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Indonesia amnesties 75 companies operating illegally inside forest areas

Mongabay - September 15, 2022

Hans Nicholas Jong, Jakarta – Indonesia has pardoned 75 companies operating illegally inside forest areas, with hundreds more to be amnestied in the future, the Ministry of Environment and Forestry announced during a parliamentary hearing in August.

Under the 2013 law on the prevention and mitigation of forest degradation, activities like oil palm cultivation and mining are prohibited from operating on lands zoned as forest areas, but many companies have done so anyway amid lax oversight.

In 2020, Jakarta introduced an amnesty scheme that gave plantation operators a grace period of three years to obtain the proper permits, including the official rezoning of their operational area to non-forest area, and to pay the requisite fines, allowing them to resume their operations.

This scheme, called 110a, applies to companies that had obtained permits from regional governments, but not the final two permits needed to operate legally from the central government – forest release decrees from the Forestry Ministry and the rights-to-cultivate permits from the Ministry of Agrarian Affairs and Spatial Planning.

As for companies that don't even have permits from the local government, such as location permits and plantation permits, their operations will be temporarily frozen until they pay administrative fines.

The amnesty scheme has drawn criticism from activists and some lawmakers. Critics have said the scheme whitewashes the crimes of setting up plantations inside areas zoned as forest, where deforestation, wildfires and land conflicts are rife.

The Ministry of Environment and Forestry has identified at least 616 companies operating illegally inside forest areas, according to a presentation made by ministry officials at a parliamentary hearing on Aug. 22.

Besides companies, the ministry has also identified 40 government entities, 129 cooperatives, and 407 individuals operating inside forest areas, bringing the total to 1,192 entities. Most of them (857) operate plantations, while some (130) operate mining.

Of the 616 companies, 75 have paid fines totaling 222.7 billion rupiah ($14.93 million).

Out of the 75 companies, 57 fall under the 110a scheme and have to pay 141.7 billion rupiah ($9.5 million). The rest, 18 companies, all mining, are under the 110b scheme and have paid 81 billion rupiah ($5.43 million) in fines.

The Forestry Ministry's secretary-general, Bambang Hendroyono, said the government estimated that it could collect at least 50 trillion rupiah ($3.35 billion) from companies under the 110a scheme, with the assumption that a company could reap up to 10 million rupiah ($671) in profit from a hectare of illegal plantation per year.

Too low or too high?

Dedi Mulyadi, a lawmaker from the parliamentary committee that oversees environmental issues, has questioned the 10-million-rupiah-per-hectare figure, asking whether it's not too low given that companies have profited for decades from illegal activities inside forest areas.

Bambang, the ministry secretary-general, said some companies could actually earn up to 25 million rupiah ($1,676) in profits from a hectare of land per year. Dedi said the calculation of fines still didn't reflect a sense of justice.

"They [companies] enjoy [profit from illegal plantations] because their production keeps going on, their businesses still running [but] they don't pay taxes nor non-tax revenue," he said. "[Their concessions] aren't confiscated [either]."

According to a calculation by the Forestry Ministry, the state missed out on at least 44 trillion rupiah ($2.95 billion) in taxes from illegal plantations in 2021 alone.

This figure may be an underestimate. An audit by local lawmakers in Sumatra's Riau province, one of the main oil palm-growing regions of Indonesia, found that Riau alone is deprived of at least 107 trillion rupiah ($7.2 billion) in potential revenue every year from the illegal plantations.

Besides tax avoidance, companies also profit from selling the timber from the areas they clear to set up illegal plantations.

Darori Wonodipuro, a lawmaker with the Gerindra Party, said plantation companies could easily make more than 10 times the amount in fines they should pay just from selling the timber they cut prior to planting. He called the fines "laughable."

Meanwhile, Muhtarom, a lawmaker from the National Awakening Party (PKB), another ruling coalition party, said the impact of illegal plantations inside forest areas went beyond financial losses and led to environmental damage.

"In reality, [the fines] don't match with [our] hope because forest and environmental degradation will become a heavy burden for the government in the future, because the damage versus the government revenue [from fines] are not comparable," he said.

But Agus Purnomo, a senior executive at the giant Sinar Mas conglomerate, which runs plantations across the country, said the fines slapped on companies under the amnesty scheme were actually too high.

