Oil Palm Plantations and
Deforestation in Indonesia.
What Role Do Europe and
Germany Play?
An update of the 1998 “Lipsticks from the
Rainforest” report
A Report by WWF Germany in collaboration with
WWF Indonesia and WWF Switzerland, November 2002
Written by
Rob Glastra, Eric Wakker and Wolfgang Richert
AIDEnvironment, Amsterdam, Netherlands
Editors
Markus Radday and Damian Oettli
Produced by
octopus media, Dreieich, Germany
Designed by
dülk.mediadesign, Neu-Isenburg, Germany
First edition December 2002
© 2002 WWF Schweiz
Titelbild: © WWF
Acknowledgements
The authors want to thank Angelika Kemmler, who conducted a rapid market survey
in Germany and Jan Willem van Gelder for his feedback and expert support.
Finally, we thank Alois Vedder and Markus Radday from WWF Germany for commissioning
this paper and for their useful support and comments. The report has
been reviewed and enriched by the following persons from within the WWF network:
Rod Taylor (WWF International, Asia Pacific Forests Coordinator), Mark
Aldrich (WWF International, Forest Officer), Damian Oettli (WWF Switzerland,
Director Forest Programme), Peter Moore (PFFSEA director), Christine Wulandari
(WWF Indonesia, Oil Palm Campaigner), Dewi Suralaga (WWF Indonesia, Director
of National Programme).
3WWF
Table of contents
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.1 Masks, deaths and smog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.2 The return of El Niño . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.3 What caused the 2002 forest fires? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.4 WWF’s early warnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
1.5 Time for an update . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
2. Background on forest fires, reforms and the oil palm boom in Indonesia . . . . . . . . . . . . . . . . . .12
2.1 Looking back at the 1997-98 fires . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
2.2 Underlying causes of the fires . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
2.3 Reform and decentralisation: opportunities for future fire control? . . . . . . . . . . . . . . . . . . . . . .16
2.4 Pledges and promises for future fire control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
2.5 The oil palm boom continues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
2.6 Forest conversion and clearance for plantations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
2.7 Oil palm plantations and the forest fires . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
2.8 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
3. Europe and Germany in the palm oil trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
3.1 The global picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
3.2 Germany’s share in the palm oil trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
3.3 Germany’s palm oil consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
3.4 Use of palm oil by German industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
3.5 German development projects in Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
3.6 European finance and the Indonesian oil palm sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
4. International action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
4.1 Some initial success – but much more is needed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
4.2 WWF’s position and strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
4.3 The donor community . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
5. WWF’s recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
5.1 Recommendations to governments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
5.2 Recommendations to the private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Appendix 1 Schematic representation of the forest conversion process . . . . . . . . . . . . . . . . . . . . .43
Appendix 2 Summary of company survey in Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Appendix 3 European financial institutions with links to Indonesian oil palm companies . . . . .48
Appendix 4 Assessment of influence of German financial institutions on the oil palm sector . . .50
Appendix 5 Recommendations to foreign financial institutions and banks . . . . . . . . . . . . . . . . . .51
Position papers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
This report is an update of an earlier
study made in 1998, “Lipsticks from
the Rainforest”, which analysed, for
the first time, the role of the rapidly
expanding oil palm sector in Indonesia’s
devastating forest fires of 1997-
98. Because of the international dimensions
of this sector – its dependence
on international capital flows
and the global market for palm oil
products – trade and capital relations
with consumer countries were examined,
with particular emphasis on
Germany. In the light of all the
changes in Indonesia’s political, economic
and social situation in recent
years, it was decided that an update
on the issue would be timely.
Forest cover in Indonesia has fallen
from 162 million hectares in 1950 to
around 98 million hectares today. The
country is experiencing one of the highest
rates of tropical forest loss in the
world and this rate is increasing as a result
of legal and illegal logging, clearance
for plantations and agricultural estates,
and fires. Official statistics show
that the forest destruction rate is now
between 2 million and 2.4 million
hectares a year. At this rate, lowland
dipterocarp forests are predicted to disappear
from Sumatra by 2005 and Kalimantan
by 2010.
For the past 30 years, timber has provided
Indonesia with much of its nonoil
export earnings. Now timber resources
from its natural forests, rich in
biodiversity, are beginning to become
exhausted. Nevertheless, the process of
overlogging and clear-cutting the remaining
natural forests and converting
them into estate crop plantations contin-
ues.
The forest fires that have affected Indonesia
since 1997 have been a truly
man-made environmental disaster. The
underlying causes are found in Indonesia
but are also rooted in the development
of global markets. Donor countries
did not react adequately when earlier
fires occurred, limiting their official
efforts at assistance to fighting symptoms
and often following a purely technical
approach. Instead of fighting the
fires, more emphasis should be put on
their prevention, along the lines proposed
by the WWF/IUCN’s Project
FireFight South East Asia (PFFSEA).
Another form of assistance by donor
countries should address one of the root
causes: there should be effective mechanisms
to regulate the activities of big
corporations from those same donor
countries, where these corporations operate
in international trade chains that
depend on the unsustainable exploitation
of natural resources in developing
countries. In the case of Indonesia, this
includes the timber, paper and pulp, and
palm oil industries.
Of the estimated five million
hectares of former forest lands in Indonesia’s
lowlands that have already
been converted to estate crop plantations,
three million hectares are covered
with oil palms. Plantations are usually
established after natural forests are
logged and then burned to clear the land
for planting. In some cases, fires run out
of control, either “accidentally” or deliberately,
and destroy extensive areas
beyond the plantation concession area,
as happened with most of forest fires in
Indonesia in 1997-98.
A changing political and
economic context
Since 1997, Indonesia has faced enormous
economic and political challenges:
an unprecedented economic crisis,
the building of democratic institutions
after three decades of autocratic
rule, and the implementation of a farreaching
decentralisation programme.
When the financial crisis struck Asia in
mid-1997, Indonesia was hardest hit
and slowest to recover.
Under Suharto’s three successors
since 1998, many institutional, legal
and policy reforms have been announced
and sometimes adopted. These
reforms, with decentralisation of powers
to provinces and districts among the
most prominent, provide a unique opportunity
for reversing the destructive
trends in Indonesian forests. However,
after more than four years of reforms,
the net results are mixed.
The breakdown of government control
gives actors in the international
trade chain – investors, traders and consumers
– a greater responsibility and
considerable leverage over what happens
to Indonesia’s forests because of
their links with companies that depend
on raw materials from those same forest
lands.
Forest fires since the
1997-98 crisis
The total area in Indonesia damaged or
destroyed by the 1997-98 fires has been
estimated at nearly 10 million hectares,
an area three times the size of the
Netherlands. The Asian Development
Bank (ADB) estimated the overall economic
cost of fire and haze in the region
at $9 billion. The massive fires have had
dramatic impact on wildlife (including
orangutans and elephants) and several
protected areas, among them Kutai and
Tanjung Puting National Parks.
Drought caused by the ‘El Niño’ climatic
phenomenon was a major factor
in creating the conditions for Indonesia’s
devastating forest fires in 1997-98.
In the next few years, the annual round
of burning, smoke and haze has continued,
although at a smaller scale and
with less intensity than in the years before.
For 2002, climate experts see another
‘El Niño’ year, and in the past few
months fires and haze have indeed been
worse than average, although some reports
say drought conditions will not be
as severe as in 1997-98.
In September 2002, satellite information
revealed that more than 75 percent
of the hot spots recorded in West
and Central Kalimantan during August
occurred in oil palm plantations, timber
plantations and forest concessions. This
indicates that the pattern which became
evident in previous years is repeating itself
in 2002: logging and estate companies
clear land by setting fire to natural
forests on their concessions after removing
valuable timber and leaving
fire-prone debris. This would mean that
the reforms in Indonesia’s political system
and its forestry policy over the last
five years have had little effect in halting
conversion and deforestation. This
was acknowledged in September by In-
4 WWF
Summary
donesia’s Environment Minister who
stated that the country’s weak judiciary
and law enforcement system were still a
major constraint in controlling the fires.
Sanctions against plantations that
initiate forest fires have been rare. Only
in a few isolated cases have NGOs and
local communities successfully challenged
plantation companies in court
for environmental damage caused by
deliberately starting fires that burned
out of control.
Underlying causes
Widespread unsustainable logging and
large-scale land clearance by agro-industrial
companies with little regard for
local communities’ land and rights to
the use of resources have been identified
as the more immediate causes of
forest fires. The expansion of forestbased
industries has resulted in social
conflicts over land ownership and natural
resource use, with arson being used
as a weapon by companies and local
communities. An international fire prevention
project (FFPCP) concluded that
the main permanent solution to Indonesia’s
fire problem lies in improved local
level landuse planning with the participation
of local communities. Such landuse
planning should also focus on fire
prevention. The breakdown of law enforcement
and widespread corruption
further compound any attempt to address
the root causes of forest fires and
to move towards more sustainable
forest management in general.
Indonesia has come under mounting
international criticism for not doing
enough to control forest fires. Several
pledges and promises have been made,
such as the adoption of a ‘zero-burning
policy’, the establishment of a “Haze
Prevention Group” by the forestry and
plantation industry, and a binding antihaze
treaty between Indonesia and fellow
ASEAN countries. Although most
of these commitments and initiatives
seem well intended, their effectiveness
so far has been doubtful and verification
in the field is poor.
Oil palm expansion in Indonesia
continues
Predictions are that about 50 percent of
the new plantation land – three out of
six million hectares – that is needed
world-wide to supply the global palm
oil market by 2020 will be established
in Indonesia. It is expected that Sumatra
will absorb most of this expansion (1.6
million hectares), Kalimantan would
account for another one million and
West Papua for 0.4 million hectares.
For economic reasons and due to the
lack of government control, oil palm estates
continue to be expanded by converting
natural forests instead of using
degraded lands which are now widely
available.
Between 1997 and 2001, Indonesian
palm oil and meal production increased
from 6.6 million to 9.5 million tonnes
and the planted area reached over three
million hectares in 2000, starting from
about 600,000 hectares in 1985.
By law, plantations can be established
only on forest land that has been
designated as Conversion Forest, not on
Permanent Forest land. Since there are
many more applications for the release
of forest land to plantation crops than
the available Conversion Forest lands
can accommodate, so-called ‘Conversion
Forest deficits’ are the result. The
government responds by re-allocating
Permanent Forest land to Conversion
Forest, yielding to company pressure on
national, and increasingly, on provincial
authorities.
Indonesia’s oil palm industry is dominated
by some of the same domestic
conglomerates that control the logging,
wood-processing and pulp and paper industries.
Examples are the Salim
Group, the Raja Garuda Mas Group and
the Sinar Mas Group. Other examples
are state-owned forestry companies
such as Inhutani that have been allowed,
since 1998, to convert up to 30
percent of their concession to estate
crops.
Indonesia and Germany in the international
palm oil trade
The world demand for palm oil is expected
to increase from its present 22.5
million tonnes a year to 40 million
tonnes in 2020. Malaysia and Indonesia
have slightly increased their dominant
position on the global production and
export market for palm oils and meal
since the previous WWF report in 1998.
In 2001, 90 percent of global exports
was accounted for by these two coun-
tries.
Germany ranks seventh among the
world’s palm oil importing countries.
The country even occupies the number
one global position for imports of palm
kernel oil (PKO), used mainly for industrial
purposes.
The biggest importers of Indonesia’s
crude palm oil (CPO) in 2001 were India
(29 percent), China (11 percent),
Netherlands (eight percent) and Germany
( five percent). As regards PKO,
Germany ranks number one, importing
28 percent of Indonesia’s exports, and
Indonesia supplies 85 percent of all
German PKO imports. Germany’s imports
of all three palm oil categories
from Indonesia rose from 602,000
tonnes in 1997 to 655,000 tonnes in
2001 (for 2001: 268 kT crude palm oil,
164 kT palm kernel oil, 223 kT palm
kernel meal).
Germany’s crude palm oil imports
directly from Indonesia doubled from
1993 to 1997, dropped in 1998 and in
1999, and have since then picked up to
regain the lead. Germany is the only
country among the big importers which
imports more crude palm oil from Indonesia
than from Malaysia.
Germany’s domestic market
Germany’s consumption of vegetable
oils has been rising steadily over the
past five years, from 2.2 million tonnes
in 1996 to 2.8 million tonnes in 2001.
Almost one quarter refers to palm and
palm kernel oil, making palm oils by far
the most imported vegetable oil in Ger-
many.
5WWF
Inquiries among processing companies
in Germany indicate that only in
exceptional cases can palm oil be traced
back to its port of origin, and tracing it
to the original plantation is considered
impossible. However, similar international
initiatives in other sectors show
that chain-of-custody mechanisms can
be developed provided there is the will
among all commercial actors. The Migros
retail chain in Switzerland represents
a pioneer case of a company that
has adopted sustainability criteria in its
palm oil business practices.
A survey was conducted among 32
companies operating on the German
consumer market for palm oil products.
The purposes of this survey were to
gather information on the volume and
origin of the companies’ raw materials,
and to find out to what extent companies
had changed their palm oil purchasing
policies since the 1997-98 fires
in Indonesia.
The survey found large discrepancies
between imported and consumed volumes.
Several companies (Nestlé, Cognis,
Unilever) claim to apply environmental
guidelines in their purchasing
and production policies. However, most
guidelines and criteria have a general
character, and usually refer to processing
aspects at the end of the chain and
not so much to what happens in the
country of origin.
Unilever is one of the biggest global
company players in the palm oil trade
chain. , Unilever has worked with
WWF for the past two years on economic,
social and environmental criteria
for sustainable oil palm agriculture.
This case may serve as an example to
other companies, but even for Unilever,
there is still a long way to go before the
palm oil production and trade chain can
really be considered sustainable. The
survey also shows that no German company
has changed its supply policy as a
result of Indonesia’s forest fires in
1997-98. It can be concluded that without
public pressure, company policies
will not change. As far as mobilising
consumers is concerned, palm oil has
the disadvantage of becoming “invisible”
in the end product because it is
mixed with other ingredients and a declaration
on the product’s composition is
not obligatory in Germany.
German development
cooperation
Indonesia is a priority country in German
development cooperation. In view
of the dramatic loss of Indonesia’s
forests, the emphasis has in recent years
been on support for sustainable forestry.
Because of inadequate reforms by successive
Indonesian governments and
continuing corruption, the German ministry
(BMZ) now follows a restrictive
policy in the Indonesian forest sector.
New forest-related proposals are no
longer encouraged. On the other hand,
the German Investment and Development
Society (DEG) promotes the oil
palm sector in Southeast Asia and, in
Indonesia, the DEG currently finances
three oil palm projects. Ecological sustainability
is an important criterion for
DEG financing, committing project
beneficiaries to adhere to social and
ecological guidelines, including a ‘zero-burning’
policy. Furthermore, since
May 2002 new German development
cooperation guidelines for the forest
sector prohibit conversion of any primary
forests or High Conservation Value
Forests (HCVF)1 by German development
projects.
International finance
The fast expansion of the oil palm sector
has been financed to a large extent
by foreign financial institutions from
Europe, North America and eastern
Asia. More recently, the oil palm sector
has lost popularity among foreign
banks, as the loans extended in the mid-
1990s have not generated the expected
returns and many Indonesian oil palm
companies ran into painful debt trouble.
At the same time, foreign banks were
faced with criticism from NGOs on
their role in converting Indonesian
forests into oil palm plantations.
Yet financial links still exist. The influence
which foreign financial institutions
could exert on oil palm companies
has increased because of the financial
crisis the companies are in. This situation
provides excellent opportunities for
leverage in the social and environmental
practices of the banks’ clients. A
case in point is the successful campaign
by NGOs which led four Dutch banks
in 2001 to adopt a more responsible
policy in their financial services to the
Indonesian oil palm sector. Through
their financial links to plantation companies,
European institutions have considerable
potential influence on Indonesian
oil palm plantations. Among them
are several German financial institu-
tions.
Apart from banks, a major role is
played by Indonesia’s public creditors,
led by the IMF. They have set a course
for economic recovery which requires
Indonesia to sell off state assets and
generate revenues by exploiting natural
resources.
International action
In February 2002, WWF adopted a position
paper with the key ingredients for
a sustainable oil palm industry. A key
element in WWF’s oil palm strategy is
to target ‘levers of change’, i.e. mobilise
those key actors that have influence
in international markets and investment
flows. These include major
European banks, international financial
institutions (IMF, World Bank), the European
consumer market, European
companies that process palm oil products
and produce consumer goods, and
institutions (EU, national governments)
that determine development, trade and
aid policies.
The 1998 report by WWF Germany
and other publications fuelled campaigns
by WWF, Greenpeace and
Friends of the Earth directed at the general
public, retailers and the financiers
behind plantation expansion. Apart
from increased general awareness of the
oil palm issue, these campaigns have
generated ‘early adopters’ of more responsible
trade and investment practices,
both in the retail (Migros in
Switzerland) and the financial sectors
(four banks in the Netherlands).
6 WWF
The report concludes with a series of
recommendations for action and policy
change, directed at the Indonesian government,
financial institutions and
donor agencies, companies in the trade
chain and consumers. NGOs have assumed
an active role, catalysing
processes to encourage the sustainable
management of oil palm plantations
and stop the conversion of any more
high conservation value forests.
7WWF
Oil Palm Plantations and
Deforestation in Indonesia.
What Role Do Europe and
Germany Play?
An update of the 1998
“Lipsticks from the Rainforest” report
A Report by WWF Germany in collaboration with
WWF Indonesia and WWF Switzerland, November 2002
1.1 Masks, deaths and smog
At least three people died and hundreds
have been suffering from respiratory
problems as thick haze from forest fires
burning out of control since July 2002
continued to engulf Palangkaraya, one
of the worst hit cities and the provincial
capital of Central Kalimantan. The haze
had also forced airport authorities to
close the airport over the past few
weeks and most schools remained
closed. Deputy governor Nahson Taway
from Central Kalimantan said he was
powerless in facing the fires and could
only hope for heavy rains to put out the
peat land fires across the province. The
central government in Jakarta sent
30,000 masks and medical teams to
deal with widely reported respiratory
problems throughout the province.4
The choking smoke caused health
problems and disrupted transport services
in other parts of western Indonesia
and neighbouring Malaysia as well, just
as in previous years. On August 18,
satellite images showed around 4,000
fire hot spots in West and Central Kalimantan.
A few days later, visibility was
as low as 10 to 20 meters in many parts
of Sumatra and Kalimantan and concentration
of smoke and dust particles
in the air far exceeded safety limits.5
This situation persisted until late October,
with Central Kalimantan as one
of the worst hit provinces. In this
province alone, the number of hot spots
even increased to almost 1,000 around
mid-October.6 Mainly due to changes in
the weather pattern, the number of fire
hot spots has declined considerably
since then.7
1.2 The return of El Niño
In 1997 and 1998 the globe was hit by a
severe ‘El Niño’, a periodic climate
phenomenon which is the result of a
change in warm water currents across
the Pacific Ocean. This brings warm
water from the western Pacific (Indonesia
and Australia) to the east (western
part of the Americas), reversing the normal
pattern. It sparks serious drought in
Indonesia, such as in 1997-98, but causes
heavy rainfall in the western part of
South America.8 The drought in 1997-
98 was a major factor in causing Indonesia’s
devastating forest fires of that
period.
Climate experts agree that 2002 is
another ‘El Niño’ year, although the climatic
phenomenon is not as strong this
time. The Meteorology and Geophysics
Agency (BMG) announced in early
September that half of Indonesia would
have a prolonged dry season this year,
meaning that crop failures and forest
fires were likely to continue threatening
the country. The BMG’s statement
came less than a week after a disaster
mitigation team warned that the drought
would prevail until the end of this year,
urging the government to take steps to
prevent and mitigate the effects of
forest fires.9
Early in November, the Singapore
Meteorological Services confirmed that
inter-monsoon conditions had started,
with the dry southwest monsoon leaving
and the wetter northeast monsoon
expected to set in by December.10
1.3 What caused the 2002
forest fires?
In September 2002, CIFOR compared
satellite information from the U.S. National
Oceanographic and Atmospheric
Agency with Indonesian land-use maps.
CIFOR data clearly show that more
than 75 percent of the hot spots recorded
in West and Central Kalimantan during
August occurred in oil palm plantations,
timber plantations and forest concessions.
Burning peat land contributed
1. Introduction
9WWF
Indonesia: Forest data and trends
Although Indonesia comprises only 1.3 percent of the earth’s land surface, it
harbours a disproportionately high share of its biodiversity, including 11 percent
of the world’s plant species, 10 percent of its mammal species, and 16 percent of
its bird species. The majority of these species are found in the country’s forests.
Many millions of people dwelling in the forest or dependent on it also rely on Indonesia’s
forests for their livelihoods.
Estimates of Indonesia’s current total forest area range from 105 million (1997
FAO estimate) to 98 million hectares (Global Forest Watch estimate for 1997),
while in 1950 this figure still stood at 162 million hectares. About 19 percent of
the remaining forest area is officially protected. More than half the country’s
forests, some 54 million hectares, are allocated for timber production (although
not all are being actively logged), and a further two million hectares of industrial
wood plantations have been established, supplying mostly pulpwood.
