Simon Siburat discusses the cost/benefits of maintaining HCV areas in Indonesia.

1. The Challenges, Costs & Benefits of
Maintaining High Conservation Values
in Indonesia
by
Simon Siburat 1, Melissa Tolley 2 and Calley A. Beamish 3
y y
1- Group Sustainability Controller, 2 – Primatologist and Conservation Manager 3
Biodiversity and Conservation Manager
i
Presentation to
ZSL Symposium
“Sustainable Palm Oil : Challenges, a Common
Vision and the way forward 5 – 6 May 2011

2. Wilmar International
• Asia’s L di
A i ’ Leading Agribusiness Group after completing merger
A ib i G ft l ti
with the Kuok Group plantation and edible oils in July 2007
• Headquartered in Singapore, we operate over 300 processing
plants and employ 88 000 people in more than 50 countries with a
88,000 countries,
primary focus on Indonesia, Malaysia, China and Europe.
• . Largest global processor and merchandiser of palm & lauric oils.
• Plantations and palm oil mills contributed to about 26 per cent to
Wilmar's annual PBT in 2010.

3. Investing in Sustainable Development
• Committed to sustainable growth and balancing economic viability
C itt d t t i bl th d b l i i i bilit
with environmental and social responsibility.
• Launched our inaugural Sustainability Report which details
our efforts and progress in conserving the natural environment and
ff d i i h l i d
reducing emissions.
• We inculcate sustainability-focused values in our employees and processes by
internalizing RSPO P & C

4. 4 ‐ RSPO MEMBERSHIP
1) PPB OilPalms Bhd ( Subsidiary of Wilmar ) – Member of RSPO Since 29
September 2004- Grower
2) Wilmar International Limited – Member of RSPO Since 16 August 2005 – Palm
Oil Processor and Traders
3) Wilmar Edible Oils – Member of RSPO Since 5 Dec 2005- Palm Oil Processor
and Traders
4) Wilmar Oleo Chemical – Member of RSPO Since 10 July 2006 – Palm Oil
Processor and Traders
RSPO

5. The Journey of Sustainability
• Have successfully RSPO certified 10 palm oil
mills from 20 plantations over an area of
78,500 ha. 7 of these mills are in East
Malaysia and 3 are in Indonesia. Together
these mills produced 430,000 mt of CSPO and
94,800 mt of PK. This represents about 33%
of Wilmar Planted area.
• Another 3 Palm Oil Mills have been audited
late last year, and are undergoing Peer
Review .
• Plan to Complete RSPO Certification in the
balance of the 25 mills by 2013.

6. For New Development – Have Successfully
conducted HCV assessments over 16
companies with a total area of over 200,000
ha. These projects spreads over 2 provinces
of Central Kalimantan and West Kalimantan
Assessment were done by Independent
Consultants who are Well Verse with HCV
matters.
matters All of them are now Approved by
RSPO in July 2010.

7. Invitees to a Public Consultation
Ibu Desi from RSPO (INA)
Government - Bupati Kotawaringin , PEMDA, Forestry, BAPEDELDA
p g , y,
Local Plantation Players
Local and International NGOs
Local community Leaders, Village Headmen,

8. Protection of 4,000 ha of Contiguous Orang Utan Habitat in PT MSM (North)
Some Population of Orang Utan , Probocis
Monkey and Sun Bear

9. Challenges 1 : Legal Recognition of
Maintaining HCV in Oil Palm Plantations
Simon Siburat-for Group Sustainability –
Land that are alienated Oil Palm Development are termed as “APL”
ControllerLain”under the Management of Provincial Governor be Non-
Areal Pengunaan
g
Forest or State land
. Administratively, such land are considered to
y
Under the Basic Agrarian Law No 5/1960, Such Land will be leased to
company over a 30 -35 year period through the Issuance of Land Title (HGU)
35
for economic development activities such as agriculture, Livestock or
Aquaculture.
Under the Environmental Law no 32/2009 , companies are obliged to
maintain environmental infrastructure and facilities. Riparian of 50 m – 100 m ,
No Development on steep areas of 25 degree and peat of more than 3 m
deep.
deep

10. Challenges 1 : Legal Recognition of
Maintaining HCV in Oil Palm Plantations
Simonjust environmental services.provide
HCV concept require practioners to
more than Siburat- Group SustainabilityHCV
Controller needHCV present.
emphasized on the
maintain or enhance the
to actively managed to
Using a precautionary approach to delineate
and protect habitat for viable populations of
species under HCV 1 and also to establish
network of remnant natural areas to produce
connectivity/corridors
This often result in vast areas of land (20% -
40%) of land that are alienated for economic
development to be set aside for conservation.
Under Indonesian HCV toolkit. Some 211
species were listed as protected (1.2) regardless
whether th are viable or not. Of th
h th they i bl t these only 41
l
species are protected under the Conservation
Law no 5/1990 and another 17 protected under
CITES.

11. Challenges 1 : Legal Recognition of
Maintaining HCV in Oil Palm Plantations
Simon Siburat- Group Sustainability
“Un Productive Land “- Acquisition by Local Government
Controller
Location permit Stage. Companies are given a period of 3 years, to
negotiate, compensate and acquire land from local communities within
the given location permit Companies need to acquire more than 50%
permit.
of the land area in the given permit. Extension of 1 year can only be
granted if the company has successfully acquired more than 50% of the
given land Otherwise the permit will be withdrawn
land. withdrawn.
HCV or set aside land are often considered non-acquired land. At
this stage companies has no p
g p protection over these Non- acquired land
q
until the Land title has been issued.

12. WILMAR- KALBAR Given to other
NON-RSPO
REGION – PT Putra
Companies
Indotropical
HCV lost – 6,000 ha
Revised
Location Permit
6,498 ha
HCVS
Initial Location Permit
20, 000 Ha ( 7,300 ha of HCVs) – 36%

13. REVISED IZIN LOKASI AND HCV AREA LOST
Old Izin
Old Izin Revised Izin
Revised Izin Differences
Companies Total Ha HCV Total Ha HCV Total Ha HCV
PP 20,000 4,235 5,135 228 14,865 4,007
PI 20,000
20 000 7,304
7 304 6,498
6 498 1,195
1 195 13,502
13 502 6,108
6 108
IPM 18,000 5,811 8,441 1,695 9,559 4,116
APS 20,000 5,463 12,000 3,581 8,000 1,882
DLP 15,000
15 000 7,276
7 276 7,140
7 140 4,883
4 883 7,860
7 860 2,393
2 393
PANP (WSP) 14,100 1,653 3,100 1,083 11,000 570
BCP 13,000 2,671 9,890 457 3,110 2,214
Total
T t l 120,100
120 100 34,414
34 414 52,204
52 204 13,123
13 123 67,896 21,291
67 896 21 291
(HCV = 28%) (HCV = 25%)
TOTAL HCV LOST = 21,291 ha
( ) ,
TOTAL PLANTABLE AREA LOST (HCV FREE) = 46, 605 HA

14. Challenges 1 : Legal Recognition of
Maintaining HCV in Oil Palm Plantations
Simon Siburat- Group Sustainability
Recent Law of Land Acquisition by Local Government
Controller
Under Government Regulations PP No 11/2010, On Idle Land that
are not productive , government has the right to acquire such land .
HCV or set aside are often considered non-productive/idle land
because its not managed in accordance to the terms specified under
the land title which is meant for economic development
development.
A Good Tiger Habitat
(shrubs/grassland) is often
classified as an Idle Land to a
Non conservationist
Non-conservationist

15. Challenges 2 : Legal Requirement that
Requires Companies to develop 20% of their
q p p
Land Holdings for Smallholder Scheme
S L o P S itbu at G oup Sustainability
Simon Siburat- Group Susta tto sett aside 20% off
• Land Permits after 2007, Require C
d ft 2007 R i Companies
i
ab idty
Controller for Plasma (smallholdings ). (PP No. 26/2007)
land released
• Companies need to provide 20% of Small holdings for every
hectare of land areas (inclusive of HCV ) th t was release f
h t fl d (i l i f HCVs) that l from
local community.
• Communities does not want to receive lower compensation of areas
identified
id tifi d as Conservation.
C ti

16. Challenges 3 : HCV Assessment itself
• C tl and ti
Costly d time consuming- h t b d
i has to be done b f
before
development starts. Location Permit is only applicable
for 3 years.
y
• HCV mis-identification by consultants.
• HCV Toolkit include many aspects that need to be
revisited especially on HCV 3 Cl
i i d i ll Classification
ifi i
• HCV 5 and agroforestry.
• Mapping and map artifacts
artifacts.

17. Detailed Mapping Over Large Area
is only Possible with High Resolution Images

18. Challenges 4 : HCV Protection
• Challenges to protect HCV from clearance from being farmed and
other activities by communities. Community tend to consider non-
planted land as Idle Land.
• Challenges from Illegal mining and Illegal Logging of Local
Communities. ( Illegal Logging on Non-Forest Land??)

19. COSTS OF MAINTAINING HIGH CONSERVATION VALUES
1. Land Acquisition and HCV Assessment Cost
1 Land Acquisition and HCV Assessment Cost
•Principle Permit, Location Permit, Environmental Impact
Assessment, Plantation Permit, Land Compensation, Forest release
permit, C d t l S
it Cadestral Survey, Land Titl (HGU) USD 200 – 400/h
L d Title (HGU), 400/ha
•Land Tax and Building tax varies between USD 4/ha/year to as high
as USD 13/ha/year. Variations depend on age of palms and company
13/ha/year
•HCV Assessment Cost – USD 4- 8/ha. Inclusive of Public
Consultation, Aerial Images, Incidental.

