BBC News, in its 18 May 2011 article "Brazil: Amazon rainforest destruction rises sharply," http://www.bbc.co.uk/news/world-latin-america-13449792, reports the following:
Deforestation of the Brazilian Amazon rainforest has increased by almost six times...... New satellite images show deforestation has increased from 103 sq km in March and April 2010 to 593 sq km (229 sq miles) in the same period of 2011.... Much of the destruction has been in Mato Grosso state, the centre of soya farming in Brazil.... Last December, a government report said deforestation in the Brazilian Amazon had fallen to its lowest rate for 22 years.
The latest data comes amid a heated debate in the lower house of Congress on whether to ease an existing law on forest protection.... Brazil's Forest Code, enacted in 1934 and subsequently amended in 1965, sets out how much of his land a farmer can deforest...... Regulations currently require that 80% of a landholding in the Amazon remain forest, but that falls to 20% in other areas.
Proponents of change say the law impedes economic development and contend that Brazil must open more land for agriculture..... However, opponents fear that in their current form some of the proposed changes might give farmers a form of amnesty for deforested land..... The changes were put forward by Aldo Rebelo, leader of Brazil's Communist Party (PCdoB) and backed by a group in Congress known as the "ruralists" who want Brazil to develop its agribusiness sector.
Khor Reports Comments:
a) Indonesia is facing much the same debate as Brazil over forest protection vs. agribusiness and rural economic development. Indonesia is over due in announcing its policy on a moratorium on deforestation, as part of its commitment to REDD plus, which is being funded to the tune of USD 1 billion by the oil-producing Norwegian state. A pilot project in Central Kalimantan is being developed^.
b) Anecdotes from the heavy equipment sector (supplying machines for land clearance) suggest that the pace of land clearance in Indonesia is likely proceeding at an unabated pace. Quite possibly, to clear as much land as possible before any new restrictions are put in place.
c) Environmentalists have won significant battles by having several large oil palm public-listed plantation groups accept slower or no forest clearance; as required via membership of the RSPO and also via more stringent promises such as the Golden Agri (Sinar Mas) - The Forest Trust deal. However, they have to balance these 'wins' against the possibility of accelerated land clearance by mid-sized and smaller planters and also by smallholders. What is the net effect on the rate of deforestation?
d) Khor Reports expects that monitoring via satellite ecosystem mapping will be a crucial tool in this environmentalist - developmentalist tussle. We talked about the 'hot topic' of HCV mapping in our newsletter "Palm Oil Strategic Analysis, Issue 003 , 27 Oct 2010." You can download a copy here: https://sites.google.com/site/khorreports2011/palmoil_strat_analysis.
^ "Local communities oblivious to govt’s plans for their forests," The Jakarta Post, 05/12/2011, weblink: http://www.thejakartapost.com/news/2011/05/12/local-communities-oblivious-govt%E2%80%99s-plans-their-forests.html.
This blog highlights news and views on markets, marketing, sustainability and political-economics of palm oil. Any views belong to the respective authors and do not represent that of any particular organization. I update this in my spare time. Since mid-2016, the more "comprehensive" news is available on customized request. Market news and big news continue to be updated. Thank you for reader interest that has generated over 130,000 page views in 2016.
Thursday, May 19, 2011
Thursday, April 7, 2011
Native customary rights (NCR) issues at IOI Pelita escalate
The RSPO steps up pressure on IOI Group to address native customary right complaints at IOI Pelita.
In accordance with the RSPO grievance procedure:
1. The current and ongoing certification process of all IOI group’s activities will be suspended with immediate effect.
2. IOI group will be given a period of 28 days from the date of this letter to revert with an acceptable solution to these matters, which preferably should be mutually agreed by parties involved.
3. IOI group is expected to with immediate effect and agreed in advance with RSPO, to publish a statement on their corporate website indicating the two measures stated above.
Failure to deliver the required proposal by the due date of May 2, 2011 will result in the RSPO considering further sanctions against your company, which may include the suspension of your license for new transactions involving Certified Sustainable Palm Oil materials including GreenPalm certificates.
