Joint Press Release: Banks Must be Held Responsible for Hundreds of Conflicts over Land and Environmental Degradation

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Joint Press Release: Banks Must be Held Responsible for Hundreds of Conflicts over Land and Environmental Degradation

Jakarta – The expansion of oil palm plantations in Indonesia continues to increase at a very high speed, and has created numerous serious environmental and social problems. High conservation value forests are converted into plantations, there are very high greenhouse gas emissions from fires in forest and peat land, there are ecological disasters and many people have lost access to land that is essential for their livelihoods and which they have been using for generations.

The ongoing expansion of oil palm plantations is increasingly massive and can certainly not be separated from what is called the “economic boom” in the oil palm plantation industry sector which is predominantly triggered by the world’s high demand for vegetable oils to satisfy the consumption of various foods, cosmetics and agrofuels. Indonesia responds to this demanding market condition by boosting the expansion of oil palm plantations, of course, with the ultimate normative goal to increase the revenues of the State economy, reduce the high rates of unemployment as well as some other normative purposes.

The trend of oil palm plantations is increasingly finding its momentum as banks and financial institutions also provide investment facilities and loans for oil palm plantation corporations. Unfortunately, often banks and financial institutions, both domestic and international, do not have screening measures to ensure that the loans they provided to the corporations are spent with due consideration for social and environmental issues as such the survival of small scale smallholders or communities nearby the plantations as well as issues pertaining to the prevention of deforestation. In practice, it is normal that loans are provided by banks before the company obtains the land use right title (HGU) from the government, said Ms Fatilda Hasibuan, Forests and Large Scale Plantations campaigner of the National Executive of WALHI.

The absence of screening measures and the lack of laws that protect the affected people, has caused hundreds of land conflicts between oil palm plantation companies and local communities that remain to be solved, such as is the case in Jambi, North Maluku, Papua and Southeast Sulawesi.

Dwi Nanto, Advocacy and Campaign Manager of WALHI Jambi said, “In 2002 PT. Krena Duta Agro came to the village of Lindung, in Sarolangun, Jambi Province, and established an oil palm plantation in an area of 1800 ha. The company has never fulfilled its obligations of: 1) Cleaning up the lake Biaro, 2) Provide clarification on the location of village’s cash land (TKD) on the 800ha of developed area, 3) Receive Lidung village labor, 4) Establish oil palm plantation for Village Cash Land (TKD), and 5) Clearing of the land “.

“Meanwhile, in North Maluku, a conflict involves PT. Korindo, which is operating in the Gane Barat Selatan, Gane Timur Selatan and Goronga Islands and PT. Mangala Rimba Sejahtera that is operating in the Patani Utara sub-district, Patani Barat sub-district and Halmahera Tengah sub-district, ” said Kuswandi Buamona, Advocacy Manager, WALHI North Maluku. Korindo has grabbed land from local communities and has systematically and illegally used fire to clear the land. Although Korindo has announced a temporary moratorium in North Maluku, there is no mention of any commitment to remedy land rights violations. Korindo should immediately halt operations on stolen land, vacate these lands, remedy damage already caused, and then begin from scratch a proper FPIC process. As primary financiers of Korindo, BNI are jointly culpable for not doing any due diligence on their client’s illegal and unethical practices. Financial sector regulation is needed to force banks to do propoer checks on client behavior before giving clients the money that facilitates environmental and social destruction.

The director of WALHI Southeast Sulawesi, Kisran Makati said that “in Southeast Sulawesi, there is an agrarian conflict between the Mowila people and PT. Merbau Indah Raya Group. According to WALHI Southeast Sulawesi, there are suspicions that PT Merbau’s management has close contacts with notorious local government officials at different levels, including government officials from the land acquisition division. They are suspected of having used fraud to trick the villagers into joining the company’s plasma program, through a benefit-sharing structure of 20% for residents and 80% for the company. In the process of paying the villagers compensation for the plasma plantation, the company requested them a copy of their land ownership certificate and their information letter of land certificate. Later PT. Merbau unilaterally claimed that it had bought the land and that it was not a plasma partnership as promised by the company when signing into agreement with the villagers “.

Interim Director of WALHI Papua, Maurits Rumbekwan adds that “in Papua, the conflict between the local residents and the state owned PTPN II company started in 1985. The government and companies grabbed concession areas by asking the people to sign a letter whose contents were unknown because the text was covered. The company only handed out an attached page for signatures. The community was pressured to sign immediately because the company’s heavy equipment was about to be deployed to the said location, the communities were told. When the heavy machineries arrived, they did not clear the initially agreed location but the sago forest area. Likewise, the extent of the agreed area was changed, but those changes were made without the involvement of local people “.

In addition to the companies and the governments, the driving force behind the strong growth of the palm oil sector are Financial institutions. They must take responsibility for those disastrous impacts. The financial industry is responsible and should be held accountable for the social and environmental impacts that are caused by the companies they provide with financial services said Edi Sutrisno, Advocacy Director of Transformation for Justice Indonesia (TuK Indonesia). We urge banks and other financial institutions to adopt strict policies regarding their investments, and implement robust due diligence procedures.