EU urged to press for more 'sustainable' production of palm oil

By Martin Banks - 14th June 2011
The EU has been urged to help shift production of palm oil in a more "sustainable direction".

Speaking on Tuesday at an event jointly organised by the Parliament Magazine, Imke Lübbeke, of the WWF, said that the environmental impact of oil palm had "not been exaggerated".

Lübbeke, the organisation's EU bio-energy policy officer, said there was "increasing evidence" that oil palm production was directly responsible for a 12 per cent reduction in the "number, variety and abundance" of wildlife in Malaysia, the world's second biggest producer of palm oil.

She added, "WWF is not against palm oil which is a very valuable vegetable oil.

"It has unique characteristics that suit it to processed foods and other consumer goods like detergents and soaps.

"We support palm oil as long as it produced sustainably."

The lunchtime roundtable, jointly organised with the Malaysian Palm Oil Council, focused on the sustainability of palm oil production, currently a controversial issue among MEPs and policymakers.

It also heard from Danish Independent MEP Anna Rosbach that palm oil has been used in "many industries" for years and is a "healthy" oil.

She told the meeting, "This issue has two parallel sides: On the one hand we have the big international companies cutting down rainforests, draining and burning swamp forests and destroying biodiversity.

"On the other hand, we have all the beneficial sides of palm oil both for use in food, fuel and for its contribution to the economy."

Rosbach, an ECR member, said that Asian countries, such as Malaysia, should not be blamed for the "devastation" she said is often caused by palm oil production.

"If we look at Africa, we see that many European companies are behind the fast-growing plantations," she added.

"We should remember that many of the environmental concerns surrounding palm oil production are the same that we see with all kinds of large scale and intensive agricultural productions."

In a Q&A session, British Tory MEP and environment committee member Martin Callanan, who chaired the debate, asked whether deforestation was still taking place even though the Malaysian government had designated all its virgin rain forests as protected areas.

In reply, Nagendran Bala Sundra, a minister counsellor at the Malaysian EU embassy in Brussels, made a robust defence of his country's record when it comes to the environmental impact of palm oil production.

He said, "We recognised that our forests are not finite and a lot of effort has been invested into tackling this issue. This is something that has not always been recognised."

He also emphasised the importance of the palm oil industry to his country's economy.

He said the sector was "one of the most heavily regulated" industries in the world and that palm oil production contributes "significantly" to global food security.
source:
http://www.theparliament.com/latest-news/article/newsarticle/eu-urged-to-press-for-more-sustainable-production-of-palm-oil/

Palm Oil demand to rise as an Bio-Diesel input

By Jithendra Antonio

Watawala Plantaitons PLC Chairman, G. Sathasivam is of the view that future Palm Oil prices would rise as Palm Oil will have higher demand as an input for bio-diesel production.

“Spurred on by the world’s intensified search for alternate sources of energy, the Malaysian government for instance has now renewed focus on developing its palm oil industry for the production of bio-diesel,” Sathasivam outlines in his latest annual financial review adding that building of new bio diesel plants is being encouraged in response to demand for bio diesel from European countries.

While the contributions from the oil palm business of Watawala Plantations Group has been commendable during the year, Sathasivam anticipates that strong demand for bio diesel is also expected from countries such as South Korea, India, Colombia and Turkey.

“As palm oil has the lowest cost of production amongst edible oils, it seems likely to

make up a significant portion of that market,” he says adding that Oil palm planted on anthropogenic grassland could supply this requirement in 2050, thus addressing some of the environmental concerns related to the destruction of forest land.

He further notes that it is encouraging the Ministry of Plantation Industries has proposed to expand Sri Lanka’s Oil Palm cultivated land extent from the current 5,000 hectares to 25,000 hectares. “A public-private partnership would be a vital element to ensure the success of this programme” Sathasivam notes in his review.

He further goes in to explain that any wage revisions during next year, would need to be linked to productivity and continuous unproductive wage revision could be detrimental to the Plantation Industry as a whole. “There is a serious need for all stakeholders to take part in this issue than isolating the Plantation Companies,’ Sathasivam stresses in his review.
source:
http://print.dailymirror.lk/business/127-local/47301.html

Indonesia forest moratorium breached on first day: group

By Michael Taylor

JAKARTA | Fri Jun 17, 2011 3:05am EDT

(Reuters) - Indonesia's freshly inked two-year forest moratorium was breached on its first day as a plantation company burned carbon-rich peatlands on Borneo island, an investigation by an environmental group said.