Background summary: After a 12-year legal battle, the Miri High Court nullified the lease of some plantation estates owned by IOI Corp in Sarawak. The Miri High Court declared four natives the winner in a class action suit against the Sarawak government, Land Custody and Development Authority (Pelita / LCDA) and IOI Pelita Plantation Sdn Bhd, end March 2010. The land leases used by IOI were “null and void” as they had been issued by the Sarawak state government in an illegal and unconstitutional way. Read more here, http://hornbillunleashed.wordpress.com/2010/04/04/6268/, where “...the Bruno Manser Fund welcomes the Miri High Court decision and expects IOI to stop its jungle clearance activities and move out of the disputed lands in the Tinjar region with immediate effect....”
Background info:
i) News report: http://biz.thestar.com.my/news/story.asp?file=/2011/4/7/business/8431450&sec=business.
ii) RSPO's announcement on grievance against IOI Group: http://www.rspo.org/?q=content/announcement-ioi-rspo-grievance-panel-breach-rspo-code-conduct-23-certification-systems-424-.
iii) IOI Group's past comment on the IOI Pelita - NCR issue: http://www.ioigroup.com/home_more.cfm?id=62D76BA9-1438-5066-5C1C4FCD256FE2D3; and links to "IOI Pelita" search on the company's website: http://www.ioigroup.com/search.cfm?searchid=44820&searchtxt=ioi%20pelita&CFID=4319922&CFTOKEN=39987901.
iv) NGO report on IOI Pelita issues: http://understory.ran.org/wp-content/uploads/2011/03/Industry_Oppresses_IPs2.pdf
Khor Reports comments:
a) Social HCVs is an emerging issue and is likely a longer term matter of concern to plantation companies. This would impact development in both forest and non-forest lands.
b) Plantation companies should prepare for better inclusion of native landholders with: i) free and/or pre-funded equity ownership with low / fair interest cost, ii) a larger proportion of smallholder schemes and iii) larger set-aside of land for HCV areas in their future developments.
c) Those who make secondary purchases of land of native customary right (NCR) areas should be concerned about the legitimacy of the land concessions. Khor Reports has viewed land deal documents that raise strong ethical questions about the lack of free prior and informed choice (FPIC) of the natives in these transactions. It appears that they were verbally promised a stake, but later they found they were unable to subscribe (pay for) their interest in the plantation developments. In the meantime, they had already assigned their interest in the land. In the strict sense, the natives had given up their right to subscribe. However, the natives would likely have been lacking in financial understanding and resources to participate in the transaction.
d) Such land dispute cases number in the 100s and many have dragged on into a decade.
In accordance with the RSPO grievance procedure:
1. The current and ongoing certification process of all IOI group’s activities will be suspended with immediate effect.
2. IOI group will be given a period of 28 days from the date of this letter to revert with an acceptable solution to these matters, which preferably should be mutually agreed by parties involved.
3. IOI group is expected to with immediate effect and agreed in advance with RSPO, to publish a statement on their corporate website indicating the two measures stated above.
Failure to deliver the required proposal by the due date of May 2, 2011 will result in the RSPO considering further sanctions against your company, which may include the suspension of your license for new transactions involving Certified Sustainable Palm Oil materials including GreenPalm certificates.
Background summary: After a 12-year legal battle, the Miri High Court nullified the lease of some plantation estates owned by IOI Corp in Sarawak. The Miri High Court declared four natives the winner in a class action suit against the Sarawak government, Land Custody and Development Authority (Pelita / LCDA) and IOI Pelita Plantation Sdn Bhd, end March 2010. The land leases used by IOI were “null and void” as they had been issued by the Sarawak state government in an illegal and unconstitutional way. Read more here, http://hornbillunleashed.wordpress.com/2010/04/04/6268/, where “...the Bruno Manser Fund welcomes the Miri High Court decision and expects IOI to stop its jungle clearance activities and move out of the disputed lands in the Tinjar region with immediate effect....”
