2) Convicted cop Labora Sitars brought to Jakarta
1) The multimillion dollar palm oil deal we should all be worried about
A tie-up is on the cards between two palm oil companies with worrying track records. If it goes ahead it could have huge implications for the palm oil sector
It’s a multimillion dollar tie-up that you’ve heard little about, but could have major implications for the drive towards a more responsible palm oil sector.
After several weeks of speculation, it is expected that Malaysian state-owned commodities company Felda is about to conclude negotiations on the acquisition of a 37% stake in palm oil company PT Eagle High Plantations.
This follows an aborted $680m deal late last year, the collapse of which was put down to heavy criticism from investors who felt the deal was too expensive. British bank Standard Chartered was also pulled into controversy over the deal and became the target of a campaign asking it not to loan money to Felda.
The deal would bring together two laggards in the palm oil industry when it comes to their lack of commitments towards sustainable palm oil.
Both companies control significant areas of land – Felda Global Ventures Holdings, Felda’s main listed entity, describes itself as “the world’s largest palm oil producer and oil palm plantation operator, based on planted hectares” and Eagle High is the sixth largest palm oil company on the Indonesian Stock Exchange, based on planted area.
More disturbingly, both have dubious track records. Fella was accused of human
rights violations on its plantations last year by the Wall Street Journal, which reported claims – denied by the company – that contractors it was using were subjecting workers to abusive conditions such as confiscating passports, withholding wages and denying them protective equipment on Felda’s plantations.
While an independent assessor last week confirmed it had found no evidence of trafficked workers on Felda’s plantations – as had also been alleged by the WSJ – independent auditors employed by the RSPO in October found examples of “other subtle forms of forced labour” on Felda plantations, such as withholding identity documents, accumulation of debt, unclear contractual arrangements, and minimum wage obligations not being met.
While Felda is a founding member of the Roundtable on Sustainable Palm Oil (RSPO), the certification body has been widely criticised by NGOs for weak standards on forest and peatland protection. For this reason, over the past couple of years many of Felda’s competitors, including the world’s second largest palm oil producer Golden Agri-Resources, and the world’s largest palm oil trader Wilmar International, together with companies representing the vast majority of globally traded palm oil, have gone beyond RSPO standards to commit to policies of “no deforestation, no peat, and no exploitation”. However, Felda has not made these commitments.
Eagle High is part of the powerful Rajawali Group. It also lacks commitments to no deforestation, no peat, and no exploitation which many other Indonesian producers of comparable size have, including Astra Agro Lestari and First Resources.
In the Indonesian province of Papua, Eagle High’s subsidiary cleared 13,000 ha of rainforest between 2010 and 2014, according to sustainability risk analysis firm Chain Reaction Research. Last year, policy development institute Greenomics Indonesia published a report (pdf) claiming that an Eagle High subsidiary had started clearing high carbon stock forest in West Papua, where it has a forested 20,000 ha concession.
Now the deal is back on the table. So why should we care?
First, this deal is at high risk of driving deforestation. If the acquisition goes ahead, Felda will acquire Eagle High’s large 425,000 ha land bank, of which an estimated 64% is undeveloped. This deal would put enormous pressure on Felda to show a return on investment, making it very likely that at least some of the undeveloped landbank would fall victim to Felda’s bulldozers.
The second major risk factor is human rights abuse. Given the abuses alleged by the Wall Street Journal, Felda should not be allowed to expand its plantation holdings until it can prove that it complies with international standards for the fair treatment of workers and respect for human rights.
Felda’s investors should consider this deal a significant risk. Many of Felda’s and Eagle High’s customers have policies on no deforestation, no peat, and no exploitation, including Cargill, Golden Agri-Resources, and Wilmar. In the event that this deal results in land clearing and/or human rights abuses, these customers may drop their contracts with Felda/Eagle High, which would make the deal a potential economic disaster for the company.
Customers and investors beware — this palm oil romance won’t be pretty.
Nethy Dharma Somba, thejakartapost.com, Jayapura, Papua | National | Mon, March 07 2016, 9:13 PM -