Indonesia revealed a long list of exemptions to its much-delayed two-year forest moratorium on logging that came into effect on May 20, in a concession to hard-lobbying plantation firms in Southeast Asia's largest economy.

The London-based Environmental Investigation Agency (EIA) and its Indonesian partner Telapak said they had documented peat forest in Central Kalimantan province's moratorium zone being burned by Malaysian plantation group Kuala Lumpur Kepong Berhad (KLK) on May 20.

KLK officials were not immediately available for comment and company executives did not respond to queries emailed by Reuters.

The Forestry Ministry told Reuters it had not seen the environmental group's report but forest and peatland burning was against the law and should be investigated.

The environmental group also criticized Norway, which promised $1 billion for Indonesia if it implemented the moratorium, for investing in KLK.

"We should all be aware of countries such as Norway which are able to take a profit from deforestation," said the director of campaigns for Telapak, Hapsoro.

Indonesia is seen as a key player in the fight against climate change and is under intense international pressure to curb its rapid deforestation rate and destruction of carbon-rich peatlands.

Norway and Indonesia signed an agreement in May last year under which Jakarta promised to impose the moratorium. In return Norway vowed to pay $1 billion, based on Indonesia's performance in achieving long-term goals to slow deforestation.

Norway welcomed the plan by Indonesia to impose a two-year moratorium on logging in primary forests despite a five-month delay to the deal.

Siv Meisingseth, spokeswoman of the Norwegian central bank, which oversees Norway's holdings abroad, said it did not comment on individual investments by the fund.

In late March, green policy group Greenomics Indonesia also criticized Norway's sovereign wealth fund for investing in palm oil firm Golden Agri-Resources at the same time as funding Indonesian moves to cut deforestation.

Singapore-listed Golden Agri is the parent of Indonesia's PT Sinar Mas Agro Resources & Technology (SMART), which Greenpeace says has cleared high conservation value forests and carbon-rich peatlands.

Norway's $550 billion sovereign wealth fund will keep investing in Southeast Asian oil palm planters but may exclude firms that severely damage the environment, a Norwegian finance ministry official said after Greenomics' criticism.

(Reporting by Michael Taylor in JAKARTA, Niluksi Koswanage in KUALA LUMPUR and Alister Doyle in OSLO; Editing by Neil Chatterjee and Alex Richardson)
source:
http://www.reuters.com/article/2011/06/17/us-indonesia-environment-moratorium-idUSTRE75G0ZK20110617

Lessons Learned (on Palm Oil in Africa)

Lessons learned

By Emilie Filou | Published: 08 June, 2011

With unprecedented investment into the development of Africa’s palm oil industry, governments in the region are trying to avoid past environmental mistakes made in Asia

As far as commodities go, palm oil is a bit of a wonder product. Thanks to its long shelf life and high resistance to rancidity, it is used in the production of myriad goods, from margarine and biscuits, to shampoos and sweets. As a crop, palm oil is also something of a bonanza: its yields are 5-10 times higher than other oil crops; it does not require much pesticide; and it is 15 percent cheaper than other vegetable oils.

For the time being, 80 percent of palm oil production comes from just two countries – Indonesia and Malaysia. Southeast Asia has dominated the palm oil trade since the 1970s and 80s, when large-scale production in the region expanded exponentially.

Success for these countries has, however, come at a price. There are now around 10m hectares producing palm oil in Southeast Asia and a report from environmental NGO Friends of the Earth found that nearly half of these plantations had been created on primary or secondary forest land. In Malaysia, the report concluded that as much as 87 percent of the deforestation that had taken place between 1985 and 2000 could be attributed to palm oil expansion. In turn, deforestation is responsible for about 20 percent of global greenhouse gas emissions; intrinsically linking the palm oil industry to global warming. The conversion of forest land to monoculture plantations also has an enormous impact on biodiversity: 80-100 percent of mammals, reptiles and birds are lost in the process.