Background info:
i) News report: http://biz.thestar.com.my/news/story.asp?file=/2011/4/7/business/8431450&sec=business.
ii) RSPO's announcement on grievance against IOI Group: http://www.rspo.org/?q=content/announcement-ioi-rspo-grievance-panel-breach-rspo-code-conduct-23-certification-systems-424-.
iii) IOI Group's past comment on the IOI Pelita - NCR issue: http://www.ioigroup.com/home_more.cfm?id=62D76BA9-1438-5066-5C1C4FCD256FE2D3; and links to "IOI Pelita" search on the company's website: http://www.ioigroup.com/search.cfm?searchid=44820&searchtxt=ioi%20pelita&CFID=4319922&CFTOKEN=39987901.
iv) NGO report on IOI Pelita issues: http://understory.ran.org/wp-content/uploads/2011/03/Industry_Oppresses_IPs2.pdf
Khor Reports comments:
a) Social HCVs is an emerging issue and is likely a longer term matter of concern to plantation companies. This would impact development in both forest and non-forest lands.
b) Plantation companies should prepare for better inclusion of native landholders with: i) free and/or pre-funded equity ownership with low / fair interest cost, ii) a larger proportion of smallholder schemes and iii) larger set-aside of land for HCV areas in their future developments.
c) Those who make secondary purchases of land of native customary right (NCR) areas should be concerned about the legitimacy of the land concessions. Khor Reports has viewed land deal documents that raise strong ethical questions about the lack of free prior and informed choice (FPIC) of the natives in these transactions. It appears that they were verbally promised a stake, but later they found they were unable to subscribe (pay for) their interest in the plantation developments. In the meantime, they had already assigned their interest in the land. In the strict sense, the natives had given up their right to subscribe. However, the natives would likely have been lacking in financial understanding and resources to participate in the transaction.
d) Such land dispute cases number in the 100s and many have dragged on into a decade.
World Bank Group - new palm oil sector approach
Khor Reports comment: On 2nd April 2011, The World Bank Group (WBG) announced its "new Framework and IFC Strategy to guide its future engagement in the palm oil sector." This follows-on a freeze on new investments in the sector, followed by months of consultations. WBG says it will focus investments as follows: i) institutional and market initiatives to benefit smallholder development, ii) on projects to improve productivity on existing plantations and iii) it sounds as though funding of new area development would have to be on degraded lands.
Excerpts:
WBG says its areas of focus include support for:
• regulatory and governance reforms;
• responsible private investments;
• improved benefit sharing with smallholders and communities; and
• development and widespread adoption of environmentally and socially sustainable standards and codes of practice.
Priorities:
a) "Institutional and market initiatives that support smallholders and foster benefit sharing with rural communities. This will take place by helping to strengthen smallholder producer organizations, promoting their access to finance and markets, improving their agronomy practices and productivity, and fostering fair contractual arrangements with larger companies."
b) "To help protect forests and biodiversity and to move palm oil expansion from forested areas and peat lands, the Bank Group will give priority to initiatives that encourage production on degraded lands and seek to improve productivity of existing plantations."
WBG will scrutinize investments, using "new analytical “tools”, such as a joint World Bank-IFC Country Situation Analysis and IFC’s Risk Screening and Assessment procedure."
Read more about it here: www.ifc.org/palmoilstrategy.
Excerpts:
WBG says its areas of focus include support for:
• regulatory and governance reforms;
• responsible private investments;
• improved benefit sharing with smallholders and communities; and
• development and widespread adoption of environmentally and socially sustainable standards and codes of practice.
Priorities:
a) "Institutional and market initiatives that support smallholders and foster benefit sharing with rural communities. This will take place by helping to strengthen smallholder producer organizations, promoting their access to finance and markets, improving their agronomy practices and productivity, and fostering fair contractual arrangements with larger companies."
b) "To help protect forests and biodiversity and to move palm oil expansion from forested areas and peat lands, the Bank Group will give priority to initiatives that encourage production on degraded lands and seek to improve productivity of existing plantations."
