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Oil palm, timber sectors must solve communication, tenure issues: panelists

Companies seeking long-term investment must overcome basic communication challenges to build sustainable working relations with communities.
The past two or three years have seen several smallholder groups become RSPO and ISCC certified.

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JAKARTA, Indonesia — Timber and oil palm: two of Southeast Asia’s most important exports, crucial to local livelihoods and national budgets. But if not managed properly, they can be damaging to forests and the environment.

A recent conference laid bare the difficulties of achieving sustainability in the timber and oil palm sectors, with two key regional challenges emerging: stakeholder communication and land rights. The Forests Asia Summit in Jakarta illuminated on-the-ground examples of these challenges, while offering cause for optimism for timber and oil palm sectors that balance forests, people and profit.

In the Southeast Asian oil palm sector, much of the challenge to improving sustainability lies in the relationship between large companies and the thousands of smallholders they rely on to provide oil palm fruit for processing, according to panelists at a discussion forum on the subject.

Smallholders in Indonesia fall into two broad categories, according to the session’s moderator, Gary Paoli of Daemeter, an Indonesia-based environmental consulting firm: independent farmers with no ties of any kind to a company, and those tied to companies through contractual arrangements.

Adrian Suharto, Sustainability Manager with Neste Oil Singapore, noted that many of these Indonesian smallholders are selling fruit to companies facing increasing sustainability requirements. According to Suharto, this raises questions about who should be accountable for ensuring these smallholders are operating sustainably.

“I think you’re going to have this question whether those smallholders — who are a big proportion of the industry — can catch up to (sustainability) requirements? If they can’t catch up, who is going to help them catch up? Is it the responsibility of the (large) plantations? Is the government playing a role?”

Certification regimes, such as the Roundtable on Sustainable Palm Oil (RSPO) and the International Sustainability & Carbon Certification (ISCC), have shown promise in engendering sustainable practices, but remain difficult to enact for smallholders.

The past two or three years have seen several smallholder groups become RSPO and ISCC certified — “a very positive sign,” Paoli said.

“But a frequent observation made by companies and groups that work with smallholders is that it is incredibly costly,” he continued. “The direct fees (to the RSPO and ISCC) are sizeable. Also, the technical skills and training that’s required in order to bring the (smallholders’) production up to the certification standard is very costly.”

Piers Gillespie from the International Finance Corporation (IFC) said that companies seeking to invest in long-term, sustainable working relations with local communities and smallholders often face basic communication challenges: It is extremely difficult, he said, for a large company to explain how monoculture oil palm farming operates to a community with a long tradition in, say, swidden farming.

“Changing a local community’s existence from one that is based on … more traditional livelihoods to a livelihood that is dominated by oil palm encompasses a huge change in livelihood that is almost impossible to explain to a community at the beginning of the relationship,” he said. It is therefore very difficult, said Gillespie, for companies to predict the long-term certainty of their investment in the community.


Relations and communications between big business, government and smallholders also present challenges in the Southeast Asian timber sector, according to panelists at a discussion forum on sustainable timber production.

Increasingly we will need people who work in agriculture with communities … who are able to communicate in a patient and effective manne

Piers Gillespie

The importance of community inclusiveness in the timber industry is paramount, according to panelist Sulthon Mohammad Amin from Kharisma Jati Antik, a company based in Indonesia’s woodcarving and furniture capital, Jepara. Artisanal furniture makers rely heavily on a steady supply of teak wood; Indonesian forests comprise more than 35 percent of the world’s planted teak forests. Yet the industry is experiencing severe challenges with respect to the issue of certification of forest products (‘green’ or certified furniture) and the scarcity of wood.

To that end, a recently established association representing 124 small-scale timber production interests in villages around Jepara has played an important role, he said, in “creating space for sharing information among small-scale producers … to level the playing field with larger furniture associations and (securing) recognition of our knowledge by the Jepara government.”

Another panelist, Andre Hue, a Jakarta-based Senior Investment Officer with the French Agency for Development (Agence Française de Développement) said his organization strongly supports sustainable product investment models, which he defined as investments that are “environmentally sustainable, socially responsible, economically viable, and showing controllable management of risk.”

According to Hue, a key element in the future of sustainable investment in Indonesia’s timber sector could be the establishment of Forest Management Units (FMUs). Hue said 600 FMUs could be operating in forests across Indonesia by 2019.

FMUs are attractive for several reasons, according to Hue. In addition to reassuring investors about secure long-term forest landscape management, FMUs offer investors the promise of better management of land tenure issues, “local community inclusiveness … law enforcement and professional forest management.”

Common to both sessions on oil palm and timber was delegates’ concerns about the lack of certainty surrounding land use and land ownership. Paoli, as moderator of the oil palm discussion, stated that the single biggest issue determining a small-landholder’s chances of successfully partnering with large companies is the question of land tenure — who has the right to benefit from land uses.

Thus the importance of trust between landholders, officials, financiers and other players is critical, panelists said, adding that it rests on solid communication — especially to ensure community understanding.

Said the IFC’s Gillespie: “Increasingly we will need people who work in agriculture with communities … who are able to communicate in a patient and effective manner.”

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Topic(s) :   Timber legality Oil palm Rights