The country is experiencing one of the highest rates of tropical forest loss in
the world and the rate keeps accelerating because of legal and illegal logging,
clearance for plantations and agricultural estates, and fires. On average, about
one million hectares per year were cleared in the 1980s, rising to about 1.7 million
hectares per year in the first part of the 1990s. Since 1996, deforestation appears
to have increased to an average of two million hectares per year. State
Ministry of Environment statistics show the forest destruction rate is now between
2.0 and 2.4 million hectares a year, with the rate having been at its highest
in the past two years.2 In terms of percentage, estimates for the annual loss in
forest cover in the country for the period 1990-2000 range from about 1.2 percent
(FAO) to 1.7 percent (Global Forest Watch). This dramatic trend is reflected
in the state of Indonesia’s biodiversity: it now has the world’s longest list of
species threatened with extinction.
The most recent and authoritative survey of the country’s forest cover predicts
that lowland dipterocarp forests – the richest tropical habitat of all – will have
vanished from Sumatra by 2005 and Kalimantan by 2010 if current trends contin-
ue.3
up to 90 percent of the smoke haze experienced
during the catastrophic fires
in 1997-98, and CIFOR staff stated they
are seeing the same thing happening
again in 2002.11
This indicates that the pattern which
became evident in previous years may
be repeating itself in 2002: logging and
estate companies clear land by setting
fire to natural forests on their concessions
after removing valuable timber
and leaving fire-prone debris. This
would mean that the reforms in Indonesia’s
political system and in its forestry
policy over the last five years have had
little effect in halting the conversion
and deforestation process. Land clearance
by fire is also an annual tradition
among small farmers around the tropics
and Indonesia is no exception, but such
fires are usually small-scale and have
less impact.
Indonesian environmentalists as well
as the Malaysian authorities have again
criticised the government of Indonesia,
just as they have done over the past five
years, for doing too little to cope with
forest and ground fires. Indonesia’s Environment
Minister recently acknowledged
that the country’s weak judiciary
and law-enforcement system still contributed
to its inability to control the
fires, which are basically man-made.
Other Jakarta officials stated they were
unable to do much to stop the fires because
of a lack of funds and personnel.12
The Environment Minister recently
said that provincial and local authorities
had the responsibility to take action
against offenders. He referred to both
forest concessionaires clearing areas to
convert the land into plantations, and to
forest squatters and traditional farmers.
The chain of causes and effects does involve
both plantation companies and
small farmers again this year, but the
picture is very complex and it is too
early to draw definitive conclusions.
1.4 WWF’s early warnings
In October 1998, WWF Germany published
Brandrodung fuer Margarine, an
analysis of the relations between Indonesia’s
forest fire crisis in 1997, the
expansion of oil palm plantations and
the international palm oil trade, focusing
on the German market. The report
was targeted at consumers and industry
in Germany, asking them to assume
their indirect responsibility for the loss
of Indonesia’s rainforests through conversion
to plantations and to help influence
the process as actors in the palm
oil trade chain.
The report has been widely discussed
within the WWF network, and
WWF Germany has reiterated the
study’s main conclusions in talks with
the private sector. But apart from occasional
expressions of good intention,
manufacturing companies and retailers
have so far made no attempt to modify
their purchasing policies.
Since 1999, forest fires have remained
a recurrent phenomenon in Indonesia,
although at varying intensity.
Now, in the dry season of 2002, fires
have again run out of control and destroyed
even more forests, peatlands,
agricultural lands and people’s houses
while creating a thick haze that affects
human health throughout Southeast
Asia.
As part of the Project FireFight
South East Asia (PFFSEA), WWF and
IUCN have issued a range of reports on
the underlying causes of forest fires in
the region (see Chapter 2.2).
Clearly, Indonesia needs all the help
it can get to stop fires and forest destruction,
although the government this
year has not yet asked the international
community for fire fighting assistance.
Sending masks, water bombers and other
costly fire fighting equipment will
not help since so many of Indonesia’s
forest fires are set intentionally and occur
in great number and on a vast scale.
Since global and German demand
for palm oil steadily rises, large areas of
forest land in Indonesia continue to be
cleared to expand the country’s oil palm
estates. This process goes on with little
regard for the forest, the environment or
indigenous communities’ interests.
1.5 Time for an update
This report is an update of WWF Germany’s
1998 report. It seeks to answer
the following questions:
What has happened in Indonesia in
the past few years? What changes have
gone on within its political system,
economy, forests and among the popu-
lation?
How has Germany’s palm oil consumption
changed? Have there been
any meaningful efforts to assist Indonesia
in stopping the fires or to influence
the rate of conversion of rainforests into
estate crop plantations, promoting the
more responsible management of palm
oil estates?
What has been done in other countries?
What can Germany learn from
these efforts?
10 WWF
Main conclusions from the 1998 WWF Germany report
> The booming oil palm plantation economy is one of the sectors, besides timber
and pulp, that controls forest land and plays a key role in forest destruc-
tion.
> Palm oil plantations also play a key role in rural social conflicts related to land
rights and access to forest resources.
> A large part of the 1997-98 fires were started by estate concessionaires to accelerate
the conversion of tropical forests into oil palm and other industrial
plantations.
> Tropical forests make way for oil palm plantations because the demand for
palm oil on the international market steadily rises. In Germany, imports of
crude palm oil (CPO) alone increased 37 percent between 1993 and 1997,
with palm oil imports from Indonesia in particular increasing very rapidly.
> The political, financial, social and environmental crisis in 1997-98 offered good
opportunities for re-thinking policies on plantation expansion and moving towards
more sustainable forest management in Indonesia. in Indonesia.
How will Germany respond to this
new fire crisis? Will the German government
simply release millions of euros
for fire monitoring programmes or
fire fighting equipment, or will more
sustainable answers be sought by the
German government, and the private
sector and consumers in seeking to address
root causes?
11WWF
This chapter provides some background
on the problem – the recurrent
fires – and examines to what extent
the political and institutional reforms
made since 1998 have been
used or missed as an opportunity for
starting to deal with the forest fire issue.
The chapter proceeds with an
update on the development of Indonesia’s
oil palm sector since the
previous 1998 report, and then briefly
discusses the role of this sector in the
fires.
2.1 Looking back at the 1997-98
fires
In the peak months of June to October
1997, there were up to 300 times more
fires, especially on Sumatra and Kalimantan,
than during the same months in
1996, an average to wet year. In southern
Sumatra, there was no effective rainfall
for six months13. Estimates put the
total area in Indonesia damaged or destroyed
by the 1997-98 fires at nearly 10
million hectares, an area three times the
size of the Netherlands. This includes
300,000 hectares of plantations, about
3.3 million hectares of lowland rainforest
and another 1.5 million hectares of
peat and swamp forest.14 The fires
caused a thick cloud of air pollution
over Southeast Asia that persisted for
several months. WWF estimated that the
haze affected the health of 70 million
people in Southeast Asia15 while the
Asian Development Bank (ADB) estimated
the overall economic cost of fire
and haze in the region at $9 billion.16
Burning by plantation companies
The international donor community
committed substantial funds and equipment
for fire fighting campaigns, but
fire fighting efforts were ineffective because
most fires were lit deliberately.
Many fires were set by large-scale plantation
owners to clear land; among them
were commercial oil palm companies
which saw the 1997-98 drought caused
by the El Niño climatic phenomenon as
a window of opportunity for implementing
extensive expansion pro-
grammes.
Until 1994, so-called ‘controlled
burning’ was legal and was common
practice. When a company applied to
the bank for credit, burning was even
included as a cost component at about
one- tenth of land clearing costs17. Plantation
companies have a preference for
using fire for land clearing because:
• burning is perceived by many as
cheaper than other ways of clearing
land (however, recent fire studies have
shown that, even from an economic
point of view, burning is not the cheapest
land clearance option).18
• banks tend to promote burning
practices because this will open up concession
areas faster and reduce the time
until the first harvest, allowing their
clients to pay back debts earlier.19
• plantation companies and land
clearing contractors are simply not accustomed
to other means of land prepa-
ration.20
Table 1 shows the percentages of
land within each land-use category that
were burned in 1997-98, taking East
Kalimantan as an example, where 5.2
million of its almost 20 million hectares
burned. Forest plantations and crop estates
were worst affected: of the total
forest plantation area, 64 percent was
burned, of the total estate crop area, 51
percent.
Land Use Status Percent
Burned
Natural Forest
Concession area 24
Forest Plantation Area 64
Estate Crop Area 51
Total protected area 10
Undefined Land Use
(e.g. farmland) 36
Table 1: Burned area of East Kalimantan 1997/98 in
relation to land use status
Source: http://www.iffm.org/ (GTZ/KfW supported Int
egrated Forest Fire Management Project)
Large-scale land clearance by estate
companies, which followed the extraction
of timber, caused numerous, large
and persistent fires in the Sumatran
provinces of Riau and Jambi. Here, up
to 80 percent of the bigger fires occurred
in plantations. In southern
Sumatra, where conversion of primary
forest is almost completed, fires were
smaller and shorter-lived, being mainly
related to land preparation for the growing
season by small farmers.21
Many of the new estates in Sumatra
lie within its 11.5 million hectares of
wetlands, often on peat soils. Migration
programmes and estate crop companies
moved into these swamps despite their
low soil fertility, poor infrastructure and
history of agricultural failure, but they
were driven by the shortage of dryland
areas and by the opportunity for extracting
valuable commercial swamp timber
species. Peat forests and drained wetlands,
however, are particularly sensitive
to dry-out and burn in El Niño
years because the initial fire set to clear
the residual wood debris enters the peat,
which continues to smoulder and emit
dense smoke haze long after the surface
fire has died22 . An estimated 80 percent
of the total smoke haze in 1997-98 originated
from the wetlands of eastern
Sumatra and southern Kalimantan.23
The massive fires have had dramatic
impact on wildlife and protected areas.
The boxes give examples of the effect
on some well-known endangered mammals
and on two of Kalimantan’s protected
areas. It is because of the devastation
caused by the fires to Indonesia’s
forests and its wildlife that WWF since
1998 has sought to mobilise the public
and influence companies and financial
institutions in industrialised countries
that consume, trade and process products
coming from Indonesia’s plantations,
and finance the plantations' oper-
ations
The following years
While the devastating fires of 1997-
98 did not return at the same scale in
the following years, the annual round of
burning, smoke and haze continued.
The general consensus on 1999 and
2000 was that, while serious, the fires
were not as extensive as in the years before.
This was due more to heavier rains
than usual than it was to any government
measures31. Nevertheless, nearly
2. Background on forest fires, reforms and the oil palm
boom in Indonesia
12 WWF
13WWF
THREATENED MAMMALS AND THE FIRES
Orangutan
Orangutans are found only on the islands of Borneo and
Sumatra. Their populations have declined more than 90 percent
in the past century and they have now become an endangered
species in Borneo and a critically endangered
species in Sumatra24. Total population estimates range from
around 36,000 individuals as of 1996 to fewer than 25,000
now.25 In the past 10 years alone, the orangutan population
has declined by as much as 50 percent as a result of forest
loss, poaching for bush meat and the pet trade. In Sumatra,
an estimated 1,000 orangutans are lost each year, according
to the UK-based Orangutan Foundation.
Illegal logging, illegal starting of fires and the conversion of
forests to timber and oil palm plantations have resulted in a
loss of over 80 percent of orangutan habitat over the past two
decades. Devastating forest fires have played a major role.
Approximately 40 percent of the total fire hot spots in Kalimantan
in 1997 and 1998 occurred in orangutan habitats
(for Sumatra, the estimate is five percent). Up to one-third of
Borneo’s orangutans are estimated to have died during the
forest fires of 1997-98. Others were taken into captivity for
the illegal pet trade, either directly or after they tried to escape
the burning forests. Today, there may be less than
15,000 orangutans left in the whole of Borneo.26
The total population of officially protected orangutans is
probably around 8,300 individuals, but this population is
highly fragmented and far from securely protected: approximately
95 percent of lowland forest within Kutai National
Park, which has an orangutan population now estimated at
no more than 300 individuals, burned in 1998.
Without the possibility of migration through safe corridors
between fragments, there is a high probability of the local
extinction of orangutan populations. Due to the particular
population biology of orangutans, a loss of only five adults
per year per 1,000 individuals will lead to extinction within
approximately five decades. Orangutans prefer feeding in
fruit trees which have large food crops, such as wild durian
and fig trees; this argues strongly for the protection of old
growth forest with an intact forest canopy for orangutans.
Sources: www.panda.org/species/orang; orangutan campaign page of www.eia-international.org;
Yeager, C. [Ed], 1999.
Sumatran rhino
Fewer than 2,900 rhinos survive in the wild in all of Asia.The
most critically endangered rhino, the Sumatran, has declined
from an estimated 600 animals in 1994 to around only 300 today.The
species is now restricted to small populations scattered
through its former range and persists in peninsular
Malaysia, Sabah/Borneo and Sumatra. Its status in other parts
of the region (Thailand, Myanmar, Laos, Kalimantan, Sarawak)
is unknown. Expansion of oil palm, wood pulp and coffee plantations
into rhino habitats must be sharply curtailed and natural
forest cover maintained if the species is to have a future.
The 1997 and 1998 fires spread to protected areas where
both orangutans and Sumatran rhinos occur. Poaching poses
another immediate threat to this species. Reports indicate
that poachers have attempted to take advantage of the
tragic situation by hunting fleeing rhinos.
Source: www.panda.org/species/asian_rhino
Asian elephant
Asian elephants, which also occur in Sumatra and Borneo,
may face extinction on the islands if the mixture of grassland
and forest which is their preferred habitat continues to be
destroyed. The remaining population in Sumatra is estimated
at between 2,500 and 4,000. Conflicts between human
and elephant populations are most marked in Riau and
Lampung where habitats are rapidly being converted to
farmland, rice paddies, and oil palm plantations to earn export
income.
When locked up in isolated pockets of forest, elephants
are known to become aggressive and often end up running
amok in villages and oil palm estates. In the city of Bandar
Lampung (Sumatra) the continuing destruction of resin trees
for oil palm plantation projects has even driven wild elephants
to rampaging in residential areas. According to local
farmers, these elephants lost their habitat to an oil palm
plantation, started to destroy crops and killed two people27.
In Lampung, 40 wild elephants are captured each year28.
Experts already consider such confrontations to be the leading
cause of elephant deaths in Asia.
The situation is particularly pressing in Riau, a province
that has about 40 percent of Sumatra’s total elephant population
(1,100 - 1,700 individuals), but also harbours the second
largest oil palm area in Sumatra. As human populations
increase, conflicts between elephants and humans rise.
Damage caused by elephants (trampling down houses, injuring
and killing people and damaging small and largescale
plantations) in and around Tesso Nilo is estimated at
$1.1 million annually. 29 There are also reports of poisoning,
including one dramatic case in Riau in 1996 where an oil
palm company poisoned 12 elephants all at one time. During
the past four years, at least 10 people have been killed
and 76 others wounded in attacks by wild elephants in areas
adjoining the South Bukit Barisan National Park.30
A combination of conversion to oil palm and pulpwood
plantations, and of fires, seriously threatens the Tesso Nilo
forest, Riau’s last remaining natural forest that could sustain
a sizeable elephant population. WWF Indonesia, supported
by various other national WWF offices, has been fighting
hard to save Tesso Nilo. In 2002, there were finally signs that
efforts were beginning to produce results, with the possible
establishment of Asia’s first Elephant Conservation Area
and commitments that should stop destructive practices.
Although no specific reports on elephant casualties due
to fires have been found, the role of fires in reducing their already
dwindling natural habitat is an obvious one.
Sources: www.panda.org/species/eleph_asian; Forests, People and Rights, Down to
Earth Special Report: June 2002; Jakarta Post, 14 Feb.2002; Wakker, 2001.
23,000 fire hot spots were detected in
Sumatra in 1999. Of these, 95 percent
were small, controlled fires that caused
little smoke haze. Of considerably more
importance were the five percent of
fires set by estate crop companies to
burn the remnants of clear-felled forests
on peat soils.32
Even if prevention and control are
organised more seriously and have
more resources than until now, fires
may reach large dimensions more easily
than in the past, given the amount of degraded
land and the vast amount of
standing deadwood from past fires.34
14 WWF
2.2 Underlying causes of the
fires
Successive forestry ministers have used
Indonesia’s critical economic condition
as an excuse for the lack of effective action
over the past five years. Each year,
Jakarta has called for more money and
technology, such as planes capable of
water bombing the fires.35 However, the
government has showed little recognition
of the need for fundamental
changes in the logging and plantation
system itself, or in the social and political
framework for land use and tenure.
In the Forest Fire Prevention and
Control Project (FFPCP), a bilateral initiative
between the EU and Indonesia, a
series of studies has been conducted on
the complex relations between actors,
causes and effects in Indonesia’s forest
fires. The project identified the more
immediate causes as36:
• widespread logging using irresponsible
techniques;
• large-scale land clearance by agroindustrial
companies;
• land clearance for major migration
schemes;
• land acquisition by companies and
government with little consideration for
the rights of local communities.
Fundamental issues that all four factors
have in common are:
1) the legitimacy of land right claims
and access to natural forest resources;
2) the mixture of incentives and disincentives
in government and legislation
that determine how sustainably or
unsustainably the forest is exploited.
Oil palm company prosecuted
There has never been much legal action
against the plantation companies
who use illegal burning methods
to clear land in their concessions.
One of the few successful prosecutions
was against PT Adei, an oil
palm plantation developer from
Malaysia in Riau. The owner was
sentenced to eight months imprisonment
and fined 100 million rupiahs
($10,000) in August 2002, for ground
fires that occurred at his palm oil
plantation in the province in 1999.
The sentence was lighter than the
verdict of the Pekanbaru District
Court, which sentenced the defendant
to two years imprisonment. The
defendant was found guilty of setting
fires in his plantation in contravention
of Law No. 23/1997 on the environment.
A total of 17 fires were found
when a team from the local environmental
control office conducted an
investigation at the plantation. Four
other companies are also close to
being brought to court, according to
the government.33
PROTECTED AREAS AND FOREST FIRES
National Parks are important strongholds for endangered species.Yet forest fires
are known to have spread to at least 19 of Indonesia’s protected areas, including
a World Heritage site (Ujung Kulon in Java), Ramsar wetland (Berbak in Sumatra)
and Biosphere Reserve (Tanjung Puting in Kalimantan). Although mature
forest is known to be much more fire-resistant than degraded forests or plantations,
these protected areas have been affected because considerable areas had
been cleared illegally.
TANJUNG PUTING
The 400,000-hectare Tanjung Puting National Park is located in the south-western
part of Central Kalimantan Province and is Kalimantan’s most famous national
park. Tanjung Puting is listed as a Man and the Biosphere (MAB) Reserve.
Tanjung Puting National Park owes its fame to two primates: the orangutan
and the proboscis monkey. Of this second species, which is endemic to Borneo,
Tanjung Puting harbours the largest protected population. The species is estimated
to number not more than about 5,000 individuals. Tanjung Puting has suffered
increasingly from illegal logging and gold mining, and – on top of this – was
severely damaged by fire in 1997-98.
Source: http://www.nature-conservation.or.id/kaliman.html
KUTAI
The Kutai National Park covers an area of almost 200,000 hectares and is located
in East Kalimantan province. In 1936, 300,000 hectares were declared a
Game Reserve to protect species such as the Sumatran rhino (now extinct in the
area), banteng (wild cattle relative) and orangutan. This protection did not prevent
the forest being cut down in subsequent years and by 1980 large parts of
the reserve had been heavily damaged by logging, developments in oil and agricultural
clearance. It took until 1995 before the area was actually gazetted as a
national park.
Great forest fires destroyed 60 percent of the forests during the 1982-83 and
1997-98 El Niño years. In the first three months of 1998, around 50,000 hectares
were destroyed by fires and approximately 95 percent of lowland forest burned
down. The vegetation is now so badly damaged that it is almost a savannah.
Anywhere from 50 to 95 percent of the trees have been lost. Direct and indirect
losses to orangutan populations and their habitat appear to be severe.
Sources:http://www.nature-conservation.or.id/kaliman.html; Down to Earth No. 37, May 1998;
⁄Down to Earth No. 45, May 2000 ; Yeager, 1999.
The breakdown of law enforcement
and widespread corruption further compound
any attempt to move towards
more sustainable forest management.
Arson is a weapon used by both
sides in the social conflict over land
ownership and use. There have been
cases where plantation companies stake
their claims by burning community
lands and embittered local people take
their revenge by destroying camps and
plantations that have been established
without their consent.37
The FFPCP concluded that the main
permanent solution to Indonesia’s fire
problem lies in much improved local
level land use planning and strengthened
local management, the latter including
fire prevention. The project
found that village-level views on natural
resource management vary from
place to place but are generally in line
with ‘wise use’. A continuation of the
top-down, bureaucratic approach to fire
management that only focuses on fire
suppression will fail during the next El
Niño drought as it did in 1997.38
In August 2002, Project FireFight
South East Asia (PFFSEA; see box)
launched four new reports39 on the legal
and economic aspects of fires and community-based
fire management as a
contribution to preventing the recurrent
disastrous forest fires in Indonesia and
choking haze in Southeast Asia. Very
briefly, the reports call for:
• legal and institutional reforms
based on clear responsibilities and ac-
countability;
• the private-sector to assume its responsibility
in fire management, since it
manages large areas of land and has the
necessary resources and expertise;
• stronger incentives for rural communities
to manage local fires, with an
emphasis on clear, secure land rights
The current El Niño will show
whether any progress has been made
with respect to dealing with these underlying
factors, or whether national
and international fire-fighting efforts
15WWF
Project FireFight South East Asia
Project FireFight South East Asia (PFFSEA) is part of a
global initiative by WWF and IUCN, funded by the European
Commission. The project seeks to secure essential policy
reform through a strategy of advocacy using syntheses and
analysis of existing information and new outputs. PFFSEA
works at national and regional levels across Southeast Asia
to support and advocate the creation of legislative and economic
bases for mitigating harmful man-lit forest fires. The
model provided by PFFSEA will be extended to South and
Central America, Russia, the Mediterranean and sub-Saharan
Africa as funds and capacity become available.