This legacy of detrimental social and environmental consequences of developing the industry sets an ominous precedent for Africa, a region that may be on the verge of a renaissance in its palm oil industry. According to a recent study by financial services group Nomura, Southeast Asia’s dominance of palm oil is set to recede, with cultivatable land in Indonesia and Malaysia expected to run out by 2020 and 2022 respectively.

Palm oil producers have therefore started looking for land elsewhere. Africa is a logical destination: as the palm’s homeland, its climate is ideally suited, has abundant land available for development and enjoys a closer geographical proximity to European markets than Asia. Companies such as Singapore based agribusiness, Olam, estimate that they could halve transportation costs and benefit from a 3-4 percent duty advantage compared to imports from Asia.

Olam is one of a growing number of firms that have secured large-scale concessions on the continent. The speed at which these concessions have been granted has raised concerns about the potential impact of palm oil in Africa, despite widespread commitments to implementing sustainable practices as recommended by the Roundtable for Sustainable Palm Oil, an international alliance of palm oil stakeholders promoting sustainable practices. One of its key principles is the prohibition to convert primary forest or high conservation value areas into plantations.

Yet few countries in Africa have gone through land use planning and have extensive information on what exactly is on their land. “In most countries, the government doesn’t have the information it needs to give out concessions,” says Puvan Jegeraj Selvanathan, executive board member of the RSPO and chief sustainability officer of Sime Darby. “They’re literally drawing lines on a map.”
source:
http://www.thisisafricaonline.com/news/fullstory.php/aid/308/Lessons_learned.html

The Lords of the Ring, The richest by Plantations

Joe Cochrane & SK Zainuddin | May 31, 2011
Fortune has favored Indonesia’s business barons and captains of industry these past 12 months. Rising commodity prices, strong consumer demand and a raging stock market have combined to push the net worth of the GlobeAsia 150 Richest to new record levels. And after three years, we also have a new number 1.

Coal, palm oil, property, consumer goods. Indonesia’s rich natural resources and fast-growing consumer market have been the backbone for one of the sharpest spikes in the net worth of the super-rich since we started compiling the GlobeAsia 150 Richest Indonesians list in 2007.

In the past year, record high global commodity prices have translated into record earnings for those tycoons who have coal mines and vast palm oil plantations. In fact, just about any businessman of stature these days is eyeing a coal mine if he does not have one already, or is looking to expand production. It is no surprise that of the 21 billionaires on this year’s list, nine have build their fortunes through ownership of coal mines.

Two of the new entrants to this year’s list, Samin Tan, who owns Borneo Lumbung Energy and Metal, and Agus Lasmono, majority shareholder of Indika Energy, both rose to fame and fortune by acquiring coal mines.

This year’s new number one, Eka Tjipta Widjaya, the patriarch of the Sinar Mas group, knocked Budi Hartono of the Djarum Group off his perch primarily because of the group’s massive expansion in palm oil. We estimate that Sinar Mas has over one million hectares of palm oil

Money does grow on trees

Fauzi Ichsan, senior economist for Standard Chartered in Jakarta, says “it’s a very simple ex- planation” why Indonesia’s rich are getting richer.

“Commodities and asset inflation,” he says. “In the last 18 months, commodity prices have more than doubled. Oil has gone from $35 a bar- rel in March 2009 – today it is $100 a barrel.
“The rise in oil prices also pushed up the pric- es of other commodities prices, especially energy commodities like gas, coal and palm oil. On top of that, we’ve seen a big equity market rally over the last 18 months,” he says.

“Basically the gap between the rich and poor is widening because of asset and commodity inflation. Even if you are a farmer and own your own rice field, you’re OK because food prices have gone up and the price of your land has gone up. We’re not talking about new jobs or inventing new stuff in Indonesia. This is not new.”

Indeed, Indonesia has for a while been among the world’s top producers and exporters of numer- ous commodities, including coal and palm oil. And globally, the past 12 months has seen more of the same.

“Indonesia’s wealth is directly tied into com- modities and the rise in commodity prices in the past year, driven by money printing and growing demand from emerging markets, particularly China and India, has seen a material improve- ment in Indonesia’s overall wealth,” said Nick Cashmore, head of securities at broker CLSA Indonesia.

