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Indonesian palm oil firm clashes with villagers it allegedly shortchanged

Mongabay - June 4, 2024

Hans Nicholas Jong, Jakarta – A dispute simmering for years has erupted into conflict between villagers and a palm oil company on the Indonesian island of Sulawesi over the latter's failure to abide by a profit-sharing scheme.

At least nine villagers in Buol district and one worker from plantation company PT Hardaya Inti Plantations (HIP) were injured in clashes on May 7 and 10 that began as protests. The villagers had since the start of the year formally objected to HIP harvesting palm fruit from the trees that the company was cultivating on the villagers' land, noting that they hadn't been paid for harvests going back to 2018, or even longer in some cases.

When HIP workers arrived at the villagers' farms on May 7 to cut down the palm fruit and load it onto trucks, the villagers attempted to stop them, leading to scuffles in which three villagers were pushed off a truck and injured.

A similar scene played out three days later, this time leaving six villagers injured and one worker with machete wounds.

Fatrisia Ain, a member of the grassroots organization FPPB that represents the villagers, said they'd been protesting peacefully and had no intention of assaulting the workers.

"They only wanted to prevent the fruit from being taken out [of their land], because the oil palm fruits grew on their lands," she said.

She added they harbored no grievances against the workers, with the villager who slashed the worker with the machete turning himself in to the police because "he knew that what he did was wrong."

"We're not against a single investor or a single company," Fatrisia said. "We're only fighting for the rights of the people in Buol, which they never received."

Zero revenue, excessive costs

The dispute between the Buol villagers and HIP dates back to 2008. Under Indonesian law, plantation companies must allocate a portion of their concession to smallholder farmers living nearby, assist them in growing oil palms, and buy their harvests of palm fruit. Known as the plasma scheme, it's meant to empower rural communities by giving them a foothold in the palm oil supply chain.

HIP's arrangement with the Buol villagers was slightly different because they already had their own land. Under the deal, agreed on in 2008, the company would do the work of cultivating the oil palms and harvesting the fruit on the villagers' land, effectively expanding the company's total planted area, while the villagers in return would receive a cut of the profits from the palm fruit from their land.

Except that the company never paid in full, or in many cases at all, Fatrisia said. "And since 2018 until now, there's no profit sharing anymore. So it's been six years without any profit sharing at all," she said.

This despite the company continuing to cultivate and harvest palm fruit from the villagers' land.

For the villagers, the losses amount to more than just the earnings they accuse HIP of depriving them of. Since the start of the plasma agreement, the villagers have run up more than 1 trillion rupiah ($62 million) in debt, according to Budianto Eldist Daud Tamin, a lawyer with Buol Pogogul Justice, a legal aid foundation representing the villagers.

That's because they initially took out bank loans to prepare their land for oil palm cultivation, then went on to pay HIP what Budianto called "excessive costs" for running the farms: management fees, overhead expenses and maintenance fees – the sum of which exceeded any profit share they were entitled to, Budianto said.

"As a result, all the farmers' co-ops that had an agreement with HIP have been suffering from losses since the beginning of the partnership," he said.

Mada Yunus, a plasma farmer got injured during a clash between villagers in Buol district and plantation company PT Hardaya Inti Plantations (HIP) in Sulawesi, Indonesia, in April 2024. He got hit by an oil palm fresh fruit bunch and thrown out of a truck into the ground. Image courtesy of FPPB.

Burned by plasma

The issue of palm oil companies stiffing local communities in plasma schemes is common throughout Indonesia, the world's biggest producer of palm oil. A 2022 investigation by Mongabay, BBC News and The Gecko Project estimates that Indonesian villagers are losing out on hundreds of millions of dollars each year because palm oil producers are failing to comply with the plasma scheme, with villagers not receiving the profits they were promised and falling deeper into debt.

The Buol villagers, working with another civil society organization, the Alliance for Agrarian Reform Movement (AGRA), have reported HIP to Indonesia's business competition regulator, the KPPU, which has been investigating alleged violations of the plasma scheme since 2019.

Earlier this year, the KPPU sent the final of three warning letters to the company, demanding it resolve the issue. With no response from HIP, the KPPU now has the option of either escalating the matter to the relevant government ministries to revoke the company's licenses, or to levy a fine of up to 10 billion rupiah ($617,000).

"We hope there will be an objective decision [from the KPPU]," said Mohammad Ali, the head of AGRA.

"This situation wouldn't have happened if HIP had responded to the farmers' demands and worked toward conflict resolution," he added.

AGRA has also flagged the issue to Wilmar International, a top buyer of HIP's palm oil (as recently as December 2023, according to supply records) and one of the world's biggest traders of the commodity. Wilmar, whose customers include Unilever, Kellogg's and Nestle, among other major global brands, has a "No Deforestation, No Peat, No Exploitation" policy and is a member of the Roundtable on Sustainable Palm Oil (RSPO), the world's largest association for ethical palm oil production.

"We want [Wilmar] to live up to its own policy, which is to not exploit laborers, as the laborers have become victims of the current plasma scheme [with HIP]," Ali said.

Ravin Trapshah Ismail, the senior manager of sustainability communication at Wilmar, told Mongabay that the company had been engaging with HIP since December 2023 to push for further transparency on the profit-sharing calculations, plasma development costs, loan repayment as well as the management of the plasma scheme cooperatives.

The clashes on May 7 and 10, however, are a different issue, he said. This is because the villagers involved in the clashes are not members of the farmers' co-ops, even though they claimed to be plasma landowners, Ismail said.

Caked in corruption

This isn't the first time HIP has been mired in controversy. In 1994, the company reportedly began forcing residents off their land by clearing forest in the area for its plantation.

In 2012, HIP's owner, prominent businesswoman and politician Hartati Murdaya Poo, was arrested by anticorruption investigators for bribing the Buol district chief at the time, Amran Batalipu, to grant her the concession. During her trial, Hartati admitted to paying Amran, but claimed it was a campaign donation and not a bribe.

Both Hartati and Amran were convicted and jailed, yet the illegally obtained concession was never revoked from HIP. In fact, the company went on to obtain a permit from the environment minister, Siti Nurbaya Bakar, in 2018 to clear, 9,964 hectares (24,622 acres) of rainforest inside the concession, allowing it to expand its planted area.

The anticorruption agency that had arrested Hartati denounced the minister's decision as "unacceptable," arguing that a permit application by a company implicated in a bribery case should never have been considered in the first place.

Besides the corruption, HIP's operation has been mired in other irregularities, according to Sawit Watch, an NGO that monitors the Indonesian palm oil industry. It found that HIP's other permits were issued without the requisite documents. It also found the company to be operating inside forest areas that legally would be off-limit for plantation activity. In its early years, HIP also planted oil palms outside its concession, illegally encroaching on 5,400 hectares (13,300 acres) beyond its borders, said Ali of AGRA.

Each of these on their own should have been reason enough for the environment minister to not issue the forest-clearing permit, Sawit Watch said; and that this didn't happen should be reason for anticorruption investigators to look into why the minister issued the permit.

Source: https://news.mongabay.com/2024/06/indonesian-palm-oil-firm-clashes-with-villagers-it-allegedly-shortchanged