The project focuses on three areas:
> community involvement
> economics of fire use
> legal aspects of forest fires
Findings and insights
On community involvement:
• Local people are often in the best position to manage or
prevent fires on a local scale and local communities can
and do manage fires in many situations and for many different
reasons.
• Communities cannot provide the complete solution to
dealing with harmful forest fires, therefore other stakeholders,
including the government and the private sector,
must also play a substantial role, particularly in preparing
for and fighting extensive or threatening fires.
• It is important to differentiate between harmful and beneficial
fires.
On the economics of fire and fire use
• Fire use may be based more on habit and historical practice
than business or ecological principles.
• Data on the economics of fire use is not readily available
and there is little or no consideration of the entire suite of
costs, benefits and externalities, even though in all cases
the use of fires has financial and economic consequences
(for example the relatively low costs of zero-burning as
against the high costs of fires).
• Alternative methods of fire use have been developed on a
commercial scale in Southeast Asia but have been suited
mainly to clearing low volumes of biomass, where zeroburning
methods are not more expensive – and may actually
be more cost effective – than burning. For the clearing
of high-volume forest, burning remains cheaper. Smallholders
are at present not able to make the investment
necessary for zero-burning.
From a legal perspective
• No country in Southeast Asia has complete and coherent
laws, but each country has some elements of legislation
that are positive and sound.
• In Indonesia, forest law enforcement is inadequate due to
confusion and conflict within and between laws and objectives
for forest management, as well as to a lack of bureaucratic
capacity and lack of support for the rule of law.
The way forward
The project’s findings reinforce the importance of a holistic
and balanced approach to fire management involving all
stakeholders. Efforts to address fires must take into account
the five components of fire management (analysis, prevention,
preparedness, suppression and restoration) and embed
fire management efforts in a comprehensive and balanced
land-use strategy with adequate attention being paid
to the underlying causes of forest fires.
See: www.pffsea.com
will be limited to throwing water at the
flames again.
2.3 Reform and decentralisation:
opportunities for future
fire control?
Since 1997, Indonesia has faced enormous
economic and political challenges:
an unprecedented economic crisis,
building democratic institutions after
three decades of autocratic rule by
General Suharto, and implementing a
far-reaching decentralisation programme.
At the same time, decades of
nepotism, corruption, poor financial
management and unsustainable forest
land use had resulted in the over-exploitation
of Indonesia’s forests. When
the financial crisis struck Asia in mid-
1997, Indonesia was hardest hit and
slowest to recover. In 1998, Indonesia’s
state banks suffered losses that were
equivalent to one-fifth of the country’s
GDP. The crisis brought a four-fold increase
in poverty, with half the population
now below the poverty line40.
In May 1998, General Suharto was
forced to resign the presidency and
handed over to his vice-president. Political
euphoria and much talk of reforms
followed. Since Suharto’s fall there
have been greater political freedoms
that have helped civil society groups
gain greater access to decision-makers
in the government and publicly raise
politically sensitive issues. Hopes were
high that this freedom would lead to
widespread reforms, including reform
in the forest sector.
Under Suharto’s three successors
since 1998, Mr Habibie, Mr Abdurrahman
Wahid and Mrs Megawati
Sukarnoputri, many reforms were announced,
debated and sometimes adopted.
After more than four years, the overall
picture is rather mixed41 :
Positive and negative effects
Reforms and signals from the government
since 1998 that are potentially
favourable for Indonesia’s forests:
• Logging concessions due to expire
in 1999-2000 would not be renewed or
extended.
• Regional autonomy laws, passed in
1999 and implemented as of 2001, have
made regional governments more responsive
to environmental and social
concerns in areas where strong action in
the interests of civil society has been
taken.
• The government imposed a moratorium
on further natural forest conversion
in May 2000.
• Megawati has appointed two respected
forestry reformers in key positions
in the Ministry.
• A total ban on log exports was declared
as from October 2001.I
• Logging operations would have to
obtain a government-approved certificate
of sustainable forest management
by 2003.II
• The current Minister of Forestry,
Mohammad Prakosa, stated that the future
of Indonesian forestry must be
based on small-scale community-based
operations, not on large-scale commercial
logging.III
• In November 2001, Indonesia’s
highest legislative body for the first
time passed a comprehensive decree
providing a legal framework for the reform
of laws relating to natural resource
management. The decree’s principles
and directives recognise the need to
protect customary rights and cultural diversity
in natural resource use.
• In 1998, the Ministry of Forestry
decided to revoke conversion permits for
estate crop companies that had failed to
develop their plantations and were only
interested in logging valuable timber.
• 1999 saw new regulations aimed at
encouraging new plantation companies
to involve cooperatives of local farmers
in the ownership and operation of oil
palm plantations.
It should be borne in mind that many
promising reforms have often been
poorly implemented or challenged by
provincial and district governments.
Reforms that have turned out disadvantageous
to natural forests, and constraints
on positive reforms:
• The logging concessions that
would not be renewed or extended in
1999-2000 were supposed to be auctioned,
as part of the IMF’s 1997 ‘rescue
package’, instead of reverting to
resident communities or being reallocated
for protection or conservation.
• Late in 2000, the Forestry Minister
issued new logging concessions to private
companies, just before the expiry
deadline.
• Since 1998, state forestry companies
have been allowed to use 30 percent
of their concession areas for estate crops
such as oil palms (see section 2.5).
• In 1999, plantation companies were
given the right to establish tree crops and
timber plantations in ‘non-productive
production forests’formerly allocated to
logging companies (see section 2.5).IV
• Regional autonomy laws are believed
to have accelerated deforestation
in areas where civil society was weak,
and where local politicians joined
forces with powerful local business
elites to extract as much short-term
profit from forests as possible.
• In November 2000, a decree permitted
local governments to issue “100
hectare” logging permits, resulting in
hundreds of logging licences in some
areas.V In 2001, the new minister
Prakosa cancelled the decree, banning
governors and district heads from issuing
any further licences, but this second
decree is widely ignored.
• Lack of political will, administrative
capacity and resources have led to a
generalised breakdown of law enforce-
16 WWF
I The ban has led to a large decline in log exports but is far from effective, considering the ships with illegal Indonesian logs that still arrive in Malaysian harbours (confidential sources).
Apart from illegal exports, ITTO even reports 300,000 m3 exported log volume in 2000 (FWI/GFW, 2002)).
II Certifiers have been designated, but NGOs have questioned several of them as being linked to former timber tycoons The Jakarta Post, Sep.12 and Sep.26, 2002).
III Statement to UK NGOs during a ministerial visit to London in April 2002.
IV This particularly threatens existing licences, since the 2000 moratorium on forest conversion (theoretically) applies to new concessions only.
ment which has in turn resulted in increased
illegal logging (see box) and
encroachment on protected areas. Several
decrees – such as the 2000 ban on
forest conversion – aimed at stopping
the downward trend in the state of Indonesia’s
forests have been widely disregarded
in the provinces.
A number of positive developments
have the potential to help slow down
further forest loss and to establish more
control over forest exploitation. At the
same time, these reforms may help to
address some underlying factors that
are driving large-scale forest burning
each year. Other reforms, however, are
meant as incentives to the plantation
sector and are potentially dangerous for
natural forests.
As long as the capacity to put positive
reforms into practice, to find the
right balance between central and decentralised
levels of government and to
enforce laws in the field is lacking, the
prospects remain alarming and, worse,
the negative trend is likely to continue.
The reduced central government
control as a result of the decentralisation
process implies that actors in the
international trade chain – investors,
traders and consumers – have greater
responsibility and more leverage over
what happens to Indonesia’s forests because
of their links with companies that
depend on resources from those same
forest lands.
2.4 Pledges and promises for
future fire control
Indonesia has come under mounting international
criticism for not doing
enough to control forest fires. Several
pledges and promises have been made:
• Efforts to address the issue made
by the Association of South East Asian
Nations (ASEAN), the region’s main
diplomatic grouping, have so far proved
ineffective. For Indonesia’s ASEAN
neighbours, the problem is the smoke
rather than the fires themselves. In
1998, Indonesia pledged commitment
to the ASEAN to follow Malaysia43 in
implementing a ‘zero-burning policy’
that would prevent forestry and plantation
companies from using fire to clear
land from mid-1999 onward. Experience
to date shows little success with its
implementation.
• Several individual plantation companies,
such as PT SMART, have stated
that they would adhere to no-burning
policies. WWF Indonesia is working
with SMART towards an agreement on
the independent verification of such a
policy.
• In June 2002, Indonesia signed a
binding anti-haze treaty with fellow
ASEAN countries. The treaty sets out
the obligations of member states and
details the preventative measures and
responses expected of ASEAN’s 10
member countries. However, the agreement
does not specifically identify large
companies as the main cause of the
fires, referring only to the need for “legislative,
administrative and/or other relevant
measures to control open burning
and to prevent land clearing using fire.”
There is scepticism both within Indonesia
and among its neighbours that
Jakarta has the required political will to
clamp down on the annual burning. The
agreement has yet to be ratified.
• International and national environmental
pressure groups are now exerting
their demands on the companies by
making use of fire location data and
satellite images to persuade banks and
financial institutions to curb lending to
companies.
• In 2001, companies from the
forestry and plantation industry in Indonesia
established the “Haze Prevention
Group” (HPG).44 Working in close
cooperation with the government of Indonesia
and surrounding countries,
WWF, the UN, EU, ADB and World
Bank, the HPG pretends to “strive to reduce
and, if and whenever possible,
eliminate forest and plantation fires and
burnings”. However, the HPG also
states its long-term objective to “be able
to operate healthy plantation and
forestry business”, raising questions as
to what it understands by ‘healthy’.
Furthermore, an effective mechanism to
verify even legal compliance and a minimum
level of standards has not been
17WWF
The enforcement challenge: illegal logging42
An issue that is now high on national and international political forest agendas,
after years of sometimes uneasy silence or denial, is illegal logging. Indonesia is
a case in point, where an estimated 73 percent of wood and timber exports in the
1990s were of illegal origin.
Despite legislation, reforms and improved planning the reality is often different.
Control and enforcement are too weak to stop illegality, fraud and corruption. In
1994, the Indonesian government admitted that 84 percent of concession holders
violated logging laws. Legal restrictions have been ignored to clear natural
forests and establish fast-growing plantations. Villagers have reported being subjected
to violence by the army and by company guards when protesting against
forest clearance on their lands. Economic losses due to illegal logging were estimated
to be $600 million a year.
Awareness is growing that all forestry reforms in Indonesia have to take the
crucial step from theory to practice although they face enforcement problems. An
interesting initiative is the bilateral Memorandum of Understanding (MoU) which
was signed between the Indonesian and the UK governments. The ambition of
the UK, an important customer of Indonesian timber, is to buy only legally logged
timber. In order to achieve this, the UK will help to build up enforcement capacity
in Indonesia.
V However, evidence is mounting that the effects of large numbers of small-scale permits can be as damaging as the old-style large concessions, and that they are generating conflicts
between villages and between logging companies and communities.
foreseen, not to mention the fact that
the group does not address the root
causes of the problem.
Although most of these commitments
and initiatives have been well-intended,
their effectiveness so far has
been doubtful. One of the bottlenecks is
the lack of co-ordination or an integrated
approach among Indonesian government
departments.
2.5 The oil palm boom
continues
Since the expansion of the oil palm sector
is one of the driving forces behind
forest conversion and the big fires in Indonesia,
this section will take a closer
look at how the oil palm boom has developed
since the previous WWF report
in 1998.
Growth trends in Indonesia
According to Oil World, the leading
market research institute for the palm
oil sector based in Germany, the world
demand for palm oil is forecast to increase
from its present 22.5 million
tonnes a year to 40 million tonnes in
2020.45 If this demand is to be met, producer
countries will have to plant
300,000 hectares of new estates annually
until 2020. In general, the economic
reason for the expansion of oil palm
plantations is that it is a lucrative crop
for investors. Labour and land costs are
often low, credit is easily available and
the market has shown steady growth.
The fact that it is a typical export crop
makes it an attractive commodity for
countries with a large external debt burden,
pressured by international financial
institutions to increase their exports.46
The FFPCP predicts that about 50
percent of new plantation land will
come from within Indonesia where
labour and land are considered to remain
plentiful. The project expects that
Sumatra, with its relatively well-developed
infrastructure and skilled labour
force, will absorb most of this expansion
(1.6 million hectares). It is inevitable
that most new oil palms will be
planted in the wetlands, as the more desirable
‘drylands’ of the island are now
occupied. Kalimantan would account
for another one million and West Papua
for 0.4 million hectares.47
The palm oil sector is a relatively
labour-intensive agro-industry, which in
1998 employed over two million people.48
With downstream processing and
service industries added, the total number
of people that rely on oil palm estates
in Indonesia is at least 4.5 million.
Palm oil sales contributed $1.7 billion
to the Indonesian economy in 2000,
with $1.4 billion in the case of
Sumatra.49 These figures were expected
to rise sharply as prices recovered from
a 15-year low. This is confirmed by the
estimated $3 billion sales for 2002.50 In
conventional economics, these facts are
often put forward as the positive part
played by the palm oil sector in Indonesia’s
development process, ignoring
however all that the conversion of
forests and wetlands to large-scale, single-crop
agriculture implies in terms of
impact on the environment and rural
people’s livelihoods.
Thirty-five years ago, the total area
planted with oil palm in Indonesia was
only 100,000 hectares. Figure 1 shows
the phenomenal growth in the total oil
palm area planted in the country in the
1980s and 1990s. Starting from about
600,000 hectares in 1985, the planted
area reached over three million hectares
in 2000.51 This was not as over-ambitious
as Suharto’s 5.5 million target for
2000 which he had set in 1996, half of
which was to be allocated to foreignowned
private estate companies52.
Around 60 percent of those three
million hectares are located in Sumatra
and Kalimantan, but the islands of eastern
Indonesia (primarily Sulawesi and
18 WWF
“As with any other crop, the problem
is not the oil palm itself but the industrial
model in which it is being implemented.
There are numerous examples
--particularly in Africa-- to show
that this palm can be grown and harvested
in an environmentally-friendly
manner and that it can serve to fulfil
the needs of the local populations in
a sustainable and equitable manner.
However, it is usually the industrial
and not the small-scale diversified
model which is being promoted”.
From: WRM Bulletin # 47, June 2001 (World Rainforest
Movement)
Fig. 1: Total area of oil palm plantations established in Indonesia From Wakker, 2000.
West Papua) have been targeted by the
government as the new growth centres.53
Nevertheless, companies have so
far been reluctant to establish plantations
in the east since they prefer the
better infrastructure, proximity to the
markets and more skilled labour force
in the western islands.54
Key factors which made Indonesian
oil palm plantations an attractive
prospect for domestic and foreign investors
were55:
• high temperature and rainfall ensure
high growth rates;
• large tracts of land have suitable soils;
• Indonesian laws and regulations relating
to land and forests could be easily
manipulated, so land was cheap;
• Indonesian labour was cheap, particularly
where plantations were coupled
with migration schemes;
• companies could benefit from selling
timber from any remaining forest before
clearing the land for planting;
• there was relatively little room for further
expansion of oil palm in peninsular
Malaysia;
• the Indonesian government was keen
to promote exports, particularly outside
the oil and gas sector.
In spite of these favourable factors,
Casson (2000) found that oil palm companies
had temporarily reduced their
planting targets in 1997. The main reasons
for this decline were:
• low international palm oil prices;
• massive debts owed by Indonesian
plantation companies;
• the government’s export tax policy;
• the above mentioned reform policies
targeted at the sector;
• social conflicts;
• great uncertainty and constant
changes in government plans regarding
privatisation of state owned oil
palm plantations;
• drought and fires resulting from the
1997-98 El Niño weather phenome-
non;
• higher than expected production costs.
As Figure 1 shows, the overall expansion
of oil palm plantations has
picked up rapidly in the past few years.
The slowdown in planted area has also
had little effect on production
growth, which has rocketed from 6.6
million tonnes in 1997 to 9.5 million
tonnes in 2001.56 Factors that are stimulating
renewed expansion are lower interest
rates, incentives for foreign investments
and other regulatory changes
that facilitate oil palm development, the
availability of land cleared through the
El Niño drought and related forest fires,
a growing global demand for palm oil,
the government’s drastic reduction of
export tax and cooperation between Indonesian
and Malaysian producers to
push up world market prices.
Who owns the plantations
The palm oil industry in Indonesia
knows three forms of ownership:
- state-owned
- (large) private companies
- smallholders
During the 1970s, most estates were
developed and owned by state companies,
whereas the 1980s saw an expansion
of smallholder estates, in both cases
as a result of government and World
Bank policies. Large-scale private plantations
have grown since the late 1980s,
stimulated by a range of government incentives
(see Table 2). Smallholders are
farmers who own a few hectares after a
company has planted them with oil
palm. The company supplies fertiliser
and pesticides and buys the fruit bunches.
This dependence makes the smallholders
economically vulnerable. They
pay back their debts with the first harvests
and have to accept the price dictated
by the company. Although they
are able to make a basic living, the social
and economic costs and benefits of
the smallholder model are complex and
the subject of heated debate.57
Behind these statistics lies the sensitive
issue of land rights, since oil palm
plantation development remains a major
cause of conflict over land and resources.
One of the social impacts of
the expansion is the appropriation of
large areas of land used by indigenous
and peasant communities who, in most
tropical countries, have not owned the
land they traditionally occupy. In boom
sectors where economic stakes are high,
such as the oil palm sector, plantation
companies may be awarded concessions
or land titles to that land and receive
government support to repress the
opposition they may face from local
communities.
Indonesia’s oil palm industry is dominated
by some of the same domestic
conglomerates that control the logging,
wood-processing and pulp and paper industries.
Examples are the Salim
Group, the Raja Garuda Mas Group
(RGM timber companies,
APRIL/RAPP pulp mill, Inti Indosawit
oil palm company) and the Sinar Mas
Group (logging companies, the APP paper
and pulp company, Matrasawit oil
palm company). Among these are the
state-owned forestry companies such as
the Inhutani groups that are allowed –
according to a decree from 1998 – to
convert up to 30 percent of their concession
to estate crops to achieve quicker
returns on investments than is possible
in the timber industry. There is also
considerable foreign investment, with
50 foreign firms having been involved
in the sector by the end of 1998, representing
a total investment of $3 bil-
lion.58
The government seems less willing
to protect corporate interests than it
once did, but neither does it appear to
have any coordinated plan for dealing
with the problem. Reformist politicians
have called for local communities to be
allowed to play a larger role in economic
development.
19WWF
Table 2: Palm oil production percentages by owner type Based on: Casson, 2000.
2.6 Forest conversion and clearance
for plantations
The analysis of the role of oil palm
plantations in forest conversion in Indonesia
in this report follows the model
which is described and depicted in Appendix
1. It shows the complexity of
land-use dynamics, where forest conversion
is often the result of a chain of
decisions. The model applies to what is
happening in Indonesia. Apart from being
driven by the forestry sector, the
conversion process is driven by actors
from the national and international
agro-industry. Many of them have close
ties with politicians.
In Indonesia, nearly seven million
hectares of forest had been approved for
conversion to estate crop plantations by
the end of 1997, and this land has almost
certainly been cleared. But the
area actually converted to oil palm
plantations since 1985 is about 2.6 million
hectares, while new plantations of
other estate crops probably account for
another one to 1.5 million hectares. The
implication: three million hectares of
former forest land are lying idle.59
By law, plantations can only be established
on forest land that has been
designated as Conversion Forest, i.e.
not on Permanent Forest land. However,
it seems from the latest revisions of permanent
forest lands, not officially published,
that conversion forest has increased
from eight million hectares in
2000 to 14 million hectares in 2002,
mainly by the re-allocation of permanent
forest land in Maluku and West
Papua60.
Such re-allocations show how the
authorities may respond to the so-called
Conversion Forest deficits. There are
many more applications for the release
of forest land to plantation crops than
there is land available classified as Conversion
Forest. Table 3 presents figures
on the deficits that will arise if the outstanding
applications for conversion
projects are approved, per island and
for the whole of Indonesia.
Provincial governments largely determine
the allocation of forest land
through their five year provincial plans
for land use. The ministry has agreed to
their requests provided that evidence
was available that the forest was degraded.
After decades of heavy logging
and forest fires, degraded forests have
become widely available in Indonesia.
Government officials themselves acknowledge
that timber companies leave
over 60 percent of logged forest in a
poor and degraded shape. Where the
forest is still in good shape, ways of degrading
it are to log and burn it before
applying for a plantation concession61.
As a result of conversion forest
deficits, many companies put pressure
on the national and, increasingly,
provincial governments to release permanent
forest land for conversion to
plantation estates, because62:
1. there is not much conversion
forest available any more in the better
developed western islands, which are
also closer to the markets.
20 WWF
“The 1990s were a boom period for
the Indonesian oil palm industry. This
‘development’ promised land, employment
opportunities and greater
prosperity – for small-scale farmers
and for the Indonesian economy. Indonesian
environmentalists now see
the expansion of large-scale oil palm
plantations as the third massive blunder
in Indonesian forestry policy, following
hard on the heels of the logging
concession system and the establishment
of industrial tree plantations
to feed the pulp and wood
industries.