“Wealth has expanded because those owning assets have seen their net worth expand as asset prices have risen. It’s a simple story,” he says. “Deals have been done, work expended but at the end of the day global loose monetary prices continue to drive asset prices higher and thereby increase the wealth of the owners of those assets.

“The numbers are staggering: the share prices of coal miners PT Banyan Resources, PT Bumi Resources, and PT Adaro Indonesia increased by 179.3 percent, 69 percent, and 10 percent, respec- tively, between May 2010 and April 2011, making them among the JCI’s top 15 performing stocks during that period.”

But nothing is etched in stone – or coal for that matter. “Just as the tide has risen, were com- modities prices to again fall, so Indonesia’s tide would subside,” Cashmore reflects. “The country remains beholden to directional movements in commodity prices. Coal mining is the latest fash- ionable investment trend and every aspirational taipan must have a coal strategy.”

Consumer is king

Of course, there is more to life than coal and palm oil. Indonesia’s economic upswing has been followed by growing consumer spending, as millions more Indonesians have more money in their pockets and are joining the growing ranks of the middle class.

“The commodities story is slightly less com- pelling than the consumption story,” says Tai Hui, Southeast Asia head of research for Standard Chartered Global Research in Singapore.

Indonesia’s economy grew at an impressive 6.5% in the first quarter of 2011 compared to the same period in the previous year on the back of consumer spending and investment.

“I would say that (retail and consumer goods players) made good money,” says Erwan Teguh Teh, head of research at CIMB in Jakarta.

The retail sales index is up quite substantially, and if we look at some of the deals done over the last 12 months, the valuations are lucrative. Matahari and Alfa Mart, for example.

“And they are reinvesting. If you follow some of the listed retailers, they are expanding. Most of them are expanding by 10% to 15% new space every year. That’s a lot. Depending on inflation, they could grow 15% to 20% each year overall.”

Among the top retail and consumer goods players are Anthoni Salim, ranked number 3, Peter Sondakh, ranked 9th; William Katuari, ranked 13th; Mochtar Riady, ranked 17th; and Chairul Tanjung, number 23; and Sjamsul Nursalim, number 29. Another sector in the portfolios of Indonesia’s richest is property – and with good reason.

The performance of listed property companies on the JCI improved by 2.6% between June 2010 and May 2011. The country’s second-largest prop- erty firm, PT Bakrieland Development, controlled by the family of Aburizal Bak- rie, who is ranked 5, announced in May that it expects its 2011 net profits to rise by 30%.

However, while share prices and demand are both going up, that doesn’t necessarily mean the same applies to property values. “I don’t think the value is going up significantly,” states Edwin Sinaga, president director of brokerage firm Financorporindo Nusa. “I think it’s about 10% to 20%.”

What will be the hot new sectors for 2012 and beyond? Hui of Standard Char- tered says that sectors linked to consumer demand are a sure bet, in particular tele- communications.

“The way the income level in Indone- sia is now ... we are moving away from the bare necessities of life to something more interesting. So you will see a rapid growth in telecommunications; we’re moving away from motorbikes to cars. That change in consumer behavior all helps facilitate income growth of those businesses,” he said.
But will this growth alone help Indo- nesia itself, rather than just making tele- coms and car manufacturers better off?

Some don’t think so, given the country’s continuing dependence on produc- ing raw materials such as coal and palm oil.

“The value-add to the economy is not apparent,” Ichsan concludes. You can’t compare Indonesia’s list of the richest with prominent figures on the US rich list like Steve Jobs of Apple or Bill Gates of Microsoft. They really change people’s lifestyles with their inventions. And the rich list in Indonesia – we are riding on global growth.”

Sime Darby Plantations makes foray into Liberia

The Star | 28 May 2011
By HANIM ADNAN
nem@thestar.com.my

MONROVIA (Liberia): Investing in a West African nation like Liberia may sound like a risky venture but for Sime Darby Plantations Sdn Bhd, it is taking it all in its stride as the resource rich republic has the pre-requisites for oil palm and rubber plantations.