WBG will scrutinize investments, using "new analytical “tools”, such as a joint World Bank-IFC Country Situation Analysis and IFC’s Risk Screening and Assessment procedure."
Read more about it here: www.ifc.org/palmoilstrategy.
Saturday, March 19, 2011
Sime explores 300,000ha landbank in Cameroon, France processing plant
Sime Darby lately announced a few proposed ventures overseas, including exploring a potential 300,000ha plantation landbank in Cameroon.
In its 18th March 2011 research note entitled "Sime Darby – Malaysia, Too early to add more overseas ventures," UOB Kay Hian research notes that, "Notwithstanding the risks associated
with investments in Africa, this venture could divert the new management’s focus from re-examining and streamlining its current business divisions........ Sime is planning to build a processing plant in France which would receive palm oil feedstock from its Liberia estates. This move faces the challenges of meeting Europe’s high oil quality requirements as well as strong resistance from the environmental movement in Europe against palm oil...." (On left, UOBKH graphic with data from Sime Darby, showing the earnings by division of the Malaysian conglomerate)
Khor Reports comment:
a) Sime currently operates in Liberia with under 10,000ha, but has potential to increase this to 220,000 ha. With perhaps another 300,000 ha from Cameroon, this could ramp up Sime's already large landbank reserves substantially.
b) Old-style plantation expansion in Malaysia did not require corporate growers to set-aside land for smallholder development (Felda was the land agency that focussed on smallholder efforts). Indonesia requires corporate land concession holders to set aside some 20% for smallholder development. Sime's planned new project in Sarawak will give substantially more allocation to indigenous land owners and a state land agency under an improved 'native customary rights' program. Thus, there is an increasing trend toward higher allocations for smallholders. Oil palm growing in Africa is characterized by significant smallholder interests and it is likely that corporates will be required to give larger allocations for these.
c) The proposed processing plant in France is a move toward creating a segregated supply chain (perhaps of sustainable smallholder palm oil??) direct to the end market in Europe. Such a supply chain is the goal of global giants Cargill and Wilmar, and large Malaysian planters such as KL Kepong and IOI Corp. Mid-sized, Europe-oriented players, United Plantations (affiliated with Aarhus) and New Britain Palm Oil have also made a similar moves, with the latter even building a dedicated supply for confectionary maker, Ferrero Rocher.
In its 18th March 2011 research note entitled "Sime Darby – Malaysia, Too early to add more overseas ventures," UOB Kay Hian research notes that, "Notwithstanding the risks associated
with investments in Africa, this venture could divert the new management’s focus from re-examining and streamlining its current business divisions........ Sime is planning to build a processing plant in France which would receive palm oil feedstock from its Liberia estates. This move faces the challenges of meeting Europe’s high oil quality requirements as well as strong resistance from the environmental movement in Europe against palm oil...." (On left, UOBKH graphic with data from Sime Darby, showing the earnings by division of the Malaysian conglomerate)Khor Reports comment:
a) Sime currently operates in Liberia with under 10,000ha, but has potential to increase this to 220,000 ha. With perhaps another 300,000 ha from Cameroon, this could ramp up Sime's already large landbank reserves substantially.
b) Old-style plantation expansion in Malaysia did not require corporate growers to set-aside land for smallholder development (Felda was the land agency that focussed on smallholder efforts). Indonesia requires corporate land concession holders to set aside some 20% for smallholder development. Sime's planned new project in Sarawak will give substantially more allocation to indigenous land owners and a state land agency under an improved 'native customary rights' program. Thus, there is an increasing trend toward higher allocations for smallholders. Oil palm growing in Africa is characterized by significant smallholder interests and it is likely that corporates will be required to give larger allocations for these.
c) The proposed processing plant in France is a move toward creating a segregated supply chain (perhaps of sustainable smallholder palm oil??) direct to the end market in Europe. Such a supply chain is the goal of global giants Cargill and Wilmar, and large Malaysian planters such as KL Kepong and IOI Corp. Mid-sized, Europe-oriented players, United Plantations (affiliated with Aarhus) and New Britain Palm Oil have also made a similar moves, with the latter even building a dedicated supply for confectionary maker, Ferrero Rocher.
