September 10, 2018

Palm oil permits with intact forests traded for USD80m

JAKARTA ( - Two palm oil permits have been sold in Papua at prices based on the extent of intact forest and volume of timber found within the concession areas concerned, equivalent in size to 80,000 football fields.

Both these permits were traded in a single purchase agreement, at a total price of USD80 million with the permits worth USD40 million each, to a third party based in Malaysia. The area of each permit is equivalent to 40,000 thousand football fields.

In a recent press release, forestry research NGO Greenomics Indonesia revealed the two palm oil permits - belonging to PT TKU and PT MSM - which were traded on the basis of the timber volume in their intact Papuan forests.

The two permits were granted in December 2011 by former Forestry Minister Zulkifli Hasan during the administration of Susilo Bambang Yudhoyono through the state forest area relinquishment mechanism.  

“It's clear that the palm oil permits traded in Papua are based on timber volumes and are therefore oriented towards timber exploitation,” Vanda Mutia Dewi, Greenomics Indonesia’s Executive Director, explained in Jakarta (Sep 7).

The Google Earth images below (7/2/2016), presented by Greenomics, portray parts of the two palm oil concessions, located right next to each other in Papua's Boven Digoel regency, which are the subject of the timber volume-based permit trading.

Fortunately however, according to Greenomics, based on time-series satellite data as of late August 2018, the intact Papuan forests in these two palm oil concessions have not yet been cleared for timber exploitation purposes.

The sale of these palm oil permits in Papua to the two companies based on the value and volume of timber, also sheds light on the fact that the companies have sold 20% of the existing, legally-binding local community rights in the concessions concerned as well. 

“As such, the sale of the two permits means that 20% of the local community rights in these two palm oil concessions have also been sold on the basis of timber volume,” Vanda lamented. 

Referring to the value of the timber in the purchase agreement for the palm oil permits, she pointed out that each 1,000 hectares of the intact Papuan forests traded was valued at USD1 million. 

If this modus operandi carries on, Greenomics cautioned, intact Papuan forests will merely continue to serve as the object of purchase agreements with international third party buyers based on their timber value.

A Greenomics study indicates that permits involving intact Papuan forests were granted far more extensively and quickly in the Yudhoyono era, particularly in his second term, compared to permit granting in President Joko Widodo's first term. 

Nonetheless, environmental NGOs remain very concerned that Papua not suffer the same fate as that experienced by Sumatra and Kalimantan, where most of the forests have been cleared and significant peatlands drained by palm oil and pulp & paper companies for many years.