REDD faces all round. Norway’s investment in forest destruction

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REDD faces all round. Norway's investment in forest destruction

On 19 May 2011, the day that Indonesia’s President finally signed the moratorium on forest concessions into force, activists from EIA and Telapak were in Central Kalimantan documenting a plantation company illegally clearing an area of peat swamp forest. This is a strange story, full of strange coincidences.

The first coincidence is that EIA and Telapak happened to see the forest being destroyed on the day that Indonesia’s President, Susilo Bambang Yudhoyono, signed a Presidential Decree bringing the moratorium into force. No one outside a small group around the President knew that the President would sign the decree on that particular day.

EIA and Telapak were in Central Kalimantan because in December 2010 the province was announced as a pilot province, under the Indonesia-Norway US$1 billion REDD deal. Since then, Central Kalimantan has seen something of a boom in REDD tourism.

In February 2011, a Norwegian delegation visited Central Kalimantan, lead by Hans Brattskar, Norway’s Forest and Climate Ambassador and Eivind Homme, Norway’s ambassador to Indonesia. They met the Provincial Governor, Augustin Teras Narang, visited an area of forest near the Rungan River and even saw some orangutans. No one, it seems, mentioned a company called PT Menteng Jaya Sawit Perdana (PT Menteng) that is operating in Central Kalimantan. Which is a pity.

Orangutan on Kaja Island in Central Kalimantan, Indonesia, visible from the boat during Helen Clark’s visit to the province. PHOTO: unitednationsdevelopmentprogramme on flickr.com

In April 2011, another delegation visited Central Kalimantan. This time, Governor Narang welcomed the head of the UN Development Programme, Helen Clark. They took a boat down the Rungan River, where they saw “forest cover and peat lands which face a real threat of deforestation,” and they saw an orangutan – perhaps one of the same animals that the Norwegian delegation saw. Unfortunately, once again, it appears that no one thought to mention PT Menteng.

In May 2011, EIA and Telapak visited Central Kalimantan to see how the pilot REDD province was addressing illegal logging. They knew all about PT Menteng and decided to take a look at the company’s operations on the ground. PT Menteng is a subsidiary of Kuala Lumpur Kepong Berhad (KLK). By another strange coincidence, the world’s largest sovereign wealth fund has a US$41.5 million shareholding in KLK (as of 31 December 2010). That sovereign wealth fund is Norway’s Government Pension Fund Global. So the Norwegian government stands to profit from the destruction of the forest in Central Kalimantan, even though the forest clearing is in breach of the moratorium signed as part of the Indonesia-Norway US$1 billion REDD deal.

In June 2011, EIA and Telapak released a report about their investigations in Central Kalimantan: “Caught REDD Handed: How Indonesia’s Logging Moratorium Was Criminally Compromised on Day One and Norway Will Profit” (pdf file, 4.6 MB).

PT Menteng’s forest clearing in Central Kalimantan appears to be taking place without the permits necessary under Indonesian law. In 2005, the company obtained a Location Permit for a 7,400 hectare concession in Kotawaringin Timur (Kotim). Two years later, when KLK took over PT Menteng, the Location Permit was its principal asset. KLK paid US$1,184,000 for an 80% stake in PT Menteng, with the agreement that it would pay the remaining US$888,000 when the remaining permits were obtained. In 2011, according to EIA and Telapak, the company still did not have a Plantation Business Permit or a permit from the Ministry of Forestry to release the concession from the designated forest area.

During their visit in May 2011, EIA and Telapak’s investigators found that large areas of forest have already been cleared and planted. PT Menteng has dug canals to drain the peat and built roads into the forest. Excavators were clearing the forest during their visit – in breach of Indonesia’s 1999 Forestry Act which requires land to be released from the forest estate before it can be converted to another use. About half of the concession has been cleared.

EIA and Telapak note that the concession is within the moratorium zone. However, they add,

as the moratorium includes a loophole that may exempt concessions principle permission, and the map is to be updated every six months, there remains the worrying possibility that PT Menteng’s concession might shortly be excised from the moratorium area. This puts the Indonesian government at a crossroads, at which it can either enforce the law and preserve the moratorium peatlands, or remove the protection and allow crime to go unpunished.

As EIA and Telapak explain in their report,

PT Menteng is only the tip of the iceberg. Information released by the Indonesia authorities show that hundreds of plantation companies are operating beyond the law in Central Kalimantan alone, where illegal plantations now substantially outnumber legal plantations.