Sunday, February 20, 2011
Golden Agri -TFT deal sets 35 tonnes carbon stored per ha ceiling
I sent out an alert via email to readers on 9 Feb 2011: BBC article on GAR deal with TFT. Weblink: http://www.bbc.co.uk/news/science-environment-12397427 (please scroll down for excerpts).
This initially sets the ceiling on land bank development at 35 tonnes of carbon stored per hectare.
Feedback to Khor Reports: Subsequently, we hear that the deal may be dependent on a) further research to validate claims that there is plenty of degraded land available for new plantings and b) the creation of a mechanism for Golden Agri to swap out of current licenses on forested land for degraded land. *This information needs to be checked and validated.
Khor Reports comment: Analysts of plantation land banks will find publicly available information to be frustratingly limited. The companies do not disclose the high risks to the 'usability' of their land banks for plantation development i.e. what proportion is on forested land, on peat land, with high biodiversity and so forth?
Snippets from "Palm oil deal aims to save forests and carbon," 9 Feb 2011, BBC news :
"A major palm oil producer is joining forces with environmental campaigners in a bid to ramp up forest protection. The giant Indonesian company Golden Agri-Resources (GAR) has agreed to work within new standards aimed at saving forests that store a lot of carbon. International environment group The Forest Trust (TFT) is partnering the company and will monitor compliance. The palm oil industry has regularly been accused of destroying old-growth forest as demand rockets. The new deal expands on existing standards agreed under the Roundtable on Sustainable Palm Oil (RSPO), an international alliance of producers, processors, retailers and environment groups...."
"...Already, RSPO rules forbid clearing old-growth forest or land with high conservation value, and developers are also supposed to obtain informed consent from local people before initiating new plantations. Under the new deal, GAR will go further, vowing not to plant on peat, and not to clear forest where significant carbon is locked up in trees. This should mean that large tracts of forest that have been partially logged will now be off-limits to the company. Initially, the figure of 35 tonnes of carbon stored per hectare will be used as a ceiling; but that could change as research progresses. "We're not trying to undermine the RSPO - we're saying 'this is something you guys need to look at and maybe move towards,'" said Scott Poynton, TFT's executive director...."
"...Earlier in the year, TFT finalised a deal with Swiss-based food giant Nestle designed to "ensure that its palm oil procurement had no deforestation footprint". This led to discussions with suppliers such as GAR - and the conclusion that in order to preserve their markets, growers would have to purify their operations. Greenpeace, which has taken the lead on the issue among international NGOs, sees the deal as a potential step forwards. "This is really throwing a gauntlet down to the rest of the palm oil sector, and to other players," said campaigner Phil Aikman. "It's setting a threshold for carbon, and that's pretty good - it'll protect a lot of orangutan habitat and other important areas that have been threatened by palm oil plantations. "It challenges the rest of the sector to increase its productivity rather than target new areas over and over again, and that's been the main issue." With RSPO, another issue has been compliance, with a number of companies accused of failing to live up to their promises...."
Source: BBC news article.
This initially sets the ceiling on land bank development at 35 tonnes of carbon stored per hectare.
Feedback to Khor Reports: Subsequently, we hear that the deal may be dependent on a) further research to validate claims that there is plenty of degraded land available for new plantings and b) the creation of a mechanism for Golden Agri to swap out of current licenses on forested land for degraded land. *This information needs to be checked and validated.
Khor Reports comment: Analysts of plantation land banks will find publicly available information to be frustratingly limited. The companies do not disclose the high risks to the 'usability' of their land banks for plantation development i.e. what proportion is on forested land, on peat land, with high biodiversity and so forth?