The rapid spread of oil palm plantations
became a major direct cause
of deforestation and social conflict in
Indonesia. Companies took adat land
without consultation or adequate
compensation; local people whose
livelihoods once depended on the
forests were tied into sharecropping
schemes (PIR) which led to indebtedness,
loss of independence and
poverty.
The palm oil industry was, until the
economic crisis, increasingly dominated
by giant conglomerates which
controlled an integrated process
from plantation to palm oil processing
and the manufacture of cooking
oils.”
From: Forests, People and Rights, Down to Earth
Special Report: June 2002.
Province / region
Permanent
forest status
(ha)
Actual forest
cover (ha)
Conversion
forest (ha)
Applications
approved (ha)
Surplus/deficit of
applications approved
and conversion forest
available (ha)
Sumatra 22,451,907 16,632,143 1,559,583 4,080,530 - 2,520,947
Kalimantan 35,342,638 31,512,208 847,958 2,056,300 - 1,208,342
Sulawesi 11,792,212 9,000,000 618,419 366,890 251,529
Java, Bali, Nusa
Tenggara
6,691,298 2,406,675 352,667 --- 352,667
Maluku 4,959,775 5,543,506 2,034,932 --- 2,034,932
Irian Jaya 32,737,449 33,160,231 2,671,275 292,780 2,378,495
TOTAL
INDONESIA
113,975,279 98,254,763 8,084,834 6,796,500 1,288,334
Source: FWI/GFW, 2002 Note: the abovementioned latest revisions of permanent forest land are not included in the table
Table 3:
Conversion Forest
deficits resulting from
applications vs. availabil-
ity
2. converting permanent natural
forest allows them to harvest large
amounts of wood, either for timber production
or to supply the pulp industry,
thus gaining fresh capital for subsequent
investments.
Such pressures have often proved
successful. In the whole of Indonesia,
over 750,000 hectares of forest land
that had not been classified as conversion
forest had nevertheless been converted
to oil palm plantations by 1999,
75 percent of this area on Sumatra and
20 percent on Kalimantan63.
Pressure may also come from leading
authorities as a recent example in
East Kalimantan illustrates (see box).
Domestic concerns and the government’s
response
Apart from export and foreign exchange
considerations, the oil palm expansion
is also driven by the fact that
palm oil is considered a strategic commodity
as a raw material for the main
cooking oil consumed by Indonesians.
In 1997, after East Asia’s financial crisis
had also hit Indonesia, the domestic
supply situation for palm oil became
critical and prices soared as a result.
The government reacted by banning
palm oil exports in early 1998. In a
move that was criticised sharply by environmental
NGOs, the IMF then gave
Indonesian palm oil exports another
boost, insisting on the removal of ‘export
quotas and punitive taxes’ as a condition
of its economic ‘rescue package’.
The Indonesian government was
forced to lift the temporary ban on palm
oil exports and dollar hungry producers
exported as much of their output as possible,
triggering another domestic shortage.
Raising export taxes of crude palm
oil (CPO) from 40 to 60 percent did little
to slow down exports. Illegal palm
oil exporters also profited. At the time,
hundreds of thousands of tonnes of
palm oil are thought to have been smuggled
from Sumatra across the Malacca
Strait. However, conglomerates like the
Astra and Salim groups lost some of
their political clout after Suharto fell
and were soon struggling to pay their
banking debts.
There have been several other reform
initiatives affecting the oil palm
sector64:
• in 1998, the ministry decided to revoke
conversion permits of estate crop
companies that were only interested in
cutting timber from their concessions
and that failed to develop their plantations.
Later that year, the ministry took
another step by deciding to stop issuing
new licenses to open up conversion
forest for plantations.
• In 1999, maximum sizes of new
concessions for estate crops became
limited per company, both per province
(20,000 hectares) and for the whole
country (100,000 hectares), in an attempt
to prevent the expansion of monopolies.
Palm oil companies might respond
by establishing numerous small
companies, but political uncertainty and
the introduction of yet another bureaucratic
process have discouraged them so
far.65
• Complicated regulations decreed in
1999 are meant to encourage new plantation
companies to involve cooperatives
of local farmers in the ownership
and operation of oil palm plantations.
Reality checks of the effectiveness of
these reforms are not available. Casson
(2000) concluded that these regulations
have kept investors away from the oil
palm sector and existing companies
have cancelled or frozen expansion
plans until the overall land-use policy
of the Indonesian government becomes
clearer and more favourable to their in-
terests.
One of the most alarming regulatory
changes was that since 1998 state
forestry companies have been allowed
to use 30 percent of their concession areas
for estate crops such as oil palms.
These companies usually have concessions
in permanent production forests
and not in conversion forest lands. Previously,
establishing crop plantations
was only allowed in the latter category.
In West and Central Kalimantan, one of
the state companies quickly announced
its conversion of 60,000 hectares of
forestry concessions into oil palm plan-
tations.
Another quite worrying new regulation,
issued in August 1999, gives plantation
companies the right to establish
tree crops and timber plantations in
‘non-productive production forests’
(containing less than 20 m_ of timber
per hectare) formerly allocated to logging
companies. Forty percent of these
areas can be allocated to estate crops
and the rest is to be planted with timber
plantations (or even the entire 100 percent
may be used for rubber plantations).
Not only does this regulation imply
a direct link between plantation ex-
21WWF
Oil palm threatens protected
forest in East Kalimantan
In response to Malaysia’s crackdown
on illegal Indonesian workers, the
East Kalimantan administration is
considering opening up one million
hectares of oil palm plantations to
provide employment for tens of thousands
of returning workers.
East Kalimantan Governor Suwarna
Abdul Fatah said in Yogyakarta
over the weekend his administration
was looking into the possibility of
opening an oil palm plantation near
the province’s border with Sabah,
Malaysia, in a bid to create jobs for
workers currently stranded in
Nunukan. “If we are able to open,
let’s say, 500,000 hectares of oil
palm plantations, we will be able to
create jobs for all the returning workers.
And that’s just for the plantation.
By including all the downstream industries,
I’m sure we will be able to
create jobs for a million workers,”
Suwarna said. He said he had reported
the plan to Vice President
Hamzah Haz and a number of ministers,
but was told the area where his
administration wanted to open an oil
palm plantation was a protected
forest.
“The East Kalimantan governor’s
idea of opening up one million
hectares of oil palm plantations is a
very good idea. It could absorb a
huge number of workers. However,
forestry regulations would seem to
be in the way,” said State Minister for
Eastern Indonesian Development,
Manuel Kaiseipo.
Source: The Jakarta Post, 16 September 2002
ment ended up prosecuting only five66.
In a few cases, NGOs and local communities
have successfully challenged
plantation companies in court for causing
environmental damage by burning.
However, a handful of prosecutions is
unlikely to put off the big companies,
who are used to government protection.
Ironically, many oil palm companies
also benefited from the fires because the
haze caused a hike in Crude Palm Oil
(CPO) prices and because the Ministry
of Forestry and Estate Crops indicated
it would release burned lands for further
plantation development. This is what
happened in East Kalimantan, where
estates destined for planting with softwoods
for pulp and paper production
suffered enormous losses, and many
timber companies left the province. As
is happening in other provinces in Kalimantan,
a new area of one million
hectares of burned and degraded land
has been released for planting with oil
palm.
2.8 Conclusions
The forest fires that have hit Indonesia
since 1997 have been and continue to
be a truly man-made environmental disaster.
The underlying causes are found
in Indonesia but are also rooted in the
development of global markets. Donor
countries did not react adequately when
earlier fires occurred, limiting their official
assistance efforts to fighting symptoms
and following a purely technical
approach. Instead of fighting the fires,
more emphasis should be put on their
prevention.
Another form of assistance would
make an even greater difference: there
should be effective mechanisms to regulate
the activities of big corporations
from those same donor countries that
operate in a globalised market, and to
regulate the trade chains that depend on
the unsustainable exploitation of natural
resources in developing countries. In
the case of Indonesia, this means the
timber, paper and pulp, and palm oil industries.
Such mechanisms are not
enough in themselves; more fundamental
changes are needed, including
land for plantations. This ban was
strengthened under the 1999 Forestry
Act. Law enforcement could therefore
make a much more significant contribution
to the prevention and control of
forest fires. Company staff found guilty
of clearing land with fire can now be
sentenced to a maximum 15-year jail
term and a fine of up to five billion rupiahs
(approx. $500,000). The courts,
however, remain very reluctant to prosecute
and convict companies that burn.
When the 1997 fires continued, the
Ministry of Forestry and Estate Crops
published a list of 176 plantation and
forestry companies whose concessions
were affected by fire and who used illegal
burning methods to clear land in
their concessions. These companies
were required to submit evidence that
they had not started the fires in their areas
and possessed adequate fire-fighting
equipment. In October that year, the
Ministry of Forests and Estate Crops revoked
151 permits. Of the 176 companies
accused, 133 of which were oil
palm plantation companies, the governpansion
and deforestation, it also represents
a disincentive for sustainable
forest management since logged forests
can now easily be converted to plantation
lands.
Regional autonomy, introduced in
2001, provided a stimulus for further oil
palm expansion with local authorities
desperate to increase their revenues
from export revenues and taxes on plantation
companies. Applications for
plantation permits now cover a huge
area; an unconfirmed source quotes a
figure as high as 32 million hectares in
2000, but accurate figures are hard to
obtain. Investors are now lobbying hard
to cut down the bureaucracy faced by
the palm oil industry for obtaining plantation
licenses, a measure which will also
speed up deforestation.
2.7 Oil palm plantations and the
forest fires
Since 1995, Indonesian law has expressly
forbidden the use of fire to clear
22 WWF
The creation of Sawit Watch
Indonesian NGOs are very concerned about trends in the palm oil sector and
have conducted activities during the last six years to empower indigenous people
and local communities to fight for their rights in their regions. Given the need to
work and develop plans together, some Indonesian NGOs initiated Sawit Watch
on July 25, 1998.
Sawit Watch, a network of NGOs throughout Indonesia, is concerned about
the expansion of oil palm plantations and forest conversion. Today around 40
NGOs, including WALHI (Friends of the Earth Indonesia), INFID, Telapak, Bioforum,
ELSAM, KpSHK, LATIN, Tanah Merdeka Foundation, IDRD, LBBT, Citra
Mandiri Foundation and Plasma Foundation, have joined the Sawit Watch net-
work.
Sawit Watch is currently focusing its work on large-scale oil palm plantation regions
including Aceh, North Sumatra, Riau, West Sumatra, Jambi, South Sumatra,
Bengkulu, Lampung, West Kalimantan, South Kalimantan, Central Kalimantan,
East Kalimantan, South Sulawesi, Central Sulawesi, Southeast Sulawesi
and Papua.
The Sawit Watch campaign is directed at halting the expansion of large-scale
oil palm plantations in Indonesia by undertaking the following activities:
• monitoring the support international financial institutions give to the oil palm
sector;
• policy research;
• investigating environmental and social problems;
• raising public awareness by disseminating information;
• facilitating lobby activities by representatives of affected communities.
http://www.sawitwatch.or.id
changes in government policy frameworks.
There is a need for active involvement
by conscious consumers and
pioneers among financiers, traders and
retailers. Fortunately, we can now report
on initial experience here.
23WWF
The global demand for palm oil keeps
growing. Indonesia has some comparative
advantages, in the form of
cheap land and labour and a number
of government incentives, over other
countries operating in the global
palm oil market. The country badly
needs hard currency to recover from
a severe economic crisis. This chapter
focuses on palm oil production, trade
and consumption, taking a closer
look at Indonesia and Germany. In
this update, more attention is given to
the role of the international financial
sector, discussed only briefly in the
1998 report.
Note: The 2002 Oil World Annual is
the source of most figures used in this
chapter. It is the most reliable source,
although some figures may seem inconsistent,
generally because Oil World uses
different methods and criteria for different
components of its annuals. However,
observable trends are more important
than the strictly technical aspects
of statistical figures: different tables
with different figures show the same development.
Consumption world wide
and in Germany is growing.
3.1 The global picture
Planted areas and production
Over the past 30 years, the global
area planted with oil palm has tripled
(see Fig. 2). The main reasons for this
explosive growth are71:
• strong prices for crude palm oil and
palm kernel oil on the world market, especially
due to consumption increases
in Europe, India and China;
• absence of unmanageable pest and
disease problems, at least in Southeast
Asia;
• favourable physical characteristics
that have enabled a diversification of
palm oil-derived products in the food
and oleochemical sectors;
• very high oil yield per hectare in
comparison with other vegetable oil
crops (e.g. six times larger than rape
seed yields), and very high resource use
efficiency (in terms of inputs of solar
energy, water, nutrients, pesticides and
fertilisers per unit of oil produced).
Due to these characteristics, oil palm
now produces 22 percent of the world’s
vegetable oil on only two percent of the
land planted with vegetable oil crops72.
Further plantations are either being implemented
or promoted in almost every
southern country where soil, water and
solar energy meet the requirements for
growing oil palm. In the long term, Oil
World forecasts a rise in world demand
for palm oil to 40.5 million tonnes by
2020.73
24 WWF
3. Europe and Germany in the palm oil trade
Introducing oil palm and palm oil
The oil palm (Elaeis guineensis) originally comes from West Africa, where it is a
traditional source of food, medicines and woven material. Portuguese explorers
first described the oil palm in 1435. Large-scale commercial growing in plantations
did not start until early in the 20th century. In 1848, the Dutch introduced
the first four oil palms to Indonesia67. Within the last 50 years, no other oil crop
has expanded throughout the tropics as much as the oil palm and today Elaeis is
the world’s most profitable palm in terms of its crop’s value.
The oil palm is particularly valued for the highly edible oil content of its red
fruit. Both fruit pulp and seeds are used for production purposes:
> Crude Palm Oil (CPO) is the primary product derived from fruit pulp. CPO is
used for a wide range of food and non-food products. Harvested fruits must be
processed locally because they start to decompose quickly. The advantages of
CPO compared to other vegetable oils are its high melting point and the solid
state of its olein fraction (used for industrial purposes) at room temperature. In
the main producing countries, one hectare of oil palms generally yields between
two and four tonnes (in Nigeria and Colombia, respectively68 ), but maximum
yields of up to 10.6 tonnes of CPO have been recorded69.
> Palm Kernel Oil (PKO), obtained from the seeds, can be used for similar purposes
as CPO. Palm kernel oil contains about 80 percent fatty acids, against
50 percent for CPO. The seeds can be stored for longer periods and therefore
transported over long distances and be processed elsewhere. One hectare of
oil palms may produce 0.9 tonnes of PKO.
> Palm Kernel Meal (PKM) is made from ground and dried seeds. It is used primarily
for animal feed. Although PKM is considered a by-product of PKO production,
its importance to the animal feed sector is considerable.70
Fig. 2: Growth in global oil palm plantations, 1961 – 2001 Source: FAOSTAT 2002
Consumption and trade
From 1997 to 2001, global palm oil
consumption grew by 34 percent, from
17.6 million tonnes to 23.6 million
tonnes74 , which is considerably higher
than the 22 percent growth for the period
1994-98 stated in the previous WWF
report. Global consumption of palm oil
and palm kernel products combined
grew by 32 percent from 1997 to 2001.
Booming consumption resulted in
skyrocketing global imports from 12.2
million tonnes in 1997 to 17.5 million
tonnes in 2001 (+43 percent), reflected
in rising global exports from 12.5 million
tonnes to 17.6 million tonnes in the
same period. Since 1998/99, palm oil
exports surpassed the combined exports
of its closest competitors – soy, sunflower
and rape oils – which remained
at around 13 million tonnes. In 2002,
palm oil and palm kernel oil will account
for almost half of total oils and
fats exports (soybean remains the number
one in production).75
India, China and Pakistan, the countries
where palm oil is the traditional
cooking oil, continue to be the world’s
largest importers, with India having
overtaken China in a strong first position
(Table 4). The Netherlands, the
United Kingdom and Germany follow
the three Asian countries and remain
25WWF
Europe’s main palm oil importers.
One plantation hectare of oil palm
produces about 82 percent crude palm
oil (CPO), 10 percent palm kernel meal
(PKM) and eight percent palm kernel
oil (PKO). PKO prices are considerably
higher than CPO prices. Comparing the
import figures for palm kernel products
with palm oil reveals some interesting
differences. The EU has a much more
dominant position in the global market
for kernel products than in the palm oil
market (65 percent vs. 17 percent) (see
Tables 4 and 5). Especially striking is
the dominance of PKM (80 percent in
2001), mainly used for animal feed.
South Korea has a 10 percent share in
global PKM imports, the remaining 10
Import per capita (in kg)
Countries 1997 1998 1999 2000 2001 2001
1. India 1,469 1,672 3,257 3,651 3,433 3.3
2. PR China 1,860 1,373 1,347 1,764 2,055 1.6
3. Pakistan 1,144 1,114 1,052 1,107 1,325 9.1
4. Netherlands 606 693 748 776 985 61.8
5. United Kingdom 456 474 542 572 612 10.2
6. Egypt 367 408 511 524 525 7.6
7. Germany 420 389 394 445 503 6.1
8. Japan 370 357 365 373 394 3.1
11. Singapore 427 328 400 367 333 81.0
24. USA 135 116 143 165 171 0.6
Others 4,996 4,594 5,185 5,490 7,187
Total 12,250 11,518 13,944 15,234 17,523 2.9
EU percent of total 17 17
Table 4:
World palm oil imports,
1997-2001 (in 1000
tonnes).
(gross imports of crude and
processed oil, excluding
palm kernel oil and palm
kernel meal)
Source:
2002 Oil World Annual
Fig. 3: Global CPO and PKO prices 1993 – 2002 Source: Van Gelder, 2002.
26 WWF
percent is divided among the rest of the
world. Growth in global oil meal demand
(especially soybean meal, but also
PKM) has increased significantly
since 2001 due to relatively low prices
and the ban on meat and bonemeal resulting
from the BSE epidemic.
Germany is the world’s leading importer
of PKO, mainly used for industrial
purposes. The USA is the second
largest importer of PKO, with 149 kT in
2001. Several palm oil importing giants
that imported insignificant percentages
of PKO in 1997 have increased their
PKO import shares in the past four
years by at least 1000 percent (Pakistan,
China and India).
Prices
After the Asian financial crisis broke
out late in 1997, CPO prices on the
world market plummeted, reaching
lows in 1999 and 2000. As said before,
palm oil supplies declined in recent
years. In the meantime, global demand
for palm oil kept rising. As a consequence,
CPO and PKO prices have
started to go up again since early 2001,
with a 29 percent rise in CPO prices between
July 2001 and June 2002. Taking
the most influential price-making factors
into consideration, Oil World expects
sharp price rises for the second
half of 2002 and 2003 in the vegetable
oil group, with palm oil as one of the
leaders with a 50 percent increase76.
Higher prices will act as an incentive to
invest in new plantations.
Focus on Malaysia and Indonesia
Figures for 2001 show that Malaysia
and Indonesia have even slightly increased
their dominant position on the
global production and export market
since WWF published its previous report
in 1998. In 2001, 83 percent of
global palm oil production (19.5 million
tonnes) and 89 percent of global
exports (15.7 million tonnes) were accounted
for by these two countries77
(for 1997, these percentages were 81
percent and 86 percent, respectively).
Table 6:
Global production and
exports: Malaysian and
Indonesian shares
in palm oil and palm
kernel products
(1000 T)
Source:
Oil World Annual 2002
Total PK PKO PKM
Countries 1997 2001 1997 2001 1997 2001
Netherlands 909 997 94 78 815 919
Germany 670 719 154 191 516 528
United Kingdom 443 379 40 46 403 333
EU total 2,475 2,693 416 443 2,059 2,250
World total 3,393 4,144 1,054 1,348 2,339 2,796
EU percent of world total 73 65 39 33 88 80
Production Exports
1997 2001 1997 2001
World 17,934 23,575 12,469 17,611
Malaysia 9,057
(51%)
11,804
(50%)
7,747
(62%)
10,733
(61%)
Palm oil
Indonesia 5,380
(30%)
7,700
(33%)
2,982
(24%)
4,940
(28%)
World 4,975 6,364 3,354 4,155
Malaysia 2,602
(52%)
3,314
(52%)
1,833
(55%)
2,461
(59%)
Palm kernel
oil and meal
Indonesia 1,235
(25%)
1,750
(27%)
1,171
(35%)
1,392
(34%)
World 22,909 29,939 15,823 21,766
Malaysia 11,659
(51%)
15,118
(50%)
9,580
(61%)
13,194
(61%)
TOTAL
Indonesia 6,615
(29%)
9,450
(32%)
4,153
(26%)
6,332
(29%)
Table 5: World palm kernel imports by country, 1997 and 2001 (in 1000 tonnes). Source: 2002 Oil World Annual
27WWF
The pattern for palm kernel products is
similar to palm oil. Indonesia managed
to increase its market share for all products,
whereas Malaysia remained sta-
ble.
Indonesia itself is one of the world’s
largest markets for palm oil, with 12
percent of total global consumption in
2001, the equivalent of 35 percent of its
national production. Domestic consumption
of PKO and PKM represent
only 10 percent and 0.8 percent of Indonesia’s
production quantities78. Demand
for CPO within Indonesia was
about 60 percent of total production in
199779. This shows that the share of Indonesia’s
palm oil production that is exported
has risen considerably as a result
of trade liberalisation, confirming the
expectation given in the 1998 WWF report,
although not as dramatically(84
percent of production was the export
expectation for 1998).