“Risks can happen anywhere even if you go to the moon,” said Sime Darby Bhd chairman Tun Musa Hitam.

International oil palm plantation companies, which are facing severe land scarcity, are flocking to Liberia which to date is believed to have made available 1.5 million ha for oil palm cultivation.

Plantation companies that are making large-scaled plantations include Golden VerOleum from Indonesia, Equatorial Palm Oil from Britain and Sime Darby.

For Sime Darby, it will be a long-term venture, Musa told a group of Malaysian journalists covering Sime Darby's first oil palm planting ceremony in Matambo Estate, Grand Cape Mount county here last week.

The Sime Darby plantations venture in the republic is the third tour of duty as the previous two attempts were interrupted by wars.

After a 14-year civil war, peace seems to have been restored in Liberia under a power-sharing government in 2003.

With the United Nation peacekeeping troops having a strong presence in the republic and the new government's liberal business policy to encourage foreign investments, Liberia is now attracting big names from the international investment circle.

Investors from Britain, China, India, Indonesia and the United States were keen to tap into Liberia's rich resources including raw timber, rubber, iron ore, gold, diamonds as well as sprawling agriculture land suitable for plantations.

International investors which have made their presence in Liberia included steel giant AccelorMittal with a US$1.5bil investment, China Union Group at US$2.6bil and Australian mining giant BHP Biliton at an estimated US$3bil.

The former Kumpulan Guthrie had operated rubber plantations in the republic between 1981 and 2002.

However, two civil wars had forced Guthrie to withdraw from the country. With the PNB plantation-GLCs merger - Sime Darby, Guthrie and Golden Hope, the new Sime Darby Bhd was formed in 2007.

“Sime Darby has a big commitment to develop these plantations and to ensure its sustainable developmen,” Musa said.

In 2009, Sime Darby Plantation had been granted 220,000ha under a 63-year concession agreement with the Liberian government to develop oil palm and rubber plantations in four counties namely Grand Cape Mount, Gbarpolu, Bong and Bomi.

“Our pledge to invest US$3.1bil over the next 15 years in the republic is a very serious commitment indeed. More importantly once the entire concession area is fully operational, we hope to be able to employ about 35,000 people in Liberia,” Musa said.

Sime Darby Plantation produces 2.4 million tonnes of crude palm oil (CPO) annually, of which over one million tonnes are certified sustainable palm oil.

“We expects a fully operational upstream capacity in West Africa will provide Sime Darby Plantation with greater access to markets on the Atlantic Rim, Europe and Africa thus offering significant savings in logistics and distribution,” Musa added.

Sime Darby head of Plantation Upstream Malaysia Helmy Othman Basha, in a media briefing near Monrovia after the seedling planting ceremony, said plans were being mapped out to fast-track the planting of oil palm in the entire concession area secured by the group.

“We aim to complete ahead of the initial timeline target. Hopefully, we can finish by 2022 or 2023 instead of 2030,” he said.

For the first 11 years, Sime Darby Plantation Liberia is targeting to plant about 120,000ha.

“We expect to see the first drop of CPO from the Liberian estates in three years and we intend to set up the first palm oil mill by 2013,” said Sime Darby head of Plantation Upstream Liberia Azmi Jaafar.

In total, there will be about 55 estates and around 20 palm oil mills to accommodate the entire Sime Darby plantations concession area in Liberia.

“For each 15,000ha, Sime Darby will be putting up one mill and later, a refinery,” added Azmi.

Azmi expected about 90% of the CPO production to be for exports.

Operational-wise, Helmy said that the CPO cost of production (COP) in the republic was about 10% to 15% higher than the Malaysian planters' COP at about RM1,100 to RM1,200 per tonne.

Of the total COP, fertiliser represented about 30%.

Helmy pointed out that the targeted oil extraction rate is slated at about 21% to 22% in the Liberia estates with targeted yield at 22 tonnes to 23 tonnes per ha per year.

The Liberia plantation landbank size at 220,00ha marked Sime Darby's third largest after its landbank in Malaysia (359,845ha) and Indonesia (288,057ha)
Source: The Star

INDONESIA: Mixed response to forest moratorium

An aerial photo of a palm oil factory in Bengkulo
JAKARTA, 30 May 2011 (IRIN) - A long-awaited moratorium by the Indonesian government on new forest concessions, aimed at curbing deforestation, has been welcomed by palm oil farmers but activists believe it does not go far enough.

