Business

Friday July 16, 2010

Moratorium may affect M’sian palm oil firms

By AMY CHEW
starbiz@thestar.com.my


PETALING JAYA: The Indonesian Oil Producers Association (Gapki) expects Malaysian companies to be affected by the Indonesian government’s two-year moratorium on concessions plan to clear natural forests and peatland to reduce carbon emissions.

This is because many of them hold stakes in Indonesian plantation companies, said Gapki.

Indonesian palm oil producers warn that the moratorium will hamper palm oil production and slow economic growth.

Indonesia is the world’s third largest emitter of greenhouse gases after China and the United States from the burning of its forests and peatland.

President Susilo Bambang Yudhoyono had pledged to cut emissions by 26% from business as usual levels by 2020 or by 41% if given sufficient international support.

Indonesia has 130 million ha of forest left in the country but less than half, or 48 million ha, are in good condition, according to the Forestry Ministry.

The massive deforestation is largely driven by illegal logging, clearing of forests for plantation and mining activities.

“This moratorium will affect the expansion of crude palm oil production as it requires new land,” Gapki’s secretary-general Joko Supriyojo told StarBiz in a phone interview.

“It will also affect Malaysian companies as many of them are either joint-venture partners or hold stakes in Indonesia palm oil companies,” Supriyono added.

Indonesia produced 20.9 million tonnes of crude palm oil (CPO) in 2009 to become the world’s largest producer.

Supriyono said the moratorium would derail the industry’s plan to double its production to 40 million tonnes by 2020. “Our industry also provides jobs to 2.5 million families and reduce poverty.”

In a deal signed with Norway in May, Oslo will invest in US$1bil in forest conservation projects in Indonesia in exchange for the moratorium scheduled to come into effect next year.

The government and environmentalists said sufficient non-forest or degraded land existed for the growth of its plantation industries.

“There are no exact figures but it is estimated that there are around 7.5-10 million ha of degraded land,” said Greenpeace forest campaigner Joko Arif.

“There is no need for CPO companies to clear pristine forests. The degraded land is sufficient for them to expand and meet their target production of 40 million tonnes.”

But Gapki said the degraded land was sometimes unsuitable for plantations as they were rocky, hilly or swampy.

“Very often the land is occupied by villagers. It is not feasible to plant CPO there,” said Supriyono.

Environmentalists blame deforestation for the country’s forest fires which burn for months on end, floodings and deadly landslides.

They said the country was already feeling the effects of changing weather patterns with prolonged wet and dry season, making it difficult for farmers to plant and harvest crops.

In recent months, Greenpeace accused Indonesia’s Sinar Mas group of destroying forests in their palm oil and pulp and paper operations.

Greenpeace’s campaign led PT Unilever Indonesia to stop procuring new CPO supply from Sinar Mas while Carrefour ceased buying paper products from its subsidiary Asia Pulp and Paper.

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