"The fines are bigger than the [amount of] investment," he told Mongabay during a recent event in Jakarta. "How could people willingly pay the fines?"

Agus added that not all cases of illegal plantations could be solved by imposing fines, as each case was unique.

In some cases, he said, companies had set up plantations in areas zoned for agriculture, only to see the land later rezoned as forest area.

If the fines are too high, then companies might have no other option but to not pay and abandon their concessions, and as a result, the amnesty scheme can't be enforced, he said.

"A regulation is only good if it can be enforced," Agus said. "If it can't be enforced because of technical issues or other things, then it's not a good regulation."

Legal or not?

Other lawmakers have questioned the legality of the amnesty scheme.

Slamet, a lawmaker from the Prosperous Justice Party (PKS) pointed out that the 2020 Job Creation Act, which serves as the scheme's legal basis, was ruled unconstitutional by the Constitutional Court in November 2021.

The court found that the law was drafted by the government and passed by lawmakers through a process that was procedurally flawed, as it didn't have meaningful public participation in the formation of the law.

Furthermore, after President Joko Widodo and the parliament approved the law, there were significant changes to its substance in violation of a 2011 regulation on lawmaking, the court ruled.

The effect of this ruling is that the government and legislature need to "rectify" the job creation law within two years of the court's decision. Within that time frame, no implementing regulations of the law can be issued until the revision has been made. If no revision is introduced within two years, the whole law will be invalidated and will no longer apply.

Slamet said the parliament hadn't started the process of rectifying the law, and thus he questioned whether the government could implement the amnesty scheme or not.

"What I know is that the law shouldn't be implemented, let alone issuing implementing regulations [from the law]," he said during the Aug. 22 hearing.

Bambang, the forestry ministry secretary-general, said the omnibus law was still in force because the government had amended the 2011 regulation to allow for the issuance of laws using the "omnibus" method with which the job creation law was passed.

Individuals or companies?

Slamet also questioned the Forestry Ministry's data, which showed that some individuals operate illegal plantations with sizes that are more akin to corporate concessions.

One plantation in Riau is identified as an operation run by an individual and has a size of 16,344 hectares (40,389 acres), an area nearly the size of Washington, D.C.

In Central Kalimantan province, there are 3,900 hectares (9,600 acres) of plantations identified as individual operations.

Slamet questioned how an individual could gain control over such a large concession.

Lawmaker Dedi said he suspected these individuals might be serving as fronts for more established conglomerates.

A recent study by Greenpeace and technology consultancy TheTreeMap found companies to be controlling half of the illegal plantations in Indonesia.

The report identified Sinarmas' Golden Agri-Resources as the plantation company with the biggest area of illegal plantations in Indonesia, with 57,676 hectares (132,520 acres, a bit smaller than Chicago) of concessions inside forest area.

GAR was followed by Singapore-based Wilmar with 50,593 hectares and Musim Mas with 36,481 hectares.

Responding to the findings, 17 companies signed a joint reply, saying they had "complied with the prevailing Indonesian laws and regulations on land permit usage for oil palm plantations."

In the letter, the companies said they didn't "deliberately" create the illegality.

Greenpeace said this might have been true in the early years for some plantations, when the Forestry Ministry temporarily waived the requirement for redesignating forests, such as in Central Kalimantan from 2000-2006.

"However, it is misleading in other cases and after that period, where companies deliberately continued operating instead of complying with the law prohibiting plantation operations on forest estate," Greenpeace said. "In such cases, plantation companies have been knowingly operating on the basis of local government-issued business permits, which only ever covered the first half of the full permitting process – they never provided a legal basis for operating inside the forest estate."

Herry Purnomo, a senior scientist at the Center for International Forestry Research and a forestry management lecturer at the Bogor Institute of Agriculture (IPB), said companies should receive punishments that are harsher than administrative fines, rather than whitewashing their crimes.

"If the actors [behind the illegal plantations] are rich people with large plantations, the solution should be law enforcement," he told Mongabay in Jakarta. "I'm not willing to accept if [companies] clear forests and [have their crimes] whitewashed."

Source: https://news.mongabay.com/2022/09/indonesia-amnesties-75-companies-operating-illegally-inside-forest-areas