How does legislation affect oil palm smallholders in the sanggau district of Kalimantan, Indonesia?

Australasian Journal of Natural Resources Law and Policy

Volumn 14, Issue 1, 2011, Pages 1-35

  Gