1. The Challenges, Costs & Benefits ofMaintaining High Conservation Values in Indonesia bySimon 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 ManageriPresentation toZSL Symposium“Sustainable Palm Oil : Challenges, a CommonVision 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 Wilmars 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 29September 2004- Grower2) Wilmar International Limited – Member of RSPO Since 16 August 2005 – PalmOil Processor and Traders3) Wilmar Edible Oils – Member of RSPO Since 5 Dec 2005- Palm Oil Processorand Traders4) Wilmar Oleo Chemical – Member of RSPO Since 10 July 2006 – Palm OilProcessor 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 Successfullyconducted HCV assessments over 16companies with a total area of over 200,000ha. These projects spreads over 2 provincesof Central Kalimantan and West KalimantanAssessment were done by IndependentConsultants who are Well Verse with HCVmatters.matters All of them are now Approved byRSPO in July 2010.
7. Invitees to a Public ConsultationIbu Desi from RSPO (INA)Government - Bupati Kotawaringin , PEMDA, Forestry, BAPEDELDA p g , y,Local Plantation PlayersLocal and International NGOsLocal 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 ofMaintaining HCV in Oil Palm PlantationsSimon 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 gForest or State land . Administratively, such land are considered to y Under the Basic Agrarian Law No 5/1960, Such Land will be leased tocompany over a 30 -35 year period through the Issuance of Land Title (HGU) 35for economic development activities such as agriculture, Livestock orAquaculture. Under the Environmental Law no 32/2009 , companies are obliged tomaintain environmental infrastructure and facilities. Riparian of 50 m – 100 m ,No Development on steep areas of 25 degree and peat of more than 3 mdeep.deep
10. Challenges 1 : Legal Recognition ofMaintaining HCV in Oil Palm PlantationsSimonjust environmental services.provide HCV concept require practioners tomore than Siburat- Group SustainabilityHCVController needHCV present.emphasized on themaintain or enhance the to actively managed to Using a precautionary approach to delineateand protect habitat for viable populations ofspecies under HCV 1 and also to establishnetwork of remnant natural areas to produceconnectivity/corridors This often result in vast areas of land (20% -40%) of land that are alienated for economicdevelopment to be set aside for conservation. Under Indonesian HCV toolkit. Some 211species were listed as protected (1.2) regardlesswhether th are viable or not. Of th h th they i bl t these only 41 lspecies are protected under the ConservationLaw no 5/1990 and another 17 protected underCITES.
11. Challenges 1 : Legal Recognition ofMaintaining HCV in Oil Palm PlantationsSimon Siburat- Group Sustainability “Un Productive Land “- Acquisition by Local GovernmentController 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-RSPOREGION – PT Putra CompaniesIndotropical HCV lost – 6,000 ha Revised Location Permit 6,498 ha HCVS Initial Location Permit20, 000 Ha ( 7,300 ha of HCVs) – 36%
13. REVISED IZIN LOKASI AND HCV AREA LOST Old Izin Old Izin Revised Izin Revised Izin DifferencesCompanies Total Ha HCV Total Ha HCV Total Ha HCVPP 20,000 4,235 5,135 228 14,865 4,007PI 20,000 20 000 7,304 7 304 6,498 6 498 1,195 1 195 13,502 13 502 6,108 6 108IPM 18,000 5,811 8,441 1,695 9,559 4,116APS 20,000 5,463 12,000 3,581 8,000 1,882DLP 15,000 15 000 7,276 7 276 7,140 7 140 4,883 4 883 7,860 7 860 2,393 2 393PANP (WSP) 14,100 1,653 3,100 1,083 11,000 570BCP 13,000 2,671 9,890 457 3,110 2,214TotalT 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 ofMaintaining HCV in Oil Palm PlantationsSimon Siburat- Group Sustainability Recent Law of Land Acquisition by Local GovernmentController 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 thatRequires Companies to develop 20% of their q p pLand Holdings for Smallholder SchemeS L o P S itbu at G oup SustainabilitySimon Siburat- Group Susta tto sett aside 20% off• Land Permits after 2007, Require C d ft 2007 R i Companies i ab idtyController 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 Areais 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 VALUES1. Land Acquisition and HCV Assessment Cost1 Land Acquisition and HCV Assessment Cost•Principle Permit, Location Permit, Environmental ImpactAssessment, Plantation Permit, Land Compensation, Forest releasepermit, 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 highas USD 13/ha/year. Variations depend on age of palms and company 13/ha/year•HCV Assessment Cost – USD 4- 8/ha. Inclusive of PublicConsultation, 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/haAverage CPO price of USD 497Profit/ha = USD 375 - USD 1866/ha yearModest estimate of USD 1,000/ha/year, if you have 10,000 ha of HCV y ythat’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 HCVAs4 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.