The biggest importers of Indonesia’s
CPO in 2001, based on statistics from
the importing countries80 , are India (29
percent), China (11 percent), Netherlands
(eight percent) and Germany (five
percent). For 1997, these percentages
were 16, 16, 13 and 10, respectively.
This shows a relative reduction in importance
of the two largest EU importers
for Indonesia, although the absolute
volumes have still increased; this
is more a reflection of the dramatic
growth in demand in India and China.
The EU in 2001 as a whole imported
around 22 percent of total Indonesian
palm oil exports. As regards PKO, Germany
imported 28 percent of Indonesia’s
exports, Netherlands eight percent,
China 10 percent and India nine per-
cent.81
3.2 Germany’s share in the palm
oil trade
By far, the highest imports of vegetable
oil to Germany are in palm oil. Germany
remains the fourth largest importer
of Indonesian crude palm oil and
the second largest inside the EU, after
the Netherlands. Germany’s crude palm
oil imports from Indonesia doubled
from 144,000 tonnes in 1993 to
288,000 tonnes in 1997, dropped dramatically
in 1998 and 1999 to 145,000
tonnes (ceding the first rank to
Malaysia again), and then picked up to
Crude palm oil Indonesia Malaysia Other
Total Volume Share Volume Share Volume Share
1995 412.3 188.6 46% 107.2 26% 116.5 28%
1996 445.7 218.2 49% 108.2 24% 119.3 27%
1997 497,8 288.1 58% 114.4 23% 95.3 19%
1998 475,8 183.1 38% 169.9 36% 122.8 26%
1999 463.2 145.3 31% 215.0 46% 102.9 22%
2000 504.7 236.3 47% 177.9 35% 90.5 18%
2001 610.5 267.7 44% 194.7 32% 148.1 24%
Palm kernel oil Indonesia Malaysia Other
Total Volume Share Volume Shar e Volume Share
1995 110.2 85.5 78% 14.6 13% 10.1 9%
1996 136.4 101.0 74% 24.9 18% 10.5 8%
1997 156.5 115.6 74% 21.5 14% 19.4 12%
1998 121.5 93.1 77% 21.3 18% 7.1 5%
1999 210.7 148.4 70% 47.9 23% 14.4 7%
2000 180.0 151.9 84% 17.3 10% 10.8 6%
2001 192.6 164.2 85% 20.7 11% 7.7 4%
Palm kernel meal Indonesia Malaysia Other
Total Volume Share Volume Share Volume Share
1995 499.3 100.4 20% 381.9 76% 17.0 17%
1996 472.0 110.6 23% 352.3 75% 9.1 8%
1997 531.5 198.2 37% 309.4 58% 23.9 5%
1998 538.1 125.0 23% 371.1 69% 42.0 8%
1999 555.5 236.7 43% 251.0 45% 67.8 12%
2000 573.3 199.0 35% 337.3 59% 37.0 6%
2001 559.1 222.7 40% 304.6 55% 31.8 5%
All three product
cat e gories
Indonesia Malaysia Other
Total Volume Share Volume Sh are Volume Share
1995 1,021.8 374.5 37% 503.7 49% 143.6 14%
1996 1,054.1 429.8 41% 485.4 46% 138.9 13%
1997 1,185.8 601.9 51% 445.3 37% 138.6 12%
1998 1,135.4 401.2 35% 562.3 49% 171.9 16%
1999 1,229.4 530.4 43% 513.9 42% 185.1 15%
2000 1,258.0 587.2 47% 532.5 42% 138.3 11%
2001 1,362.2 654.6 48% 520.0 38% 187.6 14%
Table 7:
Germany’s main palm oil
suppliers from 1995-2001
(in 1000 tonnes)
Source: 1998 and 2002 Oil
World Annual
28 WWF
regain the lead (Table 7 and Fig 4). German
imports from Indonesia now stand
at 268,000 tonnes. Germany is the only
country among the big importers which
imports more palm oil from Indonesia
than from Malaysia.
Comparing 2001 with 1997, Indonesia
increased its market share of CPO
and PKO in Germany, in spite of having
temporarily lost terrain in 1998-99. Indonesia
dominates the German import
market for PKO, having increased its
share from 74 percent in 1997 to 85
percent in 2001. Country shares in the
imports of palm kernel meal (PKM) into
Germany follow a similar pattern as
with CPO.
Note that not the entire oil palm
product volume that is imported by
Germany is actually consumed by the
German market. Part of Germany’s imports
are re-exported (see Table 8).
As shown in Table 4 (section 3.1),
gross per capita imports are excessively
high in Singapore and the Netherlands,
countries which evidently re-export
most of their imported palm oil. In
2001, about 13 percent of CPO (77 kT),
five percent of PKM (30 kT) and a negligible
quantity of PKO (0.4 kT) was
imported from the Netherlands to Germany.
In fact, the Netherlands are the
main source of imported palm oil products
in the “Other” column in Table 7,
especially for CPO (for instance, of the
24 percent from “other” countries in
2001, the Netherlands accounted for 13
percent, Papua New Guinea for six percent,
and other EU countries for the remaining
five percent).82
3.3 Germany’s palm oil
consumption
Germany’s consumption of vegetable
oils has been rising steadily over the
past five years, from 2,158 million
tonnes in 1996 to 2,785 million tonnes
in 200183. Almost one quarter refers to
palm and palm kernel oil (Fig. 5).
Germany in 2001 consumed 503,000
tonnes of palm oil and 191,000 tonnes
of palm kernel oil. This makes palm oil
the second most highly used vegetable
oil after rape oil (imports into Germany
minus re-exports).
Figure 6 shows the main types of use
and users of vegetable oils in Germany.
About two-thirds of all vegetable oils
and fats are processed in the food industry,
producing ingredients for margarine,
bakery products, sweets, cooking
oil, soups, sauces, coffee whitener,
chocolate fillings, snacks and other
food products. Whereas domestic margarine
consumption decreased in recent
years (from 6.9 kg per person in 1998
to 6.2 kg per person in 2001), the food
processing industry experienced a
growing demand for vegetable oils and
fats.
Compared to most other vegetable
oils, palm oil has the advantage of having
a higher melting point and of being
solid at room temperature. Therefore, it
doesn’t need a hardening process,
which is not only technically elaborate
but also harmful to human health. Hardening
produces so-called trans-fatty
acids, which are suspected of playing a
role in cardiovascular diseases. The
margarine industry also welcomes the
fact that palm oil does not contain linolic
acids, which oxidate easily and affect
the flavour of the product.
Additionally, palm oil and palm kernel
oil are used in the chemical industry,
in the production of washing and
cleaning liquids, cosmetics and body
lotions. All palm kernel and palm fruit
residues are used to produce animal
feed, especially for pigs.
3.4 Use of palm oil by German
industry
The production chain between an oil
palm plantation and the consumer includes
various branches of industry that
use large quantities of palm oil. One
business group can be active in more
than one of these branches; Unilever is
in all three. These listings do not pretend
to be complete, nor do they rank
companies according to the palm oil
volumes they use:
Fig. 4 Trends in German palm oil imports, 1993-2001 (CPO, PKO and PKM) Source: 1998 and 2002 Oil World Annual
29WWF
Oelmühlen (VDOE), a German umbrella
organisation, tracing a shipment of
palm oil back to its original port of departure
is possible only in exceptional
cases. Tracing it back to the plantation
where the palm fruits were harvested is
completely impossible.
However, this information is incomplete.
Big companies buy part of their
palm oil directly in the country of origin
and often have joint ventures with
Malaysian or Indonesian companies.
Unilever, for example, has both plantations
and processing facilities of its
own, though it does not use the oil from
its Malaysian operations itself but sells
it on the open market. Unilever has just
decided to sell its Malaysian plantations
and has already sold some of its processing
operations. Unilever has no
plantations in Indonesia. The share of
Unilever’s palm oil supplied by its own
plantations unknown.The same lack of
knowledge about the volume of ownsourcing
holds true for other big com-
panies.
The fact that smaller companies
claim not to know the origin of the
palm oil they use does not necessarily
mean that they could not know this. The
palm oil sector lacks transparency. It is
also very difficult to determine what
share is imported directly and what
comes through the Netherlands.Yet,
some companies claim to know that
they import only small volumes or none
at all from Indonesia. This contradicts
earlier VDOE statements.
Company survey
As part of a company survey by
WWF Germany, questionnaires about
the use of palm oil were sent to the
above mentioned companies and several
others. The purpose was to obtain information
on palm oil volumes and origin,
and also to find out to what extent
companies had changed their palm oil
purchasing policies since the 1997-98
forest fires in Indonesia, or were willing
to do so in the future.
The table in Appendix 2 summarises
the responses. Of the 33 companies that
were approached, 12 responded individually
and in detail. Three companies referred
to the VDOE umbrella organisa-
1. Processing industries, which buy
and refine crude palm oil, include Noblee
& Thörl GmbH, Walter Rau
Neusser Öl und Fett AG, Deutsche
Cargill GmbH Oel und Fettveredelung,
Unilever;
2. Food industries, that use refined
palm oil to produce food stuffs, include
Nestlé Deutschland, Intersnack Vertriebs
GmbH, Agrarfrost GmbH & Co,
Friba Pommes Frites GmbH, LorenzBahlsen
Snack World GmbH & Co KG,
Unilever;
3. Chemical industries, that use refined
or chemically modified palm oil
(palm kernel fatty acids), include Cognis
Deutschland GmbH & Co KG, Oleo
Chemicals GmbH, Procter & Gamble,
L’Oréal, Beiersdorf, Henkel, Avon Cosmetics,
Unilever.
Crude palm oil from Malaysia and
from Indonesia is often mixed in big
tanks in Rotterdam’s transit harbour.
This mixture of crude oil goes to processing
industries where it is refined
and passed on to consumer product industries.
Mixing also occurs at several
other points in the supply chain as a result
of economies of scale in handling
palm oil. Because of this mixing, many
companies, especially those that use
limited quantities of palm oil, do not
know the origin of the crude oil. According
to the Verband Deutscher
Fig. 6: Use of refined vegetable oils in Germany (source: TransGen WebMaster, 1997)
Fig. 5: Main vegetable oils used in Germany (source: VDOE, 2001)
30 WWF
tion’s standard response, but this response
did not really answer the survey’s
questions. Three other companies
referred to the Verband der Deutschen
Margarineindustrie, the margarine manufacturers’
umbrella organisation , but
this association did not respond. Five
promised to respond but did not do so;
10 companies did not respond at all. In
effect, only 12 of the 33 companies did
respond to the survey, which hardly
provides a picture of a transparent and
open sector.
In general, a large discrepancy was
detected between the volume of palm
oil that was imported and the volume
actually used. This is partly due to the
fact that several companies did not want
to provide this information because of
competitive considerations. The discrepancy
is presumably also caused by
the fact that palm oil is mixed with other
oils and fats in the processing of
many products.84
The information provided in the following
section is based on company responses
that have not been verified by
WWF.
1) The Nestlé company
Nestlé annually processes around
6,000 tonnes of palm oil. About half of
this quantity comes from Indonesia,
probably as direct supplies. It is used in
the production of soups, instant sauces,
ready-made meals, pastries and ice
cream. The importance of palm oil is
very limited for the company in terms
of raw material volume, in contrast to
its use of coffee and cocoa beans.
Nestlé referred to a set of very general
environmental guidelines when asked
about its ecological criteria for supply
policies,. These guidelines do not take
the issue of rainforest deforestation for
plantation development into consideration.
This is a pity as Nestle has just declared
that it has joined a Sustainable
Agriculture Initiative that would lead to
the adoption of the same standards as
those used by Unilever for palm oil.
2) The Cognis company
Cognis is a global leader in special
chemical products for the washing and
cleaning industry, cosmetics, food and
health items, as well as paints and varnishes.
The oleochemical division
processes world wide about one million
tonnes of vegetable and animal oils a
year. Palm kernel oil is used in larger
quantities than palm oil (Cognis declined
to give data on volumes). Indonesia
is one of the main suppliers,
and Cognis buys palm oil on the world
market without investigating its origin.
Purchase decisions are based on prices,
seasonal influences and quality. Cognis
also emphasises that environmental and
social aspects are taken into account in
its supply policy. How this is done and
what criteria are used is not clear. The
issue of rainforest conversion into plantations
is not taken into account in these
criteria. In light of the 1997-98 forest
fires in Indonesia, the company decided
to join a government-supported research
project (ECOPOP) on the sustainable
management of oil palm plantations
in Indonesia.85
3) The Unilever company
The Unilever case shows that possibilities
do exist for companies to develop
palm oil supply policies that take
ecological criteria into consideration.
The Anglo-Dutch Unilever corporation
is one of the main global buyers of
palm oil, buying more than one million
tonnes a year, equivalent to 4-5 percent
of global production. The major share is
from Malaysia. A share of this volume
comes from Indonesia, but Unilever also
owns plantations in Malaysia and
West Africa. In Indonesia, Unilever
owns one margarine plant that uses
palm oil.
As part of a “Sustainable Agriculture
Project”, Unilever has begun to address
the issue of rainforest destruction to establish
oil palm plantations. Together
with WWF, the company has been
working for the past two years on the
development of ecological, economic
and social criteria for sustainable practices
in oil palm agriculture. On the
rainforest conversion issue, Unilever
declared that no primary rainforest will
be cleared any more to establish new
plantations on forest land owned by the
company (i.e. in Malaysia and Ghana),
and this position will be incorporated in
its future sustainability criteria.
Unilever has made a clear and unambiguous
commitment to WWF that it
will examine the High Conservation
Value Forest principle as an improved
criterion for protecting the rainforest
from company plantation expansion. It
has made a clear endeavour to work
with WWF on a case study to identify
High Conservation Value Forest area in
Sabah, Malaysia. Some doubts have
been cast on this last undertaking by
Unilever’s decision to dispose of its
Malaysian palm oil plantation subsidiary,
but WWF and Unilever very
much hope they will be able to continue
this joint effort.
The company policy aims at “sourcing
all palm oil from sustainable suppliers
in the long term”. Its concerns about
the social impact of its purchasing policy
on smallholder agriculture in Indonesia,
the desire to carry the industry
with it, and the lack of an agreed definition
of High Conservation Value Forest
are reported to WWF as preventing
Unilever from moving to an environmentally
sound purchasing policy in the
short term.
Unilever has pointed out to WWF
that throughout the development of its
work on sustainable palm oil it has consulted
stakeholders, made its standards
available to all, and continues to make
clear its commitment to sustainable
sourcing, particularly in the institutionally
challenging conditions of Indonesia.
It is not known what percentage of
the total palm oil volume used by
Unilever comes from the company’s
own plantations, but the proportion of
Unilever’s own plantation palm oil used
in Europe is negligible. The origin of
the remaining volume is also unknown,
but it comes mainly from Malaysia and
Indonesia. It is still too early to determine
the real effects of Unilever’s policy
on production and supply practices
in the field. The Unilever initiative,
however, shows that there is a way in
the right direction, at least on its own,
well-managed plantations. An essential
element of such a policy concerns its
transparency: can the origin of the product
be traced and verified? It would be a
step forward if other companies would
follow Unilever’s example, even if
Unilever can still be criticised for the
fact that the origin of probably the
largest share of its raw material is unde-
clared.
Conclusions
Since the forest fires in 1997-98, no
company operating on the German market
has changed its palm oil purchasing
policy. The results of the survey lead to
the conclusion that without public pressure,
there will be little interest in the
future to change company policies.
Indonesian palm oil is more competitive
in the global market than
Malaysian oil because land clearance
practices and cheaper labour allow for
lower prices. If Indonesia would apply
more sustainable techniques, then this
would push up the costs which would
be reflected in higher consumer prices.
The fact that palm oil does not reach the
market as an end product, but as an “invisible”
component of numerous food
and chemical products, puts palm oil in
a different position as compared with
other tropical products such as timber,
coffee and tea. With these latter commodities,
it is much easier to make consumers
aware of ecological and social
production aspects. A considerable
number of consumers are prepared to
pay a higher price for products that
have been produced in a sustainable
manner. It is considered questionable,
however, whether a market can be created
for “ecological” palm oil products.
Therefore, the Migros supermarket in
Switzerland is an interesting test case.
3.5 German development
projects in Indonesia
Indonesia is a priority country in German
development cooperation. In view
of the dramatic loss of Indonesia’s
forests, the emphasis in recent years has
been on supporting sustainable forestry.
As a response to the fires in 1997, the
KfW, Germany’s development bank,
and the GTZ, the technical assistance
agency, initiated a community project
for integrated forest fire management in
East Kalimantan. Prospects for the success
of these projects are poor because
of inadequate legal and policy reforms
by successive Indonesian governments
and a lack of effective action against
corruption. The German Ministry for
Scientific Cooperation and Development
(BMZ) has drawn its conclusions
and now follows a restrained policy in
the Indonesian forest sector. New
forest-related proposals are no longer
initiated by the German government.
Among all current bilateral forest projects,
only the advisory work to the Indonesian
Ministry of Forestry will be
continued until the overall policy
framework significantly improves.
BMZ’s new concept “Forests and
Sustainable Development” considers
“forest conversion by the intensive plantation
economy”, often stimulated by
European subsidies, to be an essential
problem in the richly forested countries
of Southeast Asia. The BMZ’s concept
does not, however, address this problem
by means of relevant interventions.
The German Investment and Development
Society (DEG) promotes oil
palm plantations in various Southeast
Asian countries. In Indonesia, the DEG
currently finances three oil palm projects.
Muko, a project association in
Western Sumatra, an Indonesian-European
joint venture, is a combined oil
palm and rubber plantation with processing
facilities. In Kalimantan, the
DEG financed the construction of a
palm oil mill for the Taipan company
which runs an oil palm plantation with
similar facilities. The crude palm oil
from this plantation is processed into
cooking oil in this same mill and then
sold under its own brand name. The
KSP project, also in Kalimantan, consists
of an oil palm plantation with an
extensive associated programme for
small farmers.
31WWF
The Ophir Project
From 1981 to 1996, the German government supported the NESP-Ophir oil palm
project in western Sumatra, in the framework of a joint KfW/GTZ cooperation initiative.
The project was supposed to contribute to increased income generation
for small farmers and to the larger production of palm oil products. In the target
group were 2,400 small farmers who had come from Java and parts of Sumatra
as migrants. The basic idea of the NESP model (Nucleus Estate with Smallholder
Participation) was to involve the P.T. Perkebunan VI plantation company as a
development agent for the smallholder plantation sector.
The plantation company served as a “nucleus”, with an oil mill for its own plantations
and the smallholders. The company was also in charge of marketing for
both types of producers. In the context of the project, 6,000 hectares were planted
with oil palms, 1,200 for the plantation and 4,800 for the smallholders (2
hectares per family). Furthermore, KfW financed a processing facility, a network
of all-weather roads for the transport of palm fruits to the mill, the construction of
houses for the farmers and an infrastructure for the settlements. Technical support
by GTZ focused on the development of a community organisation.
An evaluation carried out in 2000 confirmed that the income of small farmers
had experienced a steep increase.86 Also, after the price of palm oil went down in
1998, the average income of small farmers in the project in July 1999 was still
three times higher than the Indonesian average.
However, the project also had negative social impact on the population within
the project area. Apart from the well-paid settlers, there is now a category of
poorly paid wage labourers, whose income equals only one-tenth to one-fifth of
the income of the smallholders. This has led to envy among the labourers. Two
village communities living near the Ophir project consider themselves the losers
of the project. After they declined plots that were offered on the Ophir plantation,
a considerable number of villagers were pushed back into marginal lands when
Ophir did its new plantings. They now cultivate plots with an average of 0.5
hectares.
In selecting suitable projects, DEG
concentrates on strengthening existing
oil palm projects and using abandoned
or idle agricultural land. Ecological sustainability
is an important criterion for
DEG financing, and its financing agreements
include clauses that explicitly
commit the project participants to a ‘zero-burning’
policy and to respecting
other social and ecological guidelines.
Before deciding whether to finance a
project or not, the DEG carries out environmental
assessments.
3.6 European finance and the Indonesian
oil palm sector
Recent trends
The expansion of the Indonesian oil
palm sector requires huge investments.
Developing a new plantation often involves
building a processing mill for
crude palm oil as well, and it takes a
number of years before the plantation
starts producing. On average, developing
a new plantation costs between
$2,500 - 3,500 per hectare.87 Many billions
of dollars were invested in this
sub-sector in Indonesia.
The fast expansion of the oil palm
sector has been financed to a large extent
by foreign financial institutions
from Europe, North America and eastern
Asia. Since 1998, expansion of the
Indonesian oil palm sector has slowed
down. As many oil palm groups have
run into financial trouble, funds are
scarce for investing in the expansion of
existing plantations and opening up
new ones. The slowdown in oil palm
expansion has hardly been visible in
CPO production figures, as it takes
three years after planting before an oil
palm starts producing and another five
years before it reaches its full production
capacity. The large number of oil
palms planted before 1998 can therefore
still result in strongly growing production
figures in the coming few
years.88
The oil palm sector is not very popular
at this moment with foreign banks,
as the loans extended in the mid-1990s
have not generated the expected returns.
Many Indonesian oil palm companies
were not able to pay interest and repay
their debts on time, and have entered into
a painful debt restructuring process,
which often forced foreign banks to accept
write-offs on their outstanding
loans. At the same time, foreign banks
were faced with criticism by NGOs on
their role in converting Indonesian
forests into oil palm plantations. All
these factors have greatly reduced the
appetite of foreign banks to lend to Indonesian
oil palm companies.
