Sime Darby urged to resolve long-standing land rights conflict

tuk-logoooo
TuK INDONESIA Response to Sime Darby Statement on TuK Factsheet: “Sime Darby Landgrabbing in Indonesia”
December 15, 2016
SBN
Regulatory approaches to sustainability in commercial banking
January 31, 2017
Show all

Sime Darby urged to resolve long-standing land rights conflict

Jakarta January 19, 2017

SIME DARBY URGED TO RESOLVE LONG STANDING LAND RIGHTS CONFLICT BEFORE STOCK EXCHANGE LISTING FOR ITS PLANTATIONS DIVISION

Sime Darby is reported to be preparing to list a number of its divisions on Asian stock exchanges in early 2017. Expected to be among them is Sime Darby’s plantation division – which generates more than a quarter of its revenues and more than a third of its profits[i]. One of Sime Darby’s Indonesian palm oil plantation subsidiaries is locked in a long running and bitter dispute with several Indigenous communities, who claim a number of grievances against the company, including the grabbing of their traditional land and conversion to Sime Darby’s palm oil plantation without their Free, Prior and Informed Consent (FPIC). Before any listing proceeds, affected communities and civil society are urging Sime Darby’s banks and investors to require Sime Darby to resolve all outstanding community conflicts and ensure the communities’ land rights are fully respected and protected.

Sime Darby is one of the world’s largest palm oil companies and produces around 16% of all RSPO certified palm oil.[ii] The company prides itself on its socially responsible practices and has been a member of the RSPO since 2004 as well as a signatory to the United Nations Global Compact and the New York Declaration on Forests.[iii] In September 2016 it launched its Responsible Agriculture Charter[iv] and announced its intention to join the Palm Oil Innovation Group (POIG).[v] In December 2016, Sime Darby signed the High Carbon Stock Convergence Agreement, which outlines the fundamental elements of a single set of rules for implementing its commitment to “no deforestation” and robust Free, Prior and Informed Consent (FPIC) processes for the recognition of rights and interests of local communities.[vi]

Despite these indications of commitment to responsible business practices, the company has yet to resolve serious violations of Indigenous land rights involving its subsidiary PT Mitra Austral Sejahtera (PT MAS), in Indonesia’s West Kalimantan province. PT MAS has been operating on 1,462 ha of indigenous community lands without their Free, Prior and Informed Consent, since 1995. In 2012, the affected communities filed an RSPO complaint, which five years later remains unresolved. Recent efforts by communities and civil society in 2015 and 2016 to set out an action plan for participatory mapping and the return of customary lands are yet to be adequately addressed.[vii]

Outstanding community against Sime Darby’s PT MAS include:

  • Operating on indigenous lands in West Kalimantan since 1995, without obtaining Free Prior and Informed Consent (FPIC) from communities
  • Lack of transparency on land status and partnership agreements
  • Failure to follow up on promises of infrastructural development
  • Lack of compliance to local regulations for plasma estates
  • Non-compliance with RSPO Principles & Criteria 2.2, which requires that “the right to use the land is demonstrated, and is not legitimately contested by local people who can demonstrate that they have legal, customary or user rights to”.

A factsheet of the conflict published by TuK-Indonesia can be found here. A statement by Sime Darby responding to TuK-Indonesia’s factsheet can be found here. RSPO complaint summary information can be found here and status of dispute settlement negotiations can be found here.

Sime Darby’s major financiers[ix] and investors,[x] listed below, are likely to be approached in the underwriting and/or shareholding of any listing of the company’s plantations division. Some of these institutions (including HSBC, Standard Chartered, Citigroup, Norwegian Government Pension Fund and Pensioenfonds Zorg & Welzijn) have policies in place supposed to prevent them providing financial services to client companies in violation of key environmental and social standards, such as land rights violations.

Recommendations

Sime Darby should urgently resolve the outstanding grievances of communities affected by PT MAS to the satisfaction of the communities affected. .

Banks and investors should require Sime Darby to resolve the outstanding grievances of communities affected by PT MAS, as a precondition for involvement in any listing or future financing agreements with the company.

Table 1: Loans and underwriting by financing type (US$ mln, 2009-2016 September)

Financier Country Bond issuance Corporate loan Revolving credit facility Share issuance Total (US$mln)
Malayan Banking Malaysia  1,491  100  590 2,181
CIMB Group Malaysia  376  376
Public Bank Malaysia  326  326
OCBC Singapore  220  80  300
Mizuho Financial Japan  170  110  280
HSBC United Kingdom  75  90  60  225
Mitsubishi UFJ Financial Japan  120  80  200
Standard Chartered United Kingdom  75  90  10  175
ANZ Australia  130  10  140
Citigroup United States  75  75
Hong Leong Company Malaysia  50  50
Total  2,469  920  350  590 4,329


Table 2: Bond and shareholding (US$ mln, 2016 September most recent filing)

Rank Investor Parent Investor Parent Country Value (in US$ mln)
1 Employees Provident Fund Malaysia  1,305
2 KWAP Retirement Fund Malaysia  366
3 Malaysian Hajj Pilgrims Fund Malaysia  285
4 Public Mutual Malaysia  242
5 Vanguard United States  98
6 BlackRock United States  95
7 GIC Singapore  92
8 Prudential (UK) United Kingdom  77
9 Oversea-Chinese Banking Corporation Singapore  73
10 Norwegian Government Pension Fund – Global Norway  48
11 Dimensional Fund Advisors United States  26
12 Pensioenfonds Zorg & Welzijn Netherlands  21
13 CIMB Group Malaysia  20
14 JPMorgan Chase United States  20
15 Deutsche Bank Germany  15
Total 2,784

[i] Sime Darby (2016, October), Innovating the Future: Annual Report 2016, p. 7; Lee, L. (2016, November 25), “Malaysia’s Sime Darby could list its plantations division”, online: http://www.reuters.com/article/sime-drby-results-idUSL4N1DQ2SB, viewed in November 2016. Some analysts have also indicated that a demerger of its plantation division is a likely scenario.

[ii] RSPO, 30 September 2016. “Certified Growers”. Online: http://www.rspo.org/certification/certified-growers

[iii] Sime Darby website, (n.d), “Performance Highlights”, online: www.simedarby.com/sustainability/performance-highlights/performance-highlights

[iv] Sime Darby, (21/09/2016), Press Release: “Sime Darby Plantation launches responsible agriculture charter”, online: http://www.simedarby.com/media/press-release/sime-darby-plantation-launches-responsible-agriculture-charter

[v] Sime Darby, (21/09/2016), Press Release: “Sime Darby Plantation launches responsible agriculture charter”, online: http://www.simedarby.com/media/press-release/sime-darby-plantation-launches-responsible-agriculture-charter

[vi] http://highcarbonstock.org/wp-content/uploads/2016/11/Final-HCS-Convergence-Agreement-.pdf

[vii] http://www.rspo.org/acop/2015/sime-darby-plantation-sdn-bhd/progress-report_pt-mas.pdf

[viii] Investigation Report on Conflict of PT Mitra Austral Sejahtera’s Plantation Land In Sanggau District – Province of West Kalimantan, by Asep Yunan Firdaus 2012.

[ix]To explore the data, see: http://forestsandfinance.org/?explore=AC0.YYYYKKB.KB.KKKKB.kkk1ke.E.KF.F.G#sthash.2QAjLEYI

[x] To explore the data, see: http://forestsandfinance.org/?explore=ac1.YYYYYYYYYYYKK1.KB.KKKKB.kkk1ke.E.KF.F.G

For more information, please click the following link:

ForestsandFinanceNews_SimeDarby