"We support the government's decree on the moratorium," Maruli Sitorus, a palm oil farmer in Labahan Batu in North Sumatra Province, said. "We have seen outrageous expansions of big plantation companies at the expense of small farmers whose land has been shrinking. We hope the moratorium can limit this."

More than 100,000 hectares of peatland in Southeast Asia are being converted annually into plantations for palm oil and pulpwood, according to the Center for International Forestry Research (CIFOR).

Peatlands store enormous quantities of carbon and their destruction releases large amounts of carbon dioxide, which contributes to climate change.

According to the World Resources Institute, deforestation and forest degradation and loss of peatland in Indonesia accounts for more than 80 percent of the country's greenhouse gas emissions.

Indonesia is home to one of the world's largest areas of peatland and is the largest exporter and producer of palm oil, with 7.5 million hectares of plantations.

On 20 May, Indonesian President Susilo Bambang Yudhoyono issued a long-awaited decree banning concessions on 63 million hectares of primary forests and peatland as part of a US$1 billion deal with Norway signed in May 2010 to fight climate change.

The two-year ban puts a halt to new logging areas in "primary" forests - including areas untouched by humans and areas containing peat - but does not apply to existing forest licences and those that have been approved in principle.

Sitorus, speaking on behalf of small farmers, urged the government to help improve productivity, including subsidizing saplings and fertilizers and determining the price of oil palm fresh fruit bunches, which are used in palm oil production.

"The government should not stop at the moratorium. We small farmers have very limited access to technology," he said. "Prices of fertilizers are skyrocketing and they are scarce."

Sawit Watch, an NGO advocating for small palm oil farmers, said about 500 families depended on palm oil for their livelihoods in North Sumatra.

Upping production

Swisto Uwin, a palm oil farmer in Sekadau District of West Kalimantan Province, said the moratorium was a good first step, but that further support was necessary.

"We recognize that it's a good policy, but we want the government to help farmers improve productivity so that we can focus on replanting. Lack of support for small-scale palm oil farmers from the government will not help us to be able to stand on our feet," he told IRIN. Uwin said farmers could only produce 12 tonnes of fresh palm fruit per hectare per year, while those in Malaysia produced twice as much.

Aida Greenbury, a managing director at the Asia Pulp and Paper (APP), one of the biggest pulp and paper companies in the world, was confident about the outcome of the moratorium for the firm.

"Asia Pulp and Paper will take action to emerge from the moratorium a healthier business with a clear and definitive vision for the future of our sustainable forestry management, manufacturing, conservation and social investment programmes," she said.

APP is part of the Sinar Mas Group, which also operates Indonesia's largest palm oil manufacturer, SMART. The conglomerate has been accused by environmentalists of being responsible for much of Indonesia's forest destruction.

More needed

CIFOR called the decree a "positive development", but said more stringent measures were needed if Indonesia was to meet its ambitious targets of cutting greenhouse gas emissions by 26 percent by 2020.

The moratorium's omission of secondary forests, woodlands that have been re-forested, raises concerns about Indonesia's ability to meet its emission reduction target.

"Significant reductions in forestry emissions in Indonesia through tree planting alone would not be feasible as the number of trees needed to fully achieve emission reduction targets would require a land area twice the size of the entire country," said Louis Verchot, CIFOR's principal climate change scientist. "Instead, emission reduction efforts need to focus on keeping existing forests as forests."

The NGO Greenpeace described the decree as a "progressive" move but said it was inadequate. "It doesn't mean much in terms of forest protection because most of the forest areas covered by the ban are under protected forest status legally," Yuyun Indradi, a Southeast Asia forest campaigner for Greenpeace, explained.

"We want to stress there's a need for a review of licences given to logging, pulp and paper, mining and plantation companies because they are operating in ecologically important areas," he said.

According to the environmental group, under the moratorium about 40 million hectares of forest, an area roughly the size of California, could still be destroyed.

atp/nb/mw
source:
http://www.irinnews.org/Report.aspx?ReportID=92841