As a result, the amount of fresh foreign
financing has gone down. However,
existing financing relationships have
been extended by foreign financial institutions
(voluntarily or involuntarily),
and in fact the influence which foreign
financial institutions could exert on oil
palm companies has increased as a result
of the weak financial situation of the
oil palm sector. This situation provides
foreign financial institutions with excellent
leverage opportunities to influence
their clients’ social and environmental
policies and performance. Chapter 4
presents an interesting case of successful
campaigning by NGOs which set a
unique precedent; several Dutch banks
in 2001 decided to adopt a more responsible
policy in their financial services to
the Indonesian oil palm sector.
Who is who
The study by Van Gelder (2001)
identifies and analyses which financial
institutions in the United Kingdom,
Denmark, the Netherlands, Germany,
Switzerland and Sweden are financing
the Indonesian oil palm and pulp and
paper sectors, and what level of influence
they have on specific companies in
these sectors.
Seventeen Indonesian oil palm
groups were identified which had obtained
financial services from European
financial institutions in the past 10
years. These groups include all major
private groups in this sector in Indonesia.
This proves that European banks
did not differentiate between private
groups as far as their records on forest
fires and social or environmental conflicts
were concerned.
The study also identified a total of 61
financial institutions in six countries
that provided financial services to business
groups in the Indonesian oil palm
and pulp and paper sectors. These include
24 British, four Danish and 13
Dutch financial institutions, and 19 financial
institutions in Germany, four in
Sweden and seven in Switzerland.
The following table shows that institutions
in the UK, Germany and the
Netherlands occupy the most prominent
positions.
The first table in Appendix 3 provides
the names of the 17 business
groups that have been identified, and
the total concession area each group has
access to. The table also lists the European
financial institutions which, according
to Van Gelder’s assessment, at
this moment have a strong influence on
one or more of the oil palm companies
in each business group.VI The second
table in the Appendix gives more details
on the companies, their concession areas
and production, as far as known. Put
together, European institutions have
strong influence on a total of around
three million hectares of oil palm plantations
(and lesser, but still existing degrees
of influence on a much larger
area).
32 WWF
Country Number of
institutions
Number of Indonesian business
groups to which financial
services are provided
United Kingdom 24 12
Denmark 4 1
Netherlands 13 12
Germany 19 13
Sweden 4 1
Switzerland 7 9
Total 61 17
Table 9: European financial institutions and Indonesian oil palm business groups
33WWF
Table 10 ranks ten financial institutions
in four European countries which
could be seen as most influential regarding
the Indonesian oil palm plantation
sector. The key criterion for this
ranking is the number of Indonesian oil
palm groups over which the financial
institution can exert strong influence.
No correction is made for the relative
size of each of these business groups.
Also, some other foreign financial institutions
in countries not covered in this
report (notably France, the United
States and Japan) as well as some Indonesian
financial institutions could be
equally or even more important.
Focus on German institutions
Appendix 4 lists the German financial
institutions identified in Van
Gelder’s study that had stakes in oil
palm companies. Table 11 indicates the
level of influence that banks have over
their clients. The following four banks
are seen as having strong influence:
Level of influence over Indonesian
oil palm plantation groups
Financial institution Country
Strong Moderate Minimal
Rabobank Netherlands 5 2 3
Crédit Suisse Switzerland 3 2 0
DEG Germany 3 1 0
UBS Switzerland 3 0 1
HSBC United Kingdom 2 3 4
Deutsche Bank Germany 2 0 2
CDC United Kingdom 2 0 0
Bayerische Hypo -und
Vereinsbank
Germany 1 3 1
Commerzbank Germany 1 0 1
Aberdeen Asset Management United Kingdom 1 0 0
Table 10: Most important European financial institutions with regard to the Indonesian oil palm plantation sector
VI The following levels of a financial institution’s influence on an oil palm company have been distinguished, using three criteria (directness, currency and importance) (see Van Gelder, 2001):
Strong influence
The financial institution has such a stro-ng financial relationship with the company that it can influence the company’s policies on its own.
Moderate influence
The nature and extent of the financial relationship between the financial institution and the company is such that the financial institution can assert a certain influence on the company’s
policies, especially when the institution joins forces with other banks or stakeholders.
Minimal influence
The financial relationship between the bank and the company theoretically gives the financial institution some influence on the company’s policies, but this influence is not of practical use
because of the extent and nature of the financial relationship.
Finished influence
The ability of the financial institution to influence the company’s policies no longer exists.
German financial institution Indonesian oil palm Company Relationship
Bayerische Hypo- und Vereinsbank SMART Trade financing
Commerzbank LonSum Loan 1996
Bakrie Sumatera Loan and shareholding
Deutsche Bank
LonSum Notes
Kalimantan Sanggar LoanDeutsche Investition- und EntwicklungsGesellschaft
(DEG)
Tapian Nadenggan Loan
Table 11: German FI’s whose influence in the Indonesian Oil Palm Sector is assessed as strong (see Annex 4 for complete table)
34 WWF
4.1 Some initial success _ but
much more is needed
Since 1998, when WWF Germany published
its previous report on oil palm in
Indonesia, little has changed in Germany
itself but there have been some
interesting developments in other consumer
countries.
The 1998 report and other publications
fuelled campaigns by WWF,
Greenpeace and Friends of the Earth directed
at the general public, retailers
and the financiers behind plantation expansion.
Apart from increased general
awareness of the oil palm issue, these
campaigns have generated ‘early
adopters’ of more responsible trade and
investment practices, both in the retail
(Migros in Switzerland) and the financial
sector (ABN AMRO and Rabobank
in the Netherlands) (see boxes).
Appendix 5 presents a series of recommendations
directed at financial institutions
and donor agencies, taken
from Wakker (2001), that provides
valuable guidelines to these actors for
becoming serious about sustainable de-
velopment.
At the government level, much work
remains to be done. The Indonesian
government has done little but is coming
under increasing pressure from
ASEAN countries to stop forest fires. In
the Netherlands, members of parliament
submitted questions to the government
on the role of Dutch financiers in
Indonesia’s oil palm expansion, but
apart from a token reply this was not
followed by any definite action. In Germany
and elsewhere in the EU, governments
and politicians have not done
anything.
4. International action
A responsible supermarket: MIGROS
MIGROS, Switzerland’s largest supermarket chain, has become the first European
retailer to commit itself to buying palm oil exclusively from ecologically
sound sources. The company, which has annual sales of around $12 billion a
year, announced last January that it had set itself the goal of modifying the production
of palm oil in such a way that it will no longer pose a threat to tropical
forests. The company, which uses 3,000 tonnes of palm oil a year, wants to ensure
its supplies do not come from plantations created from recently converted
natural forest. It has also set down criteria to ensure cultivation follows ecologically
sound principles, conserves resources, and supports social working condi-
tions.
MIGROS will retain independent auditors to assess annually whether its suppliers
are meeting the criteria and its products will carry a sticker confirming that
they “protect tropical forests”. As a first step, MIGROS has begun to develop a
brand of margarine with palm oil from a sustainable source in Ghana.
In conjunction with WWF Switzerland, MIGROS has drawn up a set of minimum
environmental and social criteria for its palm oil products that can be summarised
under four headings:
1. Transparency and independent verification: identified suppliers (company
group) and identified plantations (estate level) and a secured chain of custody.
Plantations agree on independent verification of compliance with the criteria.
2. Legal compliance: producer companies whose plantation management adheres
to national and regional laws.
3. Environmental standards: plantation and processing plants minimise environmental
impacts on soil, water, wildlife and natural forests.
4. Social standards: producer companies actively address social impacts and
have a policy that ensures that working and safety conditions are in line with
national laws and international agreements. The companies communicate and
consult with social stakeholders.
The pioneer role of MIGROS received international recognition at the recent
World Summit on Sustainable Development in Johannesburg, when MIGROS
was honoured with the World Business Award.
Awakening banks
Three of the biggest banks in the
Netherlands – ABN AMRO,
Rabobank and Fortis – agreed in
February 2002 to stop or substantially
restrict financing for oil palm development
in Indonesia on environmental
and social grounds. A fourth bank,
ING, joined them later in the year.
This is the result of a joint campaign
by Sawit Watch, the Indonesian oil
palm advocacy network, Milieudefensie
(Friends of the Earth NL) and
Greenpeace Netherlands. Oil palm
and pulp plant feeder companies are
seen as among those responsible for
devastating forest fires and for deforestation
in general. Dutch banks
have financial ties to several major
plantation groups in Indonesia.
NGOs confronted the banks with
these issues and pressed them to
limit their investment in the oil palm
sector to plantation companies which
adhered to the following basic re-
quirements:
• No destruction of tropical rainforest
• No forest burning
• Acting within the legal framework
• Respecting the rights and wishes
of the local communities.
The NGOs campaigned and negotiated;
in the end, four leading banks
agreed to adopt sustainability criteria
for investments in the oil palm sector.
In the case of ABN AMRO, the
bank’s new policy goes even further;
it will apply to all investments that
might affect forests, including logging,
pulp and paper, mining and oil
and gas development. Additionally,
ABN will not invest in plantation projects
where forests were cleared fewer
than five years ago. Sawit Watch,
campaigning against the large-scale
expansion of oil palm plantations, is
calling for financing agencies all over
the world, including Indonesian
banks, to follow the steps taken by
the Dutch banks.
Source: Down to Earth 52, February 2002
4.2 WWF’s position and strategy
WWF in 2002 developed a series of
position papers91 on key forest issues,
including one on oil palm. It focuses on
what WWF sees as the key elements of
sustainability within the oil palm indus-
try.
WWF recognises that palm oil is a
basic foodstuff with high consumer demand,
and that the industry generates
foreign exchange earnings and employment
in tropical producer countries. At
the same time, WWF is concerned
about the high environmental and social
costs that oil palm plantations have imposed
in the form of indiscriminate
forest clearing, uncontrolled burning
with related haze, and a disregard for
the rights and interests of local communities.
WWF therefore calls upon the
industry, regulators, financiers, buyers
and other stakeholders to work collectively
to make the oil palm industry
ecologically, socially and economically
sustainable.
WWF believes that key elements of
sustainability within this industry are
that:
• plantations do not replace forests
that have high conservation value;
• any incentives that promote conversion
of such forests should be eliminat-
ed;
• sound environmental management
practices are adopted (such as minimising
forest fires and human/wildlife con-
flicts);
• customary rights of local communities
and indigenous peoples to own, use
and manage their lands and natural resources
are respected;
• the long-term social and economic
well-being of plantation workers and
local communities is ensured;
• regulatory frameworks are respected
at a minimum, but higher standards
of performance which exceed local/national
laws should be sought;
• industry participants should make
their policies and practices related to
environmental and social performance
publicly transparent, and should involve
local stakeholders in the development
of standards and performance monitor-
ing.
In addition, a key element in WWF’s
oil palm strategy is to target the ‘levers
of change’, i.e. mobilise those key actors
that have influence on international
markets and investment flows. These include
major European banks, international
financial institutions (IMF, World
Bank), the European consumer market,
European companies that process palm
oil products and produce consumer
goods, and institutions (EU, national
governments) that determine development,
trade and aid policies.
WWF’s Forest Conversion Initiative
(currently focusing on palm oil and
soy), together with relevant WWF offices
in producer and consumer countries,
is implementing a coordinated set
of activities to achieve the common
goal: to secure that High Conservation
Value Forests are no longer threatened
by the expansion of oil palm and soy
plantations.
4.3 The donor community
The CGI and forests
Indonesia’s multilateral and bilateral
creditor group, the Consultative Group
on Indonesia (CGI), meets annually to
set levels of financial assistance. It is
chaired by the World Bank and includes
the IMF, the Asian Development Bank,
the European Commission and UN
agencies as well as bilateral lenders like
the USA, Britain and Japan.
During the Suharto era, this group
largely ignored human rights and the
environment in its discussions but, post
-Suharto it has started to broaden its demands
to include progress on ‘governance’
and forest management. Whereas
before it was seen as political meddling,
‘good governance’ is now at the
top of the donor agenda. This change of
perspective has had a knock-on effect
on the forest policy debate. The new
emphasis on law enforcement, anti-corruption
measures and stakeholder participation
reflects this change.
The CGI in 2000 held its first meeting
specifically on forestry issues and
came up with eight action points for the
Indonesian government to implement.
Illegal logging has been the main focus
of concern within the international
lending community since then.
NGOs in Indonesia and overseas
have been highly critical of the CGI
agencies for failing to take a share of
the responsibility for Indonesia’s economic
crisis. They have consistently
called for debt reduction and cancellation
of corrupt debt amassed during the
Suharto era. In November 2001, at a
meeting in Jakarta, Indonesian NGOs in
the Coalition for Forests and Debt
called on the CGI to stop financing deforestation
in Indonesia. The NGOs’ demands
presented to the CGI included
calling for a moratorium on large-scale
commercial logging in natural forests
and for a stop to the involvement of Indonesian
security forces in forest ex-
ploitation92.
35WWF
WWF’s approach to forest conser-
vation
WWF is working to provide solutions
to the threats facing the
world’s forests which could potentially
undermine forest conservation.
WWF acts through a combination
of field and policy work involving
more than 300 projects in almost 70
countries. WWF projects integrate
conservation with social and economic
elements; these projects also
examine national or international
policies that affect life on the ground.
In order to halt, and eventually reverse,
the loss of forest landscapes
world-wide, WWF is promoting the
protection, management and restoration
of forests as the means to
achieve a lasting and sustainable diversity
of forest types on all of the
world’s continents.
Of particular concern to WWF are
illegal logging and forest crime, conversion
of forests to plantation crops
of palm oil and soy, forest fires and
climate change.
IMF
During the East Asian financial crisis,
the IMF stepped in with a bail-out
package of $43 billion dollars in October
1997, followed by a ‘rescue package
for the rescue’ in February 1998. A
structural adjustment programme and
its conditionalities also had important
effects on natural resource use. Indonesia’s
creditors, led by the IMF, have set
a course for economic recovery which
requires Indonesia to sell off state assets
and generate revenues by exploiting
natural resources. The costs in terms of
lost forests and biodiversity, and degraded
environmental functions, have
not been taken into account. Forestry
policy reform was included in the conditionalities
of the IMF and World Bank
loans. In 1998, the IMF insisted on the
removal of “export quotas and punitive
taxes” on Indonesian palm oil exports
as a condition of its economic ‘rescue
package’. This measure further
strengthened the economic incentive to
expand the production of palm oil and
the area of plantations.
36 WWF
5.1 Recommendations to
governments
General recommendation to governments
of consumer and producer
countries
All concerned governments should
actively facilitate the process to make
the oil palm industry sustainable, and
create the necessary incentives and regulatory
framework to influence the private
sector. They should support NGOs
as key watchdogs to monitor what happens
on the ground, and also help
NGOs assist companies that are ready
to work towards true sustainability.
Governments should also promote minimum
standards for transparency in the
production and trade chain.
Specific recommendations to the Indonesian
government
This update to the 1998 report does
not provide much reason for optimism
about the state of Indonesia’s forests
and the role of oil palm plantations.
Discrepancies remain large between
forest land-use planning and policies,
and the actual situation on the ground.
The Indonesian government is in the
unique position to change things for the
better and take specific action to preserve
and develop one of the country’s
most important natural resources for future
generations. Therefore the following
examples of measures and reforms
needed in Indonesia to place the country’s
oil palm sector on a more sustainable
footing are recommended to the
Indonesian government for consideration.
They include:
• socially and environmentally sound
land-use planning, involving the local
population, local governments and civil
society groups. The aim should be to restore
a sound balance between allocating
forest land to forest, small-scale
agriculture and agroforestry, plantations
and settlements. This process also requires
capacity-building among local
community organisations and authori-
ties.
• a moratorium on new concessions
for oil palm on forest lands until a national
inventory of the permanent forest
estate is completed. Exceptions to this
moratorium could be areas that have
been severely degraded in the past, by
fires or otherwise, that do not show any
potential of high conservation value, be
it social, ecological or otherwise.
• elimination of perverse incentives
that promote the expansion of oil palm
plantations at the cost of natural forest
(see section 2.6 for examples).
• legal protection as permanent forest
estate to all remaining forested areas in
Indonesia.
• strengthened rules and penalties
against clearing plantations with fire as
well as the institutional capacity to enforce
them.
• legal protection of forest ownership
and use by local communities dependent
on the forest ecosystem, implementation
of land reforms and assistance to
local communities in sustainable forest
management.
• effective mechanisms for the independent
monitoring and early warning
of trends and threats to forest lands related
to the oil palm industry. This includes
early warning systems in the
field and greater transparency throughout
the trade chain.
• standards of best practice (benchmarking)
for oil palm plantation establishment
and management, as well as
palm oil production.
At the level of individual plantations,
the recommendations made to plantation
owners in the previous WWF report
are still valid:
- within plantations, conserve forest
areas that have a particular value for
watershed protection, biodiversity, faunal
migration, and erosion protection;
keep NTFP reserves for local use.
- restore forest that has an environmental
function back to certain parts of
exploited plantations (see previous
point).
- enforce zero-burning land clearing
and waste removal methods.
- develop and introduce integrated
pest management techniques in oil
palm plantations.
- introduce nutrient recycling techniques
(mulching).
5.2 Recommendations to the
private sector
Plantation companies in the oil palm
sector should adhere to the following
basic guidelines:
• do not convert High Conservation
Value Forests.
• do not initiate uncontrolled forest
burning.
• act in accordance with international
best practices in countries with poor
governance or ambiguous regulatory
systems.
• respect the land and resource use
rights of local communities.
Financial institutions and private
banks should:
• screen investments in the oil palm
sector and other forest-related activities
against measures of social and environmental
responsibility.
• adopt these same basic guidelines
in financial service policies.
• transparently and openly cooperate
with an independent verification
process that measures how well these
guidelines have been applied.
If companies from consumer countries
want to have a share of the benefits
in the oil palm trade (or any other sector),
they should develop clear and verifiable
investment and purchasing policies
based on sustainable criteria. They
should discuss these with local stakeholders
and rigorously implement the
policies. They could also fund activities
related to forest conservation.
Companies operating in the producer
countries should also develop and implement
sustainability policies and engage
local stakeholders in the process.
Furthermore, all companies in the
trade chain should be fully transparent
regarding the origin of their raw palm
oil materials. Transparency is a key
condition for gaining credibility on sustainability
claims made by commercial
companies and their financial service
providers. Transparency is thus a precondition
for any ‘license to operate’.
37WWF
5. WWF’s recommendations
NGOs
Through research, advocacy, campaigning
and creative support work,
NGOs play a key role in catalysing action
taken by the private sector, governments
and consumers. But their role
needs to move beyond simply calling
for boycotts, to working with the private
sector and governments to come up
with workable solutions. This implies
developing specific recommendations
for relevant industries which set higher
standards of environmental performance,
and which are adapted to local aspirations
for development.
Consumers
Consumers should be informed
about the story behind the product they
are consuming. It should be made clear
that they can make a real difference by
pressuring others into action, by requesting
proof of transparency from retailers
and processing companies in
their sourcing and purchasing policies.
They can help to build on positive examples
such as the Swiss Migros and
the Dutch banks to set benchmarks and
persuade mainstream industry to raise
its standards.
38 WWF
39WWF
Anderson et al. 1999. Vegetation fires in Indonesia: the fire
history of the Sumatra provinces 1996-1998 as a predictor
of future areas at risk. From: Summary of Report 1998 –
2001. Forest Fire Prevention and Control Project (FFPCP).
EU / Government of Indonesia.
Anderson et al. 2000. Vegetation fires in Sumatra, Indonesia:
Reflections on the 1999 fires. From: Summary of Report
1998 – 2001. Forest Fire Prevention and Control Project
(FFPCP). EU / Government of Indonesia.
Anderson & Bowen 2000. Fire zones and the threat to the
wetlands of Sumatra, Indonesia. From: Summary of Report
1998 – 2001. Forest Fire Prevention and Control Project
(FFPCP). EU / Government of Indonesia.
Barber & Schweithelm 2000. Trial by fire. Forest fires and
forestry policy in Indonesia’s era of crisis and reform.
From Word Resources Institute, forest frontiers initiative
in collaboration with WWF Indonesia & Telapak Indonesia
Foundation.
Bompard & Guizol 1999. Land management in South
Sumatra province Indonesia. Fanning the Flames: The institu-tional
causes of vegetation fires. From: Summary of
Report 1998 – 2001. Forest Fire Prevention and Control
Project (FFPCP). EU / Government of Indonesia.
Bowen et al. 1999. Anthropogenic fires in Indonesia: a view
from Sumatra. From: Summary of Report 1998 – 2001.
Forest Fire Prevention and Control Project (FFPCP). EU /
Government of Indonesia.
Casson, A. 2000. The Hesitant Boom: Indonesia’s oil palm
sub-sector in an era of economic crisis and political
change, CIFOR Occasional Paper No. 29, Centre for International
Forestry Research, Jakarta.
Down to Earth 2002. Forests, People and Rights, Down to
Earth Special Report.
Fairhurst & Mutert 1999. Introduction to Oil Palm Production.
From Better Crops International, Vol.13, issue 1.
FWI / GFW 2002. The State of the Forest: Indonesia. Bogor,
Indonesia: Forest Watch Indonesia, and Washington DC:
Global Forest Watch.
Glover, D. and T. Jessup 1999. Indonesia’s Fires and Haze.
