- Only 21% of Indonesia’s oil plantation companies have fulfilled their legal obligation to set aside land for small farmers under a scheme called plasma, a new government audit has found.
- To address the lack of compliance by companies, the government has set up a task force.
- The task force will also address other issues in the plantation industry, such as tax evasion.
JAKARTA — Only a fifth of Indonesia’s palm oil companies comply with a requirement to allocate part of their land to small farmers, according to official data.
The government’s audit agency, BPKP, found that only 21% of the country’s 2,864 plantation companies allocated the mandatory 20% of their concessions to communities under a sharing scheme called “plasma.”
The scheme dates back to the 1980s, when the palm oil industry began to boom in Indonesia. In 2007, the government made the plasma scheme mandatory, which means that companies that hold plantation licenses are legally obliged to give a fifth of any new plantations to small farmers.
The scheme aims to ensure that rural communities benefit from large plantations near them, including through training, supplies of seeds and fertilizers, guaranteed buyers for their oil palm fruits, and finally land titles.
If done correctly, the plasma scheme can empower local communities and contribute to the local and national economy, according to Linda Rosalina, executive director of TuK Indonesia, an NGO that promotes social justice in the agribusiness sector.
“[The benefits are] very bad,” he told Mongabay.
However, various media and NGO reports found the implementation of the scheme to be lacking.
An investigation by Mongabay, BBC and The Gecko Project in 2022 found that companies failed to provide potentially hundreds of thousands of hectares of legally required plasma land to communities. In one province alone, Rural Indonesians are estimated to lose over $90 million in potential annual income as a result.
Until now, it was unclear how widespread the problem was. This is because the government’s data on oil palm plantations is very fragmented and inconsistent, with the number of companies, the size of the plantations and the level of plasma compliance varying from one agency to the next, BPKP found in a 2019 audit.
As a result, the evaluation of the compliance of the companies with plasma obligations is not possible, the BPKP audit ended on time.
In 2022, BPKP conducted another audit, this one due to the severe shortage of cooking oil in Indonesia that lasted for several months in early 2022. This latest audit tried to solve the problem of data inconsistencies.
“We started matching [the data on] land because we need to know how much land there is, how many companies own the land, and how much is managed by locals,” BPKP chief Muhammad Yusuf Ateh said at a press conference in Jakarta on June 23. “This data is missing.”
The audit concluded that only 581 plantation companies met their plasma obligations.
“This number is very small,” Ateh said.
2022 Data from the Ministry of Agriculture also indicate a widespread lack of compliance, with 83 million hectares released by private companies in 207.
If all companies comply, then at last count there should be 1.6 million hectares (4 million hectares) of plasma plantations in Indonesia.
That means there is a shortfall of approximately 965,000 hectares (2.4 million acres), an area six times the size of London.
The large oil palm groups are better in terms of plasma compliance, with 21% of the planted areas of the 25 largest plantation groups in Indonesia already allocated to small farmers, according to a 2019 report by TuK Indonesia.
The report found that 25 groups have planted 3.4 million hectares (8.4 million hectares) of oil palm plantations, and 711,603 hectares (1.76 million hectares) of these have been given to communities by the end of 2017.
However, the government still needs to make sure that these plasma plantations actually exist and are not just claims reported by companies, said Linda of TuK Indonesia.
In the province of Jambi on the island of Sumatra, TuK Indonesia found that the size of the plasma plantations recorded by the provincial government was greater than what the NGO could identify in the field. In the province of Central Sulawesi, on the island of Sulawesi, a plantation company has claimed the areas reserved for plasma as plasma plantations even though they have not been planted, Linda added.
The BPKP audit also found other problems, such as failure to pay taxes by holders of 9 million hectares (22 million acres) of concessions – an area three times the size of Belgium.
In April, President Joko Widodo established a task force to follow up on the results of the audit. The members of the task force represent various government agencies, including the BPKP.
“This [plasma] The issue is one of the aspects to be fixed by the task force,” said Ateh. “That is why the task force will improve the management of palm oil from upstream to downstream, including plasma.”
Banner image: A worker in an oil palm plantation. Image by Cooke Vieira/CIFOR via Flickr (CC BY-NC-ND 2.0).
Read about our multiple award-winning collaborative plasma investigations here:
A hidden crisis in Indonesia’s palm oil sector: 6 takeaways from our investigation
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