CDC projects criticised over impacts

Down to Earth No. 50, August 2001

Communities in Kalimantan are trying to secure fair compensation for lands and resources from two oil palm plantation companies funded by CDC, the British private investment agency. Although some moves towards negotiations have been made, CDC still fails to acknowledge that the projects' policies on land acquisition and community relations have led to social conflict, deforestation and, for some communities, increased poverty. In the meantime, the projects are proceeding, while many disputes remain unsettled.

Communities in Central and West Kalimantan affected by the two CDC projects want redress for the loss of lands and livelihoods caused by the projects. Both projects, PT Agro Indomas (AI) in Central Kalimantan and PT Harapan Sawit Lestari (HSL) in West Kalimantan, were agreed with the government without the local people's prior knowledge. As a result, some local people have found their lives in upheaval, their customary land rights denied and their livelihoods destroyed.

PT Agro Indomas, is owned by Sri Lankan, Malaysian and Indonesian companies, with substantial investments from CDC, and the Dutch bank, Rabobank. Located in Danau Sembuluh sub-district, Kotawaringin Timur district, it is currently managed by one of the Malaysian partners, PT Agro Hope Shd. Bhd. PT AI was the first oil palm company, in 1995, to move into the Sembuluh Lakes area, with rights to develop a 12,000 hectare oil palm plantation and to construct a 60 tonnes/hour palm oil processing plant. CDC made an initial investment of US$14.4 million in March 1999 and Rabobank US$10.3 million later that year.

PT HSL has plantation concessions covering 25,000 hectares on Dayak and Melayu customary lands in Manis Mata sub-district, Ketapang district, West Kalimantan. PT HSL started operations in 1993. CDC is now the majority shareholder and manager of the project.

CDC invested in both projects well after the problems with local people were apparent. No proper environmental or social impact assessment was carried out despite the insitution's ethical business principles policy. In September last year, DTE and local branches of the Indonesian environment NGO, WALHI, completed two substantial reports on the AI and HSL plantation projects. These reports, drawn up with input from the affected communities, detailed the local grievances against the plantation companies, listed their demands and made recommendations on how to start addressing the problems.

The reports also questioned CDC's decision to invest in these conflict-ridden projects given the agency's close ties to the British government's overseas aid agency, DFID. DFID, which promotes environmentally and socially responsible development and stakeholder involvement in decision-making in its own forestry sector projects, is currently CDC's sole shareholder.

The reports were sent to CDC, Rabobank, DFID staff in Jakarta and Britain's Minister for International Development, Clare Short. They were timed to reach the minister before she left for a visit to Indonesia en route to the CGI meeting in Tokyo, October 2000. Short made a visit to the West Kalimantan capital, Pontianak, where a meeting was organised to allow community representatives affected by the HSL plantation to present her with their grievances. The minister promised to address the problems and asked the community to report back to her on progress in four months' time.

CDC responded by sending a member of the London headquarters Business Principles Unit to each project to assess the problems and to reply to the issues raised by WALHI and DTE. These were short visits and no genuine consultation with communities took place. Reports were duly made - although the second, on PT HSL, was not circulated to concerned NGOs until June this year. While there is some acknowledgement in the reports of past bad practice and the negative impacts of oil palm plantations, most of the community demands presented in the DTE-WALHI reports are ignored - see DTE's comments on the response at

CDC also failed to acknowledge that the project had caused social conflict, deforestation or increased poverty. Moreover, CDC and their partner companies still fail to grasp the nature of the indigenous peoples' adat rights. Instead of addressing the communities' need for a sustainable livelihood, CDC is blaming NGOs for misrepresenting the situation.

While CDC was drawing up its reports, tension was increasing on the ground. In West Kalimantan, there were reports of attempts to intimidate community groups in dispute with the company. Police detained one community leader for six weeks in a cell 200 km from his village, following a minor confrontation with a company official. In March this year a meeting was held between DTE, CDC and DFID, where it was agreed that an improved environment for dialogue, including greater transparency, was required, if community grievances are to be properly addressed. It was also agreed that it would be constructive for CDC and their oil palm plantation partners to engage in a broader consultation with other reputable sources of expertise and information, particularly on social issues such as land rights, customary land use and livelihoods. Indonesian NGOs have taken this suggestion further at subsequent meetings with CDC staff, and are now calling on DFID to appoint independent consultants to advise CDC on these issues.

The same month, DTE wrote to Clare Short to report on developments since her October visit. The letter said: "While it is clear that PT HSL-CDC have made some efforts to listen to disaffected community groups, the measures taken so far fall a long way short of addressing their basic demands. These stem from local people's concerns for the well-being of their families and their future livelihoods since their land and agro-forestry systems have been taken over by the plantation."

The letter looked forward to receiving news of "concrete measures, targets for action and time schedules for these" in the near future. No answer has yet been received.

At the time of writing, the negotiations are still at the stage of "talks about talks." CDC still does not admit that the companies' land appropriation methods (in the AI case) were unfair and remains doubtful about the genuineness of community claims. Given this unhelpful stance, serious concern remains about CDC's commitment to reach a fair and long-lasting settlement with the communities. It is disappointing that, while the disputes continue, the plantation companies have not agreed to the proposal that further land clearance should be suspended until compensation and replacement livelihood issues have been settled with the whole of the affected communities. Instead - in the HSL case at least - the company is continuing with efforts to make separate settlements with each village. Some villages have agreed not because they welcome the oil palm plantations but because there is now no alternative. Most of their forest and other lands have gone and what little compensation they received has run out. Others continue to refuse any settlement. This piecemeal approach has been condemned by local NGOs because it will most likely lead to yet more conflict in future.

(DTE letter to Clare Short, 14/Mar/01; The dispute between the local community and PT Agro indomas oil palm plantation, Central Kalimantan Indonesia, WALHI Kalteng and DTE, September 2000; The dispute between the indigenous community and PT Harapan Sawit Lestari, oil palm plantation Manis Mata, Ketapang district, West Kalimantan; WALHI Kalbar & DTE, September 2000; NGO sources).

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