North Sumatra – Looting of plantations has become a major headache in Indonesia, hitting bottom lines in the sector and threatening investment and privatization plans.

The problem is compounded by land disputes as plantation companies have been accused of failing to pay compensation for properties that villagers claimed belonged to their ancestors.

Companies hire security guards and police armed with machine guns to fend off rampant looting across plantations in one of the world's largest producers of rubber, palm oil, coffee, cocoa, gold, tin and pepper.

"We have to hire policemen and military personnel to help us secure our plantation from looters," said Halomoan Siahaan, plantation manager of state plantation PT Perkebunan Nusantara II (PTPN II) in Limau Mungkur, near Medan, North Sumatra.

"We gather our tappers, staff and security guards with the police and military personnel once a month, to show off our force to [potential] looters," said the manager of the secluded plantation some 20 kilometers outside Medan. Last year, looting affected some two million hectares of oil palm, rubber and coffee plantations, run by both state and private operators, causing losses totaling billions of rupiah.

"Looters come at night and steal latex and palm oil fresh fruit bunches. When our tappers come in the morning, they find no latex or fresh bunches left," Siahaan said.

A short distance away, a crude palm oil processing plant also owned by PTPN II suffers from looting. "We are running 60% at our designed capacity because of a shortage in fresh fruit bunches," factory manager M. Simarmata said. PTPN II operates 9,200 hectares of rubber and 40,000 hectares of oil palm plantations in North Sumatra.

Marketing Manager Hakim Bako said looting of oil palm fruit was more attractive than latex because they fetched better prices. He said last year looting reduced the company's crude palm oil output by 15% and rubber output by 10%.

Blame Wahid

Just south of Medan, villagers burn oil palm trees and build houses on land that once belonged to a big private oil palm plantation. Villagers took over the area after the company failed to pay compensation for the land, which they claimed had belonged to their ancestors.

As Indonesia moves to a more open political climate following the downfall of authoritarian president Soeharto in May 1998, demands have grown for compensation for past seizures of land by plantation and mining companies.

Indonesia's 14 state plantation companies manage millions of hectares of palm oil, coffee, rubber, cocoa and sugarcane plantations. They say they have suffered the most. "I can say that my company is among those which has received most land claims from villagers," Bako of PTPN II said.

Bako said that in the 19th century, most PTPN II land in North Sumatra comprised tobacco plantations owned by people belonging to the local Deli Sultanate.

In 1873 the Sultan of Deli asked his people to rent their land to Dutch colonial authorities, who planted rubber, sugarcane and other crops. But the land was taken over by state plantation firms after Indonesia become independent in 1945.

"Most contracts ended after 100 years in 1973. But at the time no one dared to ask for land back because the political conditions did not allow people to do so," Bako said. "Now everything has changed and they want to take it back." State plantation firms also blame President Abdurrahman Wahid, saying his sometimes conflicting comments have worsened the situation.

"It was Gus Dur who encouraged people to claim the land," said an official at another state plantation, PT Perkebunan Nusantara IV, using Wahid's popular nickname. Wahid said earlier this year that 40% of areas managed by state plantation firms was stolen or taken without paying fair compensation. This land should be returned, he said.

Security costs

The uncertain climate has also hit bottom lines. "In the last two years we have had to spend millions of rupiah to improve security," said Jendamita Sembiring, a director of private plantation firm PT Kinar Lapiga at Langkat in North Sumatra.

"It is a burden for us, especially when CPO prices are not as high as two years ago." M. Sy. Zeiny, general marketing manager of Belgium-based PT Tolan Tiga Indonesia, said the increase in production costs caused by security expenses would make output less competitive.

Industry sources said while looting this year had not been as intense as in 1999, this was mainly due to falling international prices for crude palm oil and rubber. But they feared the overall perception of Indonesia as being too unstable to invest in would hurt the plantation sector.

"Overall, the situation is improving. But looting and land disputes are still happening," said Derom Bangun, chairman of the Indonesian Palm Oil Producers Association. "These problems, together with social unrest across the country, will discourage investors." Bangun said looting of oil palm fruits had reduced overall production by 10% annually in the past two years.

Officials at PTPN IV fretted that looting would ruin the government's plan to privatize the company. "No one wants to buy our stakes if they have to deal with looting and land claims," said the PTPN IV official.

The government has delayed plans to privatize PTPN IV but the sell-off of another state plantation firm, PTPN III, is still planned for October.