The Cost of Catastrophe. ISEAS./IDRC
Gouyon, A. 1999. The sustainable development of tree crops
and the prevention of vegetation fires in South Sumatra
province, Indonesia. Jungle Rubber. From: Summary of
Report 1998 – 2001. Forest Fire Prevention and Control
Project (FFPCP). EU / Government of Indonesia.
Lair, R. 1997. Gone Astray. The Care and Management of the
Asian Elephant in Domesticity. FAO Regional Office of
Asia and the Pacific. Bangkok.
Mielke S. 1998. The Outstanding Role of Indonesia in the
Phenomenal Development of the World Oil Palm Industry
in the Past and the Future. International Oil Palm Conference.
Commodity of the Past, Today, and the Future. Bali,
September 23-25, 1998.
Oil World Annual 1998. ISTA Mielke GmbH. Hamburg.
Oil World Annual 2001. ISTA Mielke GmbH. Hamburg.
Oil World Annual 2002. ISTA Mielke GmbH. Hamburg.
Pamin, K. 1998. A Hundred and FiftyYears of Oil Palm Development
in Indonesia: From the Bogor Botanical Garden
to the Industry. International Oil Palm Conference.
Commodity of the Past, Today and the Future. September
23-25, 1998. IOPRI/GAPKI.
Potter L.M. and Lee J.L. 1998. Oil Palm in Indonesia: Its
Role in Forest Conversion and the Fires of 1997/98, unpublished
consultancy report prepared for WWF Indonesia,
Jakarta.
Rijksen H.D. & Meijaard E. 1999. Our vanishing relative.
The status of orang-utans at the close of the twentieth century.
Tropenbos publication. Kluwer Ac. Publ.
Sargeant, H.J. 2001. Vegetation fires in Sumatra, Indonesia.
Oil Palm agriculture in the wetlands of Sumatra: De-struction
or development? From: Summary of Report 1998 –
2001. Forest Fire Prevention and Control Project (FFPCP).
EU / Government of Indonesia.
Toyne, P. O’Brien, C. & Nelson, L. 2002. The timber footprint
of the G8 and China. Making the case for green procurement
by government. WWF International.
Van Gelder, J.W. 2001. European banks and palm oil and
pulp and paper in Indonesia. A research paper by Profundo
for WWF International.
Van Gelder, J.W. 2002. Draft report on Australian economic
links with the oil palm sector of Papua New Guinea.
Wakker, E. 1998. Introducing Zero-burning Techniques in
Indonesia’s Oil Palm Plantations. Report Prepared for
WWF Indonesia. AIDEnvironment. Amsterdam.
Wakker, E. 2000. Funding Forest Destruction. The Involvement
of Dutch Banks in the Financing of Oil Palm Plantations
in Indonesia. Report by AIDEnvironment – Telepak
– Contrast Advies, for Greenpeace Netherlands.
Literature
40 WWF
Wakker, E. 2001. PT Matrasawit. Relations between
Rabobank, ING and ABN-AMRO, and forest destruction
and poverty in East Kalimantan, Indonesia. Report by
AIDEnvironment – LBB Puti Jaji, for Friends of the Earth
Netherlands.
WWF, 2002a. Position Paper on Forest Conversion.
WWF, 2002b. Position Paper on Forest Fires.
WWF, 2002c. Position Paper on High Conservation Value
Forests.
WWF, 2002d. Position Paper on Oil Palm.
WWF, 2002e. WWF’s Approach to Forest Conservation.
WWF Germany, 1998. Brandrodung für Margarine. Waldbrände
in Indonesien und Palmölprodukte in Deutschland:
Zusammenhänge, Ursachen und Konsequenzen. WWF
Deutschland und WWF Indonesien.
Yeager, C. [ed.] 1999. Orangutan Action Plan. WWF, PHPA,
CERC.
41WWF
1 High Conservation Value Forests (HCVF) are defined by
the Forest Stewardship Council (FSC) as “forests of outstanding
and critical importance due to their high environmental,
socio-economic, biodiversity or landscape values”.
WWF is extending the HCVF concept to comprise
the crucial forest areas and values that need to be maintained
or enhanced in a landscape, using it as a tool in
more general conservation planning including the design
of representative networks of protected areas and buffer
zones.
2 see Down to Earth’s Update on forestry on
http://dte.gn.apc.org/cfprs.htm.
3 FWI/GFW, 2002.
4 Three die as haze cloaks Kalimantan, The Star, 5 September
2002.
5 Various Jakarta Post reports. Also: WWF-Indonesia,
pers.comm.
6 see Fire Bulletin no.8, via WWF Indonesia’s web site
(www.wwf.or.id)
7 See e.g. Straits Times of 8 Nov. 2002 (referring to data
from the Singapore Center for Remote Imaging, Sensing
and Processing, CRISP)
8 BMG predicts prolonged dry season, Jakarta Post, 6 September
2002.
9 BMG predicts prolonged dry season, Jakarta Post, 6 September
2002.
10 Straits Times of 8 Nov. 2002
11 CIFOR press statement by Luca Tacconi on Sep.13
12 The Jakarta Post, 24 August 2002.
13 Anderson et al., (FFPCP), 1999
14 FWI/GFW, 2002.
15 Glover, D. and T. Jessup, 1999.
16 ADB in: Dennis, R. 1999. A Review of Fire Projects in Indonesia
(1982-1998). CIFOR.
17 Waluko, J. Smoking Gun. Inside Indonesia. No. 53 January-March
1998. Note: investments per hectare tend to
vary significantly and may be as high as Rp 8 million per
hectare.
18 Representatives from the Agro Indomas company claim
that mechanical clearing of forests is 2.3 times more expen-sive
than non-mechanical clearing with burning.
However, according to the Fire Prevention Control Project
(FFPCP), there is no compelling reason to use fire to clear
land for new plantations. The cost of establishing an estate
from the first step of government approval through to full
production is identical whether the land is cleared by
purely mechani-cal means with no burning, or is first
cleared mechanically, and the debris then burned. Several
leading companies al-ready recognise this and favour a zero-burn
land clearance policy, although such a policy does
not always translate into a ‘no-burn’ practice (Sargeant,
FFPCP, 2001).
19 Wakker, 2000
20 Simorangkir and Gouyon (www.pffsea.com)
21 Anderson et al., (FFPCP), 1999
22 Bompard & Guizol (FFPCP), 1999; Sargeant, (FFPCP),
2001
23 Anderson et al., (FFPCP), 1999
24 IUCN Red List of Threatened Species at www.redlist.org,
viewed 23rd October 2002
25 36,000 is an authoritative estimate by Rijksen & Meijaard
(1999). WWF’s species web site now estimates the
total at less than 25,000
(http://www.panda.org/species/orang/population.cfm).
26 Orangutan Numbers Plummeting World-wide: Species
may Vanish in the Next TenYears, Study Says. Wildlife
Conservation Society. February 26, 2001; Our Vanishing
Relative. The Status of Wild Orang-Utans at the Close of
the Twentieth Century. Rijksen, H.D. and E. Meijaard
1999.
27 Tree Cutting Angers Elephants. Jakarta Post 5 April 1997
28 Wild Elephants Caught and Tamed. Jakarta Post, 29 July
1998.
29 WWF Riau, 2001.
30 Source: Antara, September 16, 2002. The survey on encounters
between human beings and wild elephants inside
and around the national park was conducted by a local environmental
agency (Watala) and the Wildlife Conservation
Soci-ety-Indonesia.
31 The worst affected areas were central and southern Sumatra
and Kalimantan; there were few reports from other
parts of Indonesia.
32 Anderson et al., (FFPCP), 2000
33 Jakarta Post, 31 August 2002; Down to Earth 553-54, August
2002. This case and another are the subject of case
studies being prepared by PFFSEA to determine the elements
and aspects that were critical in a successful and an
un-successful prosecution.
34 Potter & Lee, 1999.
35 A review of the effectiveness of aircraft in fire suppression
is being conducted by PFFSEA – preliminary analysis indicates
this approach is ineffective and inappropriate (Peter
Moore, PFFSEA, pers.comm.).
36 Gouyon, (FFPCP), 1999
37 Special Report from Down to Earth on “Forests, People
and Rights”, from June 2002.
38 Bowen et al., (FFPCP), 1999
39 See www.pffsea.com. The four new reports are:
“Review of Legal, Regulatory and Institutional Aspects
of Forest and Land Fires in Indonesia”
“Review and Analysis of Legal and Regulatory Aspects
of Forest Fires in South East Asia”
“The Economics of Fire Use in Agriculture and
Forestry – A Preliminary Review for Indonesia”.This is
a compre-hensive economic analysis of the fire problem.
In a first part this report examines the state of knowledge
about fires and their associated costs and benefits. The
second part analyses the costs of being a responsible fire
user; if and under what circumstances zero burning is an
option for large-scale commercial plantations and smallscale
farmers. The last part analyses the costs of being ir-
42 WWF
responsible: Who pays the bill? The economic impact of
fires.”Community Involvement in and Management of
Forest Fires in South East Asia”
40 Special Report from Down to Earth , from June 2002.
41 Most of this section is based on a Special Report from
Down to Earth , from June 2002, on forest reforms in the
post-Suharto era, and on Casson’s report published by
CIFOR in 2000.
42 Toyne c.s., 2002.
43 SeeWWF Germany, 1998.
44 See www.hazeprevention.com
45 Oil World 2020, 1999. ISTA Mielke GmbH.
46 Carrere, 2001.
47 Sargeant, (FFPCP), 2001
48 Casson, 2000.
49 Sargeant, (FFPCP), 2001
50 WWF Indonesia, pers.comm.
51 FWI/GFW, 2002 (p.43), based on Ministry of Forestry
statistics.
52 Casson, 2000.
53 Wakker, 2000.
54 FWI/GFW, 2002.
55 Forests, People and Rights, Down to Earth Special Report:
June 2002
56 Oil World Annual 2002.
57 Wakker, 2000 and Wakker, pers.comm.
58 Barber & Schweithelm, 2000.
59 FWI/GFW, 2002.
60 down from 33 million in 1981, the decrease mostly as a
result of actually concluded conversion. The recent increase
is based on unpublished Ministry of Forestry data.
Source for this section: FWI/GFW, 2002.
61 WWF Germany report, 1998.
62 FWI/GFW, 2002.
63 Casson, 2000.
64 Most of this section is based on Casson (2000) and the
Down to Earth Special Report from June 2002.
65 Casson, 2000.
66 See Wakker, E. 1998.
67 Pamin, K. A Hundred and FiftyYears of Oil Palm Development
in Indonesia: From the Bogor Botanical Garden to
the Industry. IOPRI. 1998 International Oil Palm Conference.
September 23-25, 1998.
68 Oil World Annual 2002 (p.15)
69 Oil Palm – Fact File in Better Crops International, 1999.
70 See for details on oil palm uses e.g.: Pocketbook of Palm
Oil Uses. Palm Oil Research Institute of Malaysia. Ministry
of Primary Industries. March 1997.
71 Fairhurst & Mutert, 1999
72 Fairhurst & Mutert, 1999.
73 Oil World Annual 2001
74 Oil World Annual 2002
75 Oil World Annual 2002
76 Oil World Annual 2002
77 Oil World Annual 2002
78 Oil World Annual 2002
79 Mielke 1998.
80 This is because export statistics from Indonesia include reexports
to third countries; we therefore believe that import
statistics are more realistic.
81 however, PKO export statistics for Indonesia and the import
statistics of the importing countries show enormous
differences.
82 Compare Oil World Annual 2002. Butter fat does not exclusively
contain palm oil.
83 Verband Deutscher Oelmühlen, 2002
84 VDOE, pers.comm.
85 The ECOPOP research project comprised a number of
German universities, private companies and WWF Germany
as partners. After two years of intensive (and costly)
preparations the whole project was rejected by the German
Federal Ministry for Research and Education
(BMBF) as the main donor, allegedly because “the different
research sub-projects were not enough harmonized”.
86 GTZ und KfW, 2000
87 Potter and Lee, 1998.
88 Casson, 2000.
89 PT SMART Annual Report 1998; Sinar Mas Libatkan
75,000 KK Penduduk Kaltim Untuk Kembangan Sawit.
Suara Pembaruan. February 12, 1999.
90 PT SMART Annual Report 1999.
91 WWF, 2002a; WWF 2002b; WWF, 2002c; WWF, 2002d;
WWF, 2002e.
See http://www.panda.org/news_facts/factsheets/forests
92 Forests, People and Rights, Down to Earth Special Report:
June 2002.
43WWF
Source: Kessler, Wakker, Richert and Dros (november 2001).
RETRAC – Resource Trade Cycle analysis. Application to
Tropical Forest Conversion. AIDEnvironment Amsterdam.
Defining forest conversion
Forests are defined by FAO as “ecosystems with a minimum
of 10% crown cover and not subject to agricultural
practices”. Deforestation according to FAO involves “the
complete clearance of tree formations (closed or open) and
their replacement by non-forest land uses”. ‘Forest conversion’
is defined as the transition from closed forest to agro-industrial
plantations (tree plantations, also including oil palm,
rubber, coconut etc.).
This definition does not capture the intermediate phases of
the forest conversion process, from logging, clearing, planting
to early establishment and maturation of a non-forest
plantation.
Yet, a definition of deforestation needs to reflect the more
complex and dynamic reality. In most available literature on
deforestation the term forest conversion generally refers to
the gradual transition from forest to man-made forest (plantations)
or non-forest land-use. The final stage is generally
characterised by:
AIDEnvironment defines forest conversion as a continuous
process of declining forest functions, with intermediate
stages of forest degradation, forest fragmentation and deforestation.
The forest conversion process thus captures the
range of extractive and forest clearing activities that ultimately
leads to a landscape dominated by man-made monocultures,
and is characterised by the loss of key forest functions
and socio-economic benefits for local people.
Critical aspects of the process of forest conversion are: the
transition of natural forests to man-made monocultures
through progressive frontiers, the scale involved and the rapid
speed, the connections with global commodity markets and
the loss of forest functions (often of an irreversible character).
In line with this definition, plantations of perennial crops
such as oil palm and agricultural monocultures, e.g. of soybeans,
meet these criteria of forest conversion.
Forest conversion as a continuous process of forest
degradation
Forest conversion can be considered as a continuous
process of forest degradation characterised by four different
stages. The four figures below show these stages and the dy-
namics.
The four stages of the forest conversion process leading to
deforestation
Appendix 1 – The forest conversion process
44 WWF
45WWF
Primary (natural) forest. This stage is characterised by
closed canopy cover, little human influence, possibly low intensity
/ extensive use by indigenous communities, e.g. exploitation
of non-timber forest products. There are no significant
changes in forest functions and forest regeneration capacity
is optimal. Concessions for selective logging may be
allocated but are not yet operational.
Logged (natural) forest. Road construction is often the first
industrial activity in the primary forest, followed by selective
logging with variable intensity, depending upon the presence
of commercial tree species and accessibility of the terrain.
This stage provides the bulk of timber production in the tropics,
much of which is export oriented. Net capital flows are
outward oriented. After logging, a partially degraded logged
over or residual forest remains. Natural restoration processes
are still largely intact, although the regenerating capacity of
valuable timber species might be endangered. Secondary
forests provide little commercial timber, but still provide
many forest products, have a high biodiversity and sequester
large amounts of carbon. Hunter-gatherer communities tend
to move deeper into the primary forest while some community
members may be hired by logging companies. Commercial
hunting pressure tends to increase significantly. Along logging
roads total forest clearance, soil erosion and the first
signs of shifting cultivation may be observed.
Degraded forest. This stage is a second wave of forest
degradation as a result of (unsustainable) logging. A rapid influx
of migrant settlers (e.g. unemployed logging crews) may
occur, using the infrastructure left behind. The logging companies
move deeper into the primary forest but sawmills often
also obtain logs produced in the conversion area, often for local
markets. Investments in sustaining the forest resource are
minimal. Governmental interference is absent. Conversion
forests have been cleared and burned for small-scale subsistence
agriculture. Commercial agriculture is increasingly introduced,
possibly after legal reclassification of logging concession
areas to other land use categories. In this stage, logging
is highly unsustainable and often considered illegal.
Wildfires are more widespread and contribute to further forest
degradation. In this stage, relatively stable semi-traditional
subsistence agricultural and mixed agropastoral systems with
various degrees of integration of trees and forest functions
may consolidate for a longer period of time. Natural restoration
processes are still intact to some extent. In this stage the
area does not generate substantial export revenue.
Converted forest or non-forest stage. In the final stage, the
last remaining forests are completely cleared/deforested. Significant
loss of biodiversity occurs and most natural forest
functions are affected temporarily (during conversion) or permanently
(e.g. biodiversity). The landscape transforms from
patchy small-scale agriculture to large-scale agro-industrial
monocultures. This might include land-use for ranching, treecrop
plantations, annual crops, pulp wood plantations, etc.
which may be introduced within a certain sequence as well
(e.g. rubber being converted into oil palm, ranches being converted
to soybean). Landless workers are thus pushed into the
conversion forest or to urban areas. Like in stage 2, the area
generates substantial export revenue. Major capital and management
inputs are required to develop and maintain the productivity
of the large-scale monocultures, though land use is
labour extensive compared to the former stage. Natural
restoration processes have been largely destroyed; shifting
back to (natural) forests requires major investments.
Frequent travellers in the tropics may recognise the geographic
pattern of these four stages from the air while flying
from an urban centre to a forest rich region. There are several
frontiers characterising the transitions from one stage to another:
the logging frontier (from stage 1 to 2), a colonising
frontier with mixed activities (stage 2 to 3) and an industrial
agricultural frontier (from stage 3 to 4).
Of course the forest conversion process does not always
follow this pattern of all four stages. For example the agro-industry
drives the forest conversion process in at least three
possible ways:
- By clearing natural primary forests (stage 1) directly,
thereby possibly also benefiting from the valuable timber, and
thereby skipping the intermediate stages;
- By occupying logged land and land previously allocated
to permanent forestry (stage 2), thus forcing timber exploitation
to penetrate deeper into the primary forest. This is the
most common form of expansion for the oil palm sub-sector
in Southeast Asia.
- By occupying land used for small-scale agriculture and
ranching (stage 3), thus forcing farmers and ranchers to clear
secondary or primary forest. This is probably the most common
form of expansion for the soybean expansion in Brazil.
No matter which of these transitions is most important,
due to the interrelations between the different stages and the
cumulative effect of various pressures on scarce (forest) land,
land occupied for agro-industrial purposes directly or indirectly
pushes the forest frontier zones further into the primary
forest.
It is important to recognise the profitability of agro-industrial
monocultures as a key driving force behind the forest
conversion process. The role of international industry is often
underestimated, while the logging and colonisation frontiers
and their interaction are generally recognised.
Conclusions
The AIDEnvironment model of the forest conversion
process leads to three main insights:
(1) The land-use dynamics including forests are complex.
Thus, the ‘success’ of one policy measure depends upon a
range of other contextual and policy factors.
(2) Forest conversion is often the result of a chain of decisions
made at different spatial levels. Solution strategies
should therefore engage actors at multiple-levels (from local
to international).
(3) Apart from the forestry sector, actors and factors outside
the forestry sector are very important players in the dynamics
of forest conversion. A multi-sectoral approach is an
indispensable condition for success.
46 WWF
47WWF
Appendix 2 – Summary of the company survey in Germany
Company name Observation
Oleo Chemicals (formerly AKZO Nobel)
Imports finished palm kernel fatty acids from
Malaysia; joint venture with a Malaysian
company
Walter Rau Neusser Öl und Fett AG
Uses palm oil, does not want to inform on
volumes; claims that no Indonesian palm oil is
used
Nestlé Deutschland See Text
Unilever GmbH see Text, wants to respond in more detail later
Lever Faberge GmbH
Owned by Unilever, for response referred to
Unilever
Vand e Moortele (formerly Meylip)
in Germany only sells products, not involved in
production
Cognis See Text
Colgate Palmolive GmbH
in Germany only sells products, not involved in
production
Henkel KG a.A. Only uses processed product
Johnson & Johnson No significant production in Germany
Beiersdorf GmbH Does not buy palm oil, only processed product
Vortella Lebensmittelwerke
Refers to German Margarine association for
response
Münsterländische Margarinewerke
Refers to German Margarine association for
respo nse
Westfälisches Margarinewerk
Refers to German Margarine association for
response
Homann Feinkost GmbH & Co KG Does not use palm oil
Noblee & Thörl Has promised to respond
Meistermarken-Werke
Refers to common response by VDOE
association; promised additional individual
response
Deutsche Cargill GmbH
Refers to common response by VDOE
association; promised additional individual
response
C. Thywissen GmbH Ölfabrik Refers to common response by VDOE
Procter & Gamble GmbH
Will provide general response from USA head
office
Agrarfrost GmbH & Co Has promised response
Intersnack Vertriebs GmbH Has promised response
L’Oréal French head office said to respond
Avon Cosmetics No response
Dresdener Margarinewerke No response
Fauser VITAQUELLWERK KG No response
Heinrich Hamker Lebensmittelwerke GmbH No response
Pflanzenfett Velten GmbH No response
Dommitzscher Pflanzenfett GmbH No response
Otto Aldag GmbH & Co No response
Jb. Schmidt Söhne GmbH & Co KG No response
Gebr. Smilde GmbH Im- und Export No response
48 WWF
Notes:
1) The total figure for the concession areas includes a considerable amount of double counting, as many plantations are owned
by more than one plantation group.
2) In some company cases no FI has been mentioned. They do have European financial stakeholders, but their influence in the
company has not been assessed as ‘strong’, but as ‘moderate’ or ‘minimal’.
