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Haze and sustainable oil palm development

  • More and more Malaysian companies are owning large swathes of oil palm plantation lands in Indonesia, and their combined land bank has exceeded what they are holding within Malaysia.

By Ten Kiat Loong

According to the statistics of Indonesia's agriculture ministry, the country's land area under oil palm plantation has since the 1990s increased exponentially from 700,000 hectares to 12 million hectares in 2017, nearly 90% of which are found in Kalimantan and Sumatra.

Many international scholars have estimated that over 50% of the country's oil palm plantation lands used to be tropical rainforests before the conversion.

Comparing the above statistics, transboundary haze began to take place on a more regular basis since 1990s, and has become increasingly serious in recent years. As most of the forest fires and hot spots are found in Kalimantan and Sumatra, there are good reasons to believe that oil palm plantation indeed has a lot to do with the perennial haze. Human factors supersede the natural ones, and as demand for oil palm plantation land escalates, large scale land clearing activities through burning are expected to go on unceasingly.

Indonesia's environment and forestry minister Siti Nurbaya pointed out last week that the authorities had sealed off the plantation lands of more than 30 companies, as there were signs of land clearing through burning. Of these, four are subsidiaries of listed companies in Malaysia, namely Sime Darby, IOI Group, TDM Berhad and KL Kepong.

IOI was the first to refute the accusation while KLK admitted that indeed one of its plantation plots was on fire but arguing that it “occurred during an unusually acute dry spell”.

Meanwhile, Sime Darby clarified that there was no hot spot at the oil palm plantations run by its Indonesian subsidiary, claiming that the fire occurred “outside of the operational area” of the subsidiary.

However, TDM Berhad confirmed with Bursa Malaysia that 1,201 hectares of oil palm plantation area run by its Indonesian subsidiary had been sealed off by the authorities to facilitate the investigation on the cause of fire.

Sure enough there are more than four Malaysian companies that are involved in the oil palm industry in Indonesia. In fact, more and more Malaysian companies are owning large swathes of oil palm plantation lands in the country. Their combined land bank has already exceeded what they are holding back in Malaysia.

For instance, KLK's latest annual report shows that 54% of its total oil palm plantation area is in Indonesia, vis-à-vis 43% in Malaysia.

This shows that the Malaysian government cannot afford to ignore its role in the transboundary haze issue. If the government opts to ignore Malaysian companies' irresponsible land clearing activities overseas that will trigger forest fires and haze, in the end Malaysians will be the ones that suffer the most. At the same time, this will deal a severe blow to the sustainable development of the oil palm industry.

The Malaysian government must ensure that Malaysian companies carrying out oil palm plantation activities in Indonesia as well as Papua New Guinea comply with the certified sustainable operational procedures, as they do in Malaysia. This includes procedures certified by Roundtable on Sustainable Palm Oil (RSPO) and International Sustainability & Carbon Certification (ISCC).

To be fair to other operators who conscientiously adhere to the laws, it is imperative that the government take more stringent actions against the violators, and even to terminate their operating licenses in Malaysia.

Secondly, the Malaysian government must exercise its power as the major stakeholder to demand the listed oil palm plantation companies under its jurisdiction to reinforce internal supervision and law compliance to make sure their oversea subsidiaries will implement the “zero burning” policy and be not involved in jungle burning activities.

As we all know, as the world's largest oil palm grower and palm oil producer, Sime Darby's biggest shareholder is actually the Malaysian government. PNB holds 51.3% of shares in the company, KWSP 9.6% and KWAP 6.9%, collectively amounting to almost 70% in equity stake. This shows that the government cannot stay clear of this whole thing.

As for TDM Berhad, it is a direct investment arm of the Terengganu state government (61.49%), while KWSP has more than 10% share in KLK and IOI Group.

Thirdly, perhaps the federal government can consider adopting a new law similar to Singapore's Transboundary Haze Pollution Act, to empower the local enforcement authorities to take actions against companies involved in irresponsible activities that trigger transboundary haze, instead of pushing the responsibility to Indonesia.

According to the UN Food and Agriculture Organization (FAO), Indonesia and Malaysia supply over 85% of the world's palm oil. It is therefore an inevasible issue that both countries must face in order to ensure the sustainable development of Southeast Asia's oil palm industry so as to avoid allegations by the West and environment groups that oil palm industry is the culprit causing irreversible damages to the environment.

(Ten Kiat Loong is Ampang Jaya Municipal Councilor, Selangor.)


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