Snippets from "Palm oil deal aims to save forests and carbon," 9 Feb 2011, BBC news :
"A major palm oil producer is joining forces with environmental campaigners in a bid to ramp up forest protection. The giant Indonesian company Golden Agri-Resources (GAR) has agreed to work within new standards aimed at saving forests that store a lot of carbon. International environment group The Forest Trust (TFT) is partnering the company and will monitor compliance. The palm oil industry has regularly been accused of destroying old-growth forest as demand rockets. The new deal expands on existing standards agreed under the Roundtable on Sustainable Palm Oil (RSPO), an international alliance of producers, processors, retailers and environment groups...."
"...Already, RSPO rules forbid clearing old-growth forest or land with high conservation value, and developers are also supposed to obtain informed consent from local people before initiating new plantations. Under the new deal, GAR will go further, vowing not to plant on peat, and not to clear forest where significant carbon is locked up in trees. This should mean that large tracts of forest that have been partially logged will now be off-limits to the company. Initially, the figure of 35 tonnes of carbon stored per hectare will be used as a ceiling; but that could change as research progresses. "We're not trying to undermine the RSPO - we're saying 'this is something you guys need to look at and maybe move towards,'" said Scott Poynton, TFT's executive director...."
"...Earlier in the year, TFT finalised a deal with Swiss-based food giant Nestle designed to "ensure that its palm oil procurement had no deforestation footprint". This led to discussions with suppliers such as GAR - and the conclusion that in order to preserve their markets, growers would have to purify their operations. Greenpeace, which has taken the lead on the issue among international NGOs, sees the deal as a potential step forwards. "This is really throwing a gauntlet down to the rest of the palm oil sector, and to other players," said campaigner Phil Aikman. "It's setting a threshold for carbon, and that's pretty good - it'll protect a lot of orangutan habitat and other important areas that have been threatened by palm oil plantations. "It challenges the rest of the sector to increase its productivity rather than target new areas over and over again, and that's been the main issue." With RSPO, another issue has been compliance, with a number of companies accused of failing to live up to their promises...."
Source: BBC news article.
Current work projects
Currently, I am working on a feature article for Lipids Technology (editor: Prof Frank Gunstone) on Indonesia and Malaysia reactions to the NGO campaigns on palm oil. Thank you to industry leaders for taking the time to chat with me about this.
At the same time, I am wrapping up an analysis of oil palm land bank trends for a corporate client. Our multi-client database of plantation statistics is building up. For client projects, we access this database to customize studies for their needs.
At the same time, I am wrapping up an analysis of oil palm land bank trends for a corporate client. Our multi-client database of plantation statistics is building up. For client projects, we access this database to customize studies for their needs.
Newsletters on sustainable palm oil issues (Aug-Nov 2010)
Welcome to Khor Reports' palm oil blog. In Aug-Nov 2010, we issued a 3-parter on sustainable palm oil issues which garnered a lot of industry interest. It was circulated at the highest level of the oil palm industry decision-makers. Thank you to our readers for your interest!
For your convenience, here are the links for you to download the thee newsletters in our "Palm Oil Strategic Analysis" series:
1st of 3: khorreport001-palm_oil-eu_sustainability_policy-100803a.pdf, 192k
2nd of 3: khorreport002-palm_oil-rspo_growers-100826.pdf, 269k
3rd of 3: khorreport003-palm_oil-rspo_stakeholders-101027.pdf, 406k
Weblink: https://sites.google.com/site/khorreports2011/palmoil_strat_analysis
For your convenience, here are the links for you to download the thee newsletters in our "Palm Oil Strategic Analysis" series:
1st of 3: khorreport001-palm_oil-eu_sustainability_policy-100803a.pdf, 192k
2nd of 3: khorreport002-palm_oil-rspo_growers-100826.pdf, 269k
3rd of 3: khorreport003-palm_oil-rspo_stakeholders-101027.pdf, 406k
Weblink: https://sites.google.com/site/khorreports2011/palmoil_strat_analysis
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