Appendix 3 – European financial institutions with links to
Indonesian oil palm companies
Group Concession
area (ha)
Financial institution Country
Anglo-Eastern United Kingdom
Astra
Netherlands
Germany
Bakrie
Switzerland
Barito Pacific
United KingdomCarson Cumberbatch
Netherlands
CDC United Kingdom
Incasi Raya & Metro
Johor
Kumpulan Guthrie
United Kingdom
Netherlands
Germany
Germany
Switzerland
LonSum, Napan &
Risjadson
Switzerland
Lyman Germany
Oriental Netherlands
Germany
Netherlands
Raja Garuda Mas
Switzerland
Rowe Evans United Kingdom
SwitzerlandSalim
Switzerland
Netherlands
- und Vereinsbank Germany
Sinar Mas
HSBC
Rabobank
Deutsche Bank
Crédit Suisse
CDC
Rabobank
CDC
HSBC
Rabobank
Commerzbank
Deutsche Bank
UBS
Crédit Suisse
DEG
Rabobank
DEG
Rabobank
UBS
Aberdeen Asset Management
Crédit Suisse
UBS
FMO
Bayerische Hypo
DEG Germany
Sipef
Total
35,087
298,621
100,000
29,000
17,500
69,900
134,304
18,563
325,000
355,424
193,750
22,000
453,000
33,491
227,207
591,000
53,000
2,956,847
European financial institutions with strong influence on Indonesian palm oil business groups
(Source: Van Gelder, 2001)
49WWF
Note: Total figures include a considerable amount of double counting, as many plantations are owned by more than one
plantation group.
Group Concession area
(ha)
Planted area (ha) Annual CPO
production (tons)
Anglo -Eastern 17,754
Astra 185,608
Bakrie 19,425
Barito Pacific ?
Carson Cumberbatch 13,800
CDC ?
Incasi Raya & Metro ?
Johor ?
Kumpulan Guthrie ?
LonSum, Napan & Risjadson 85,506
Lyman ?
Oriental ?
Raja Garuda Mas 130,000
Rowe Evans 23,583
Salim ?
Sinar Mas 272,800
Sipef 29,241
Total
35,087
298,621
100,000
29,000
17,500
69,900
134,304
18,563
325,000
355,424
193,750
22,000
453,000
33,491
227,207
591,000
53,000
2,956,847 777,717
52,300
435,189
55,401
?
?
?
?
0
400,000
?
?
?
600,000
?
800,000
850,000
122,764
3,315,654
Indonesian Palm Oil Groups with European financial links (Source: Van Gelder, 2001)
50 WWF
German FI Indonesian Oil Palm Co. Relationship Influence Assessment
Bakrie & Brothers Shareholding Minimal
Bakrie Sumatera Shareholding Moderate
LonSum Loan 1996 Moderate
PLSP Loans 1996 Finished
SMART Trade financing Strong
Bayerische Hypo- und
Vereinsbank
Golden Agri -Resources Principal banker Moderate
Bakrie Sumatera Loan Moderate
Kulim (Malaysia) Loan Finished
Bayerische Landes bank
Girozentrale
Gunung Maras Loan Moderate
Sumalindo Lestari Loan Minimal
Kulim (Malaysia) Loan Finished
LonSum & PLSP Loans 1994 Finished
LonSum Loan 1996 Strong
PLSP Loans 1996 Finished
LonSum Shareholding Moderate
Commerzbank
SMART Loan Finished
Anglo-Eastern Banking Minimal
Bakrie & Brothers Loans Finished
Bakrie & Brothers Shareholding Minimal
Bakrie Sumatera Loan Finished
Bakrie Sumatera Loan & shareholding Strong
Deutsche Bank
LonSum Notes Strong
Kalimantan Sanggar Loan Strong
Agro Muko Loan Moderate
Deutsche Investition - und
Entwicklungs Gesellschaft
(DEG)
Tapian Nadenggan Loan Strong
Sumalindo Lestari Loan Minimal
Bakrie & Brothers Shareholding Minimal
Bakrie Sumatera Shareholding Moderate
Incasi Raya Loan Finished
Kulim (Malyasia) Loan Finished
Dresdner Bank
Nawa Panduta Loan Finished
Sumalindo Lestari Loan Moderate
Bakrie & Brothers Shareholding Minimal
Westdeutsche Landesbank
Girozentrale (WestLB)
Bakrie Sumatera Shareholding Moderate
Appendix 4
Influence assessment of German FIs in the Indonesian Oil Palm Sector (Source: Van Gelder, 2001)
FOREST FIRES
Financiers may insist that their clients:
> Adhere to strict implementation of well-planned and ecologically
appropriate land clearing techniques.
> Develop programmes for the conservation and restoration
of ecologically valuable forests (these can also include
burned forest!) and forests that are important to local people
inside and near plantation areas.
DEFORESTATION
Plantation companies and their financiers can at least partially
make up for deforestation in the past and, especially, avoid
deforestation in the future considering that a substantial area
of land not under forest cover is available in Indonesia. Financiers
can insist that their clients:
> Provide independently verified evidence that no natural
forests are converted for plantation development by any of
the subsidiaries within a company group.
> Develop forest retention and forest restoration programmes
in their concession areas. Financial incentives
can help to compensate for the opportunity cost of forest
retention, crop damage by wildlife and the cost of integrated
pest control.
> Avoid hasty (mechanical) land clearing to minimise soil
erosion.
ILLEGAL LAND CLEARING
Banks are keen to assure that their clients are not involved in
illegal practises since because prosecution can seriously impede
the company’s ability to pay back debt. Financiers can
insist that their clients:
> Provide evidence that all required permits are secured before
land clearing operations commence(d).
> Restore or mitigate damage caused to forests and other
vegetation along riversides and lakeshores.
POLLUTION
In order to minimise the environmental impact of investments
in the oil palm industry, financiers can insist that their clients:
> Adopt and install appropriate wastewater processing tech-
nologies.
> Avoid heavy application of agro-chemicals in plantation
areas and adopt integrated pest management approaches.
> Do not develop plantations in areas that require heavy
agro-chemical inputs (e.g. peat).
SOCIAL CONFLICTS
Social conflicts often come at great cost to the plantation
company and may thereby impede the company’s ability to
pay back debt. Financiers can insist that their clients:
> Provide independently verified evidence that local communities
are fully informed about the project before project
proposals are submitted. Consultations should include
non-governmental organisations with expertise on the local
situation and the needs of local communities.
> Assure no estates are developed in areas where communities
resist this kind of development.
> Settle existing conflicts.
> Contribute to improved smallholder schemes and promote
better labour conditions in private estates.
ECONOMIC EXPOSURE
The disappointing benefits of oil palm schemes on the livelihoods
of local people and estate workers are a source of
social unrest and reduce the productivity of smallholder
schemes. Rather than to force an alien model of economic
development upon local communities, financiers can:
> Assist in the development of production and markets of
non-timber forest products such as illipe oil, rattan, rubber
and other products based on indigenous forest and land use
strategies.
> Assist oil palm producers to improve existing smallholder
schemes, allowing farmers to opt for diversification of the
cropping system.
CORRUPTION, COLLUSION AND NEPOTISM (KKN)
Considering that it is generally felt that the new government
under president Wahid is serious in its efforts to fight KKNpractises,
financiers to the plantation sector can assist the
Government of Indonesia in its efforts by:
> Being reluctant to write off further bad debts that will allow
a debtor to continue unsustainable practices.
> Taking into full account the KKN-record of the managers
and owners of joint-venture companies and debtors in investment
decisions and avoiding financial transactions
with companies whose KKN-record has not been cleared.
source: Wakker, 2001
51WWF
Appendix 5 – Recommendations for foreign financing
institutions and banks
Forest Fires
Fire, depending on where, when and why it occurs, can be either an essential factor in the
ecological cycle of the forested landscape and the survival of associated plants and
animals, or a destructive unnatural threat. Fire is a natural disturbance factor in boreal and
temperate forest regions, but all too frequently has been introduced or encouraged in
other forest types. Suppressing or encouraging fire must start with an understanding, at
the landscape or regional level, of how it can maintain, restore or undermine the
ecological integrity of forest ecosystems, as well as its impacts on human activities. Today
we are causing major disturbances to natural fire regimes around the world: sometimes by
increasing rate of fires and by setting fires in forests that would seldom burn under natural
conditions; sometimes by suppressing natural fires, causing ecological damage and
leading to infrequent, catastrophic fires due to a build-up of inflammable material. Some
analysts think that destructive fires cause as much forest loss and degradation as poor
logging practices and agricultural conversion. In many areas people now deliberately or
accidentally cause most of the fires. Harmful forest fires are a symptom of the underlying
causes that drive other forms of forest loss, such as: misuse of economic incentives;
inequitable land tenure; failure to recognise or respect customary law; and weak
government institutions. Forest removal, by cutting or burning, frequently simplifies forest
landscapes, by e.g. truncating age distributions and reducing diversity. A fire strategy
should be consistent with goals to maintain or restore forests’ ecological integrity, by
understanding how management creates conditions that deviate from natural benchmarks
and developing responses that help to maintain or restore ecological processes.
WWF believes that, where fires are a problem, inadequate attention is paid to their
underlying causes and to preventing a downward spiral of recurrent catastrophic fires and
consequent degradation. Effective and efficient fire strategies are needed on a case-bycase
basis, addressing three elements: prevention, response and restoration. Prevention
includes social and physical strategies for minimising the risks of destructive fire through
education, management and by addressing underlying causes. Responses range from
rapid fire-fighting tactics to longer-term management changes in forested landscapes.
Restoration is required when repeated mismanagement of the fire regime causes serious
ecological damage. Effective management also needs the participation of stakeholders
(governmental, NGO, community and private sectors) in planning and implementation.
WWF will work with governments, international organisations and communities to
address underlying causes of forest fires and reduce impacts of harmful forest fires, by:
• Working on forest fire policy as an ecological integrity issue, and crafting policy
responses that return fire regimes to their historic frequency and intensity levels so as
to restore natural forest types and conditions
• Supporting research to improve the understanding of forest fires and their associated
costs and benefits, causes and management options
• Building awareness amongst policy-makers, the public and the media as to the
underlying causes of catastrophic forest fires, their associated societal and economic
costs and the importance of addressing these in a systematic fashion
• Mandating and equipping managers to implement integrated fire management plans
• Involving key stakeholders (especially local communities and land managers) in
management planning and, where appropriate, implementation, assisting them to
obtain the knowledge, skills and resources needed to participate effectively
• Developing and enforcing compatible and mutually reinforcing land-use laws that
provide a legal basis for the ecologically-appropriate use of fire but discourage
misuse, and that take account of social equity, welfare and human rights issues
• Discouraging land management practices that predispose forests to harmful fires
• Promoting management strategies to mimic natural fire regimes, where their ecology
is known, including techniques such as prescribed burns and wildfire management
• Avoiding manipulating natural or well-established fire regimes as a means of meeting
international climate change obligations
• Establishing reliable fire monitoring systems that provide early warning of high fire risk
and fire occurrence, and include evaluation of ecological and human impacts of fire.
• Preventing further forest loss and degradation from recurrent catastrophic fires, and
reduce fire risk in forested landscapes, through ecologically appropriate restoration
• Incorporating considerations of fire management when planning to maximise forest
resilience and land use adaptability to climate change
Position Paper
January 2002
One of a series of
position papers
produced as WWF’s
response to the
WWF/IUCN Forests for
Life strategy and
WWF’s current five-year
target-driven
programme on forests
For further details
contact
Peter Moore
p.moore@cgiar.org
Forest Conversion
During the last twenty years of the twentieth century, 300 million hectares of tropical
forests were converted to non-forest land-uses worldwide. The conversion of forests to
other land uses imposes severe environmental and social costs due to the ecological
impacts of clearance, uncontrolled burning, and disregard for the rights and interests of
local or indigenous communities. Without significant changes in policy and practice, the
process of forest conversion is likely to continue at a rapid rate and pose a major threat to
High Conservation Value Forests (HCVF – see separate position paper), freshwater
ecosystems, livelihoods of forest dependant peoples and habitats of endangered species
such as elephants, rhinos, tigers and great apes. Reduction of wildlife habitat leads to
increased human-wildlife interaction and conflict.
WWF defines forest conversion as a continuous process of forest degradation, leading
from natural forests over one or several steps to the replacement of forests by other forms
of land use, such as plantations, agriculture, pasture, mining and urbanization. The driving
forces behind forest conversion vary and are often interrelated. Among the most important
are: the fact that forests are not valued for the long-term benefits that they provide, and
that conversion often costs very little money. This creates incentives to log and sell the
valuable timber out of forests and then convert the degraded forest land to more profitable
land uses rather than to undertake sustainable forest management. Non-existent or
insufficient landscape planning procedures and lack of guarantee of land ownerships and
tenure rights often set the ground for uncontrolled and unwanted forest conversion
processes.
WWF believes that forests are amongst the most diverse and valuable ecosystems
around the globe. They provide a wide range of products and benefits for humans and
nature that can rarely be substituted through other means. Therefore in general every
effort should be made to prevent any forest, but especially HCV Forests from, being
converted. WWF recognizes that under certain conditions planned and targeted
conversion can be beneficial or necessary to reach specific goals of public interest without
endangering the overall functionality of forests. Where conversion is planned the following
conditions shall be fulfilled:
• Identified High Conservation Value Forests should not be affected by any forest
conversion
• At a minimum, conversion must not contribute in any way to the extinction of species,
or to the loss of significant subpopulations of an endangered species
• The total forest cover within a country or region should not be below an agreed longterm
goal described in a National Forest Programme or planning documents
developed through a multi-stakeholder process
• There should be proven and agreed public interest and benefits from the new landuse,
that surpasses public interest in forest conservation
• There should be a transparent planning process on a landscape level, involving all
relevant stakeholders
• Independent environmental and social impact assessments should be conducted and
the necessary measures to prevent negative impacts of the conversion implemented
WWF will work together with governments, public and private institutions and other
partners towards the elimination of unplanned and damaging forms of conversion to
safeguard biodiversity and social values by:
• Calling for transparent planning processes to achieve an optimal distribution of
natural forests, plantations, agricultural areas, urban areas and other land-uses in a
given landscape. This includes well-informed negotiations among a wide range of
stakeholders to balance ecological, social and economic dimensions of natural
resource use across the landscape
• Enforcing adequate safeguards that recognize and guarantee the legal and
customary rights of indigenous peoples and rural population to own, use and manage
their lands, territories, and resources
• Engaging with financial institutions and market actors in forest conservation and
lobbying for the elimination of policy incentives that contribute to forest conversion
and forest destruction
Position Paper
February 2002
One of a series of position
papers produced as
WWF’s response to the
WWF/IUCN Forests for
Life strategy and WWF’s
current five-year targetdriven
programme on
forests
For further details contact
Damian Oettli
WWF Switzerland
Tel: +41-1-297-2121
Damian.Oettli@wwf.ch
Oil palm
According to the WWF Living Planet Index, the tropical forest species index declined by
25% in the last thirty years. Worldwide, 300 million hectares of tropical forest were
converted to non-forest land-uses during the last two decades of the twentieth century.
Most of the world’s oil palm plantations are within these converted hectares.
Oil palm plantations have often imposed environmental and social costs due to
indiscriminate forest clearing, uncontrolled burning with related haze, and disregard for
the rights and interests of local communities. Without significant changes in policy and
practice, the expansion of oil palm plantations poses a major threat to high conservation
value forests, freshwater ecosystems, livelihoods of forest dependant peoples and
habitats of endangered species such as elephants, rhinos, tigers and orang-utans.
WWF recognizes that palm oil is a basic foodstuff with high consumer demand. The
industry generates valuable foreign exchange earnings and employment opportunities for
tropical producer countries. WWF is, however, deeply concerned at the prospect of the
industry continuing to expand and operate in an unsustainable manner. WWF calls upon
the industry, regulators, financiers, buyers and other stakeholders to work collectively to
develop and promote adoption of environmentally appropriate, socially beneficial and
economically viable practices in the oil palm industry.
WWF believes that key elements of sustainability within the oil palm industry are:
• Maintenance of high conservation value forests: Oil palm plantations should not
replace high conservation value forests (see separate position paper). This will
normally require well-informed negotiations among a wide range of stakeholders to
achieve optimal integration of oil palm plantations with the mosaic of other land-uses
in a given landscape or ecoregion.
• Sound environmental management practices: Industry participants should adopt
management practices to minimize environmental impacts such as air and water
pollution, forest fires, soil erosion, pest invasion, human/wildlife conflict and
biodiversity loss.
• Respect for rights of local communities and indigenous peoples: Industry
participants should recognise the legal and customary rights of local communities and
indigenous peoples to own, use and manage their lands, territories, and resources.
Plantation development should not proceed in areas over which there are unresolved
tenure disputes.
• Positive social impacts: The industry should maintain or enhance the long-term
social and economic well being of plantation workers and local communities. In many
cases this will include the strengthening and diversification of the local economy to
avoid dependence on a single plantation product.
• Proficient regulatory frameworks: Regulatory frameworks should encourage
practices that will achieve the desired environmental, social and economic outcomes
described above. At a minimum, industry participants shall respect all applicable laws
of the country in which their plantations and mills are sited. However, responsible
behaviour will often require standards of performance that exceed the requirements
of local and national laws, especially where regulatory frameworks are
underdeveloped or governance is weak.
• Transparency: Industry participants should adopt and make public their policies,
practices and implementation plans pertaining to their social and environmental
performance. They should encourage independent monitoring of their performance
and make public their findings. They should involve local stakeholders both in the
development of standards and performance monitoring.
WWF will work with governments, private companies, financial institutions and civil
society organizations to:
• Develop and promote adoption of policies and practices consistent with this position
• Eliminate incentives for oil palm plantations to replace high conservation value forests
Position Paper
February 2002
One of a series explaining
the WWF/IUCN Forests for
Life strategy and WWF’s
current five-year targetdriven
programme on
forests. For further details
contact
Rodney Taylor
WWF Forest Futures
Tel: +62-361-247-125
rodtaylor@walacea.wwf.id
High Conservation Value
Forests
High Conservation Value Forests (HCVFs) are defined by the Forest Stewardship Council
as forests of outstanding and critical importance due to their high environmental, socioeconomic,
biodiversity or landscape values. WWF is developing and extending the HCVF
concept in its wider protect-manage-restore programme. HCVFs comprise the crucial
forest areas and values that need to be maintained or enhanced in a landscape. HCVFs
are found across broad forest biomes (tropical to boreal), within a wide range of forest
conditions (largely intact to largely fragmented), and in ecoregions with complete or
under-represented protected area networks. HCVFs could be old-growth forests in
Siberia, habitats of threatened orang utans in Southeast Asia or the sacred burial grounds
of a North American first nations people. Although originally designed as a tool to help
certification, the HCVF concept is being extended to more general conservation planning
including the design of representative networks of protected areas and buffer zones.
The identification of HCVFs requires a multi-scale approach. First a rapid assessment and
mapping of potential HCVF areas is made at a global or continental scale, based on
indicators of biologically or environmentally important forest values that can be mapped at
this broad scale. Next, these areas are further refined within ecoregions and a more
detailed investigation within a given landscape delineates actual HCVFs, including local
stakeholder consultation to identify forests that meet community needs and maintain
cultural identity, and scientific research to identify biologically important forest stands and
those critical for maintaining ecosystem functions and populations of endangered species.
WWF believes the first priority is to ensure that HCVFs are adequately represented in
protected area systems. In practice, many HCVFs will continue to be managed outside
protected areas and here approaches will vary – e.g. enhanced management or long-term
"no-cut" reserves – but should always aim to maintain HCVF values. In regions where the
forest is largely degraded, HCVF management should be consistent with a forest
landscape restoration strategy (see separate position paper) that addresses ecological,
social and economic objectives. Two principles are paramount: (1) HCVFs are managed
to maintain the attributes that are of high conservation value, and (2) management
employs the precautionary principle, which requires that where the effects of extraction
and other management are unknown, values are insured through a cautious approach.
WWF calls on producers, retailers and investors in the forestry, agricultural, mining and
petroleum sectors and governments to ensure that their business activities do not
promote the clearing or degradation of HCVFs.
WWF will work with partners to identify and protect HCVFs by:
• Developing tools for identification of HCVFs that are applicable around the world,
particularly through pilot projects and dissemination of the lessons learned
• Developing tools and activities for the adequate protection of HCVFs that are
applicable around the world
• Working with the Forest Stewardship Council in developing detailed guidance on the
application of FSC's Principle 9 that covers HCVF
• Co-ordinating with other organisations, so that a HCVF approach can integrate
conservation agendas
• Working to ensure, where appropriate, that development of the HCVF concept is
coordinated between interested organisations
• Further developing the concept of HCVFs as a useful guide for fulfilling ecologically
friendly procurement policies for forest products
• Promoting and helping to apply the HCVF concept with forest managers and forest
management certifiers in selected ecoregions
Position Paper
March 2002
One of a series
explaining the
WWF/IUCN Forests for
Life strategy and
WWF’s current five-year
target-driven
programme on forests.
For further details
contact
Steven Price
WWF Canada
Tel: + 1 416 489 4567
extension 256
sprice@wwfcanada.org
WWF is the world’s largest and most experienced independent conservation
organization. It has 4.7 million regular supporters and global network active in
96 countries.
WWF’s mission is to stop the degradation of the planet’s natural environment
and to build a future in which humans live in harmony with nature, by:
• conserving the world’s biological diversity
• ensuring that the use of renewable natural resources is sustainable
• promoting the reduction of pollution and wasteful consumption.
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