for now... “It remains to be seen if the new Indonesian administration (led by Joko Widodo) will agree to the Bill as well as the foreign ownership limit, which is also being considered for other sectors, including banking and mining.” The investment bank suggests that Malaysian planters could consider mergers with Indonesian peers to reduce equity stakes in response to the new possible measure..."

Indonesia lawmakers draft bill to slash foreign ownership of plantations By Michael Taylor and Yayat Supriatna; JAKARTA  Fri Aug 15, 2014 3:04am EDT; Aug 15 (Reuters); "Indonesian lawmakers are looking to restrict foreign ownership of plantations to no more than 30 percent, as the top palm oil producer tries to maximise land usage, protect indigenous people and tighten environmental controls in the sector....Indonesia's parliament is looking to finish discussions on the draft bill with the government soon and expects it to be approved before the new administration is in place, Gamal Nasir, director general of plantations at the agriculture ministry told Reuters....
If the draft bill becomes law, it would be retroactive for companies that already own plantations, said Herman Khaeron, an influential lawmaker and vice chairman of the parliamentary committee for agriculture, forestry, fisheries and maritime... This interpretation was rejected by agriculture ministry and industry officials. Firms would be given five years to comply with the new bill, according to a copy of the draft seen by Reuters, and those that refused to comply may face fines, temporary suspensions or the revoking of licenses...."


Indonesia environment and industry (update 2): coal industry clamp down?

Indonesia to Clamp Down on Coal Industry’s Worst Excesses - ‘Serious Environmental Damage’: The government is finally taking notice of the detrimental side effects coming out of the nation’s burgeoning mining sector By David Fogarty on 09:30 pm Oct 23, 2014;; "The aim is to review the legality of the permits, check if mining companies have valid tax identity numbers, are paying their taxes fully and whether the permits overlap palm oil and other mining concessions and protected forest areas - a common ..."

24 September 2014: Indonesia and Jokowi: greening hopes?

Khor Reports: I had just noticed reader interest picking up on my Indonesia related postings on more palm oil sustainability technical matters and regulations, and thought a collation here might be handy. Also, a good summary on Jokowi stance on green matters (see below) from Climate Advisers of the US which says it takes a constructive stance on Indonesia's greening prospects. Climate Advisers works alongside TFT (interestingly, it is formally a UK-registered charity) in advising Wilmar on its traceability program. Useful to see what is the US organization is saying. 

Indonesia recent moves tightening up on environmental regulations - hefty fines. I'll look for my piece on indigenous land rights and impact on concessions and post up soon.
On Brazil: How Brazil clamped down on deforestation, Friday, July 11, 2014,

Online links:

Jokowi Wins: This Could Turn Out to be the Biggest Climate News of 2014 By Andreas Dahl-Jørgensen and Michael Wolosin, Forests & Lands, Political Strategy;
What does Jokowi’s win mean for the world’s climate? The short answer: Possibly a huge deal. Here’s why. ... where is Indonesia heading on deforestation and carbon emissions? There are two diametrically opposed answers to this question... The “glass-half-empty” camp looks at deforestation rates and sees failure. Recent studies have confirmed that the loss of natural forests has dramatically increased in the last couple of years. Deforestation is now higher in Indonesia than in Brazil, in part due to Brazil’s 80% reduction over the last decade – the largest emission reductions anywhere anytime ....The “glass-half-full” view – which we share – looks not only at the disturbing deforestation data, but also takes into account the dramatic systemic changes and leadership that is taking place. Frances Seymour, previously the head of the Center for International Forestry Research and now a senior fellow at the Center for Global Development, has referred to the deal with Norway as the most significant game changer for Indonesia’s forests in the last 25 years....

...Here’s what we see below the surface:
1.Disruptive transparency that “exposes the mess.”... One Map
2.Fundamental land-use reforms. Moratorium. Land swaps?
3.Ending impunity. The President’s special reform unit and the anti-corruption unit (KPK) have embarked on a review of existing concessions and a comprehensive law enforcement campaign. It is following the money, with fines up to $ 9 million and executives being jailed.
4.Indigenous rights.... Landmark court ruling in 2013 Indigenous claims are being included in the government’s One Map initiative.
5.Private sector sea change.... Large and powerful companies have gone from opponents to critical allies of the reformers.

These remarkable developments are reminiscent of the strategies that helped Brazil’s deforestation rate plummet in a way no one thought possible.

The Jokowi Forest Agenda. There are three big reasons forest advocates and observers should be excited about a Jokowi presidency... First, while environmental issues didn’t feature strongly during the campaign, the things he did say were good, even if lacking specifics. (See Loren Bell’s excellent summary here; He stated that Indonesia has “pursued economic growth too aggressively and not paid attention to the environment.”...Second, Jokowi agreed to implement the reforms requested by the indigenous peoples’ organization AMAN, including implementing the Constitutional Court decision granting land rights to indigenous peoples. In return Jokowi received AMAN’s endorsement and active campaign support, the first presidential candidate ever to do so.... The third and perhaps most important reason for optimism relates not to his stance on the environment but his vision for good governance and social justice.... His coalition does not hold a majority in parliament, and he may need to learn to play the political game of favors to get things done. Even with the right reforms, deforestation is unlikely to decline immediately given the sheer inertia. But it’s hard to see how one could have asked for a president more aligned with the anti-deforestation agenda than Jokowi....