Groups Slam World Bank’s Support for Massive Indonesian Plantation Increase

Wednesday, February 21, 2007

CAPPA, Yayasan Keadilan Rakyat, WALHI South Kalimantan, Yayasan PADI, WALHI National Executive, NADI, Environmental Defense ,Friends of the Earth-International

Jambi, Kalimantan, Jakarta (Indonesia) / Amsterdam (the Netherlands) / Honolulu (US), February 21, 2007-- Groups from three countries, today slam World Bank' support for increased industrial plantation scheme in Indonesia.

“In Indonesia, plantation establishment has traditionally been linked to extraordinary deforestation, uncontrolled forest fires impacting local communities and neighboring countries and significant human rights violations”, said Rivani Noor of CAPPA in Sumatra, a local NGO based in Jambi province of Indonesia.

The Bank’s plan identifies as “among the highest priorities”, support for the Department of Forestry’s plan for the acceleration of plantation development which includes the establishment of 5 million hectares of industrial timber plantations and 2 million hectares of so-called “community forests”.

“The push to establish between 5 to 7 million hectares of industrial plantations will cause tremendous harm to our forests and the women and men whose livelihoods depend on them,” said Farah Sofa, WALHI, the Indonesia's largest environmental group.

“So-called plantation - community “partnership” programs have generated conflicts, impoverishment, and environmental degradation for decades, said Rukaiyah Rofiq of Yayasan Keadilan Rakyat, a local group based in Jambi Province of Indonesia. “Lack of recognition of adat and community land and forest rights, the use of military security forces on behalf of plantation companies, the loss of lands due the vastly unequal power of the partners are all tremendous problems with ‘community plantation’ programs.”

“We oppose the application of ‘plantation partnership’ programs in the continued absence of full prior recognition of indigenous forest and land tenure rights,” said Koesnadi, Yayasan PADI of East Kalimantan.

Between 1985 and 2004, “donor” funding for Indonesia’s forestry sector totaled over US$1 billion, with the Bank providing approximately one third of these funds many of which must now be paid back by the Indonesian people. During this period, massive overcapacity was established in the forestry sector, illegal logging grew to astonishing proportions, the land and forest rights of indigenous communities were increasingly violated as entire areas were subject to military intervention on behalf of forestry companies, said Titi Sintoro, NADI.

“It is important to remember that the Bank withdrew from Indonesia’s forestry sector after disastrous projects with irreversible impacts on forests and indigenous peoples,’ said Dr. Stephanie Fried of Environmental Defense, U.S.A. “We do not see substantial positive change in terms of illegal logging, corruption, and human rights in Indonesia’s forestry sector.”

In the new plan, the Bank admits that the Indonesian forestry sector suffers from tremendous overcapacity, including large bankrupt paper and pulp mills operating without a legal supply of timber. The report mentions “corrupt practices” apparently involved in the sale and debt restructuring efforts of major forestry companies and cites as a “moral hazard” inappropriate debt write-offs and settlement agreements which plague the sector. Rather than recommending a downsizing of the industry in line with bankruptcy proceedings, however, the Bank calls for a vast increase plantation establishment which would keep these companies and, apparently, new companies planning on constructing additional mills afloat. The Bank suggests as a “policy of convenience” that “on conversion forest land, it may be appropriate to allow some added timber harvest (and forest/land damage) in the short run to balance industrial timber demand and supply”.[1]

“Reducing overcapacity in the forestry sector, through the downsizing of bankrupt companies and preventing the establishment of additional industrial capacity including new paper and pulp mills is one of the key first steps which must be undertaken to bring demand into line with legal timber supply, “ said Berry Nahdian Forqan, Director of Walhi South Kalimantan. “The troubled United Fiber System and Kiani Kertas mills are the perfect example of financially unstable companies without access to sufficient legal timber.” (See enclosed documentation on UFS and Kiani Kertas.)

“The bank claims to have followed a process of consultation during the development of this plan”, said Rivani, Facilitator of CAPPA. “Despite our repeated requests, they have refused to provide copies of their draft strategy and plan in Indonesian language, making it impossible to carry out proper consultation with affected peoples. It is as if nothing has changed.”

For more detailed information about the World Bank's history and involvement in Indonesia forestry sector, please see attached background information. For information on current attempts to expand the pulp and paper sector, see the attached account of proposed UFS and Kiani Kertas chip and pulp mills in Kalimantan.

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Background Information
Today, the World Bank is launching a new “strategic plan” for re-entry into the Indonesian forestry sector in support of a massive industrial plantation scheme promoted by the Indonesian government”.[2]

The Bank withdrew from direct involvement in Indonesian forestry sector finance almost a decade ago after disastrous projects with “serious and probably irreversible impacts on the forests and indigenous people[s]” of Indonesia, according to the Bank’s own auditing department, the Operations Evaluation Department.[3]

In 2000, during the World Bank’s regional consultation on Forestry Policy, prominent Indonesian NGOs, including WALHI, ELSAM, INFID, Solidaritas Perempuan, LPPMA, YALI, KSPPM, Evergreen KSPHK, called on the World Bank and the Government of Indonesia to take crucial measures prior to any consideration of engagement in the Indonesian forestry sector. Most of these core steps – necessary for the establishment of a sustainable and socially equitable forestry sector –have not been taken. They continue to be as important in 2007 as they were in 2000:

1. Any forest sector strategy must be predicated on prior full legal recognition by Indonesia of hukum adat,/ hak atas hutan adat -- indigenous rights to land and forest.
2. Postponement of Bank adjustment loans, which the 2000 OED study indicated have significant impacts on forests, until there is clear "ownership" by GOI of loan conditionalities including:
3. Prosecution of 176 companies alleged to have been involved in setting forest fires and not yet prosecuted;
4. Cancellation of the logging concession/plantation system that the OED identified as a “moral hazard” Revision of forestry law 41/1999 to recognize the rights of indigenous peoples and their forest management systems
5. Redefinition the forest areas in a participatory manner working together with indigenous and other forest dwellers;
6. Given the overcapacity in the paper and pulp sector identified by the OED as the largest threat to Indonesia's forests, and research indicating the likelihood that the paper and pulp sector is supplied by illegal logging, focus on reducing overcapacity in this sector.
7. Strong governmental action against private sector debtors in forestry sectors (in 2000, 70% of forest related debt was held by 10 big conglomerates including those owned by Bob Hasan, Barito Pacific, Salim group, Sinar Mas, etc). Do not absolve these debts. Collect where collection is possible. Shut down operations, including paper and pulp, where bankrupt. Private debts must not be come public debts.
8. Cessation of the use of military security forces in forest sector management.