EIA and Telapak describe Indonesia’s moratorium as a “positive step of sorts”, while pointing out that the moratorium’s “significant loopholes” allow forest destruction to continue in large areas of the country’s primary and secondary forests. But even if the moratorium succeeds in delaying and reducing legal deforestation, it cannot stop illegal deforestation. “Without significant law enforcement improvements, REDD+ looks set to fail in Indonesia,” EIA’s forest campaigner Tomasz Johnson said in a press release.

EIA and Telapak were not surprised to find that Norway stood to profit from forest destruction in Indonesia. In July 2010, EIA wrote to the Norwegian government about US$437 million that the Government Pension Fund Global has invested in forestry, agriculture, and related commodities companies. The companies control a total of 9.4 million hectares, mainly in Indonesia, Malaysia and Papua New Guinea. Norway responded noting the concerns, which would be addressed by the Ethical Council to the Fund. Yet by March 2011, Norway’s investments in these same companies had increased to US$678 million. EIA wrote again to the Norwegian government. Norway has, so far, declined to respond.

EIA and Telapak conclude their report with the following recommendations:

The Government of President Yudhoyono should:

  • Immediately cease the activities of PT Menteng Jaya Sawit Perdana and investigate how the company was clearing peat forest in the moratorium area with impunity.
  • Significantly improve law enforcement in the plantation sector, in cooperation with the Corruption Eradication Commission (KPK) in line with its pledges.
  • Employ the Sistem Verifikasi Legalitas Kayu (SVLK) to audit for forest clearance without relevant permits.
  • Ensure the moratorium map is strengthened rather than further weakened in future revisions.

The Government of Norway should:

  • Empower the Ethical Council to the Pension Fund Global to immediately investigate the plantations operations of the KLK group, and three other groups with operations in Central Kalimantan, in which the country holds significant shares.
  • Institute formal policy and investment coordination between the Ministry of Finance and the Ministry of Environment, to ensure Pension Fund investments adhere to the goals of REDD+ in Indonesia and worldwide.
  • Use its privileged financial position and positive climate change reputation to engender frank and open debate at the international level on how to make investment and commodity markets crime and deforestation free.
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4 Comments

  1. mongabay.com reports that Indonesia’s REDD+ Task Force will investigate whether PT Menteng has cleared peat forest in breach of the Indonesia’s moratorium: “Indonesia to investigate palm oil company that allegedly breached moratorium”.

    REDD-Monitor looks forward to reporting on the outcome of the investigation. The fact that it is being carried out by the REDD+ Task Force raises interesting questions, since the Task Force is not mentioned in the Presidential Instruction that brought the moratorium into force. What happens if the logging is found to be in breach of the moratorium? Will the company be prosecuted? What legal status does a report by the REDD+ Task Force hold? What happens if the Task Force agrees with EIA that the forest clearing was illegal?

  2. Johnson Erienyu

    REDD+ is currently being conceptualized in Uganda under the Stewardship of of the National Forestry Authority (NFA), the custodial authority of all Central Forest Reserves in the country.
    in one of the Central Forest Reserves called West Bugwe Central Forest Reserve, a huge volume of Timber has been cut to pave way for the extension of Electricity to a Revenue Check point. the contractor, clearing the way for the power line, is not in possession of any EIA document nor does the NFA staff on the ground.What happens if the felling is found to be unrealistic and not in consonance with Environmental mitigation specifications? Will the company or NFA be held responsible? What happens if the National Environmental Management Authority disagrees with the posthumous EIA?

  3. Any update on this case so far? REDD+ Task Force as an institution was not mentioned in the Presidential Instruction on Moratorium. However, the Head of REDD+ Task Force was mentioned under the Article 7 – that he was required to monitor the implementation of the Presidential Instruction and report the result to the president. This institution or the Head of Task Force carries no legal status. Their report will only be a recommendation to the President. A Presidential Instruction has low hierarchy in Indonesian legal system. But it still prevails over any local/provincial regulation (PERDA/locatio permit,etc). Any violation (such as forest conversion without Minister of Forestry’s permit and other illegal activities under Article 50 of the Forestry Act) against the Forestry Act(UU 41/199) should be prosecuted.

  4. @Aisha (#3) – There’s a press release from Greenomics Indonesia here. A Supreme Audit Agency (BPK) report dated January 2012 found that PT Menteng Jaya Sawit Perdana was illegally clearing forest. No prosecution (yet).

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