20. 2. Operational Costs of HCV Management on Plantation:
Cost varies Between USD 3- 4/ha/year (Initial years). Will Double over the
next 5 years USD 6 – 8 /ha/year)
Training to all levels from Community,
Workforce,
Workforce Staff and Managers.
Managers
Oil Palm Management in the Past Does not
Cover Conservation

21. 2. Operational Costs of HCV Management on Plantation:
Cost varies Between USD 3- 4/ha/year (Initial years). Will Double over the
next 5 years USD 6 – 8 /ha/year)
Monitoring of Riparian – No Spraying, No
Encroachment.
Monitoring of set aside areas from
encroachments
Setting up of Nursery for Orang Utan
Food Plant

22. 2 Operational Costs of HCV Management on Plantation:
Monitoring of Orang Utan in an Oil
Palm Plantations

23. 2. Operational Costs of HCV Management on Plantation:
• P
Population A
l ti Assessment i PT MSM
t in
• Population estimate of 42 individuals
• Density of 1.07 individuals / km2

24. Orang Utan Monitoring By BOSF

25. 3. Potential Profit Loss from Unplanted Area:
Average Oil Yield /ha = 4 - 7 t/ha
Average CPO price of USD 497
Profit/ha = USD 375 - USD 1866/ha year
Modest estimate of USD 1,000/ha/year, if you have 10,000 ha of HCV
y y
that’s USD 10 million per year. Over 25 years, that’s USD 250 million
One Oil Palm Cycle is 25 – 30 years

26. 3. Cost to Government due to Lost of Tax
•Income tax from employees.
p y
Retaining HCV areas affects employment in district
because oil palm is a labour-intensive crop and therefore
requires more workers per hectare than HCV land.
Standard Labour requirement is 6- 8 ha/worker
(Employment for 1,200 – 1,600 job opportunity for 10,000
ha of HCV)
Revenue from income tax at district level is relatively low
therefore the impacts on employment opportunity is more
relevant than the financial opportunity cost.
•Service ta es on pay e ts to contractors for construction
Se ce taxes o payments co t acto s o co st uct o
work and land clearing.
•Corporate income tax on company’s total revenue.
•VAT and export tax on CPO.

27. •Opportunity costs of HCV to the government are largely in the
form of reductions in tax revenue received by central
government.

28. Benefits of Maintaining HCVAs
4 main types of benefits of maintaining HCVAs:
1. Ecological.
2. Social.
3. Economic.
4. Branding/ Reputation.

29. 1. Ecological Benefits -Continued
• Ecosystem services provision is a huge benefit from HCV
maintenance in plantations -
• Soil is a major capital needed in agriculture.
• Loss of nutrient rich top soil = Increase use of fertilisers
n trient se
= increased cost of production.
• Minimizing the loss of soil= Economic implications
• Maintenance of natural ecosystems = increased soil production =
Economic benefits.

30. 1. Ecological Benefits
• Recognition a d p otect o o Endangered, Rare a d Threatened
ecog t o and protection of da ge ed, a e and eate ed
ecosystems and species.
• Birds 12 Types under CITES Appendix I and II
• 9 Birds Species protected by Law of RI
Law.of RI.
• 14 Types and 4 Families of Amphibians
• 12 Types – 5 Families of Reptiles.
• Provides a support function to nationally and internationally protected
areas helping to maintain their viability. This is done through
maintaining connectivity and corridor
i t i i ti it d id
• Ensures the maintenance of ecosystem integrity and function
3. Limnonectes leporinus
(Endemik Kalimantan)

31. 2. Social Benefits
• HCV process ensures the maintenance of the cultural identity of
the communities.
• HCV process involves wide ranging consultation which can result
in wider acceptance of the palm oil development.
• Different levels of consultation with communities ensures
recognition of the communities rights and their important areas
and helps build trust between the company and the community.

32. 2. Social Benefits
Helps to identify area of concern (sacred areas) to avoid or minimise
conflicts
• Participatory mapping of important community areas results in less
social conflict and reduced likelihood of expensive clearance mistakes.
Social license to operate = Economic Benefits

33. 3. Economic Benefits
• Oil palm requires a high capital investment to establish and often relies
on project financing in the developmental stages.
• The HCV concept is internationally recognized and accepted as a
means of conservation of critical environmental and social values whilst
still allowing development.
• Compliance with Equator Principles = Project Financing which is critical
to allow palm oil development
development.
• RSPO principles and criteria fit well with Equator Principles and RSPO
certification is accepted as evidence of Equator Principle compliance.

34. 4. Branding and Reputations
• RSPO Certification (inclusive of HCV maintenance) improves corporate
sustainability and helps companies realize their commitments to engage in
best practices.
• Sustainability is one of the most important trends in 21st century business
and should not be overlooked
overlooked.
• The company may lose market opportunities to be an industry leader for
ethically-motivated
ethically motivated consumers if it does not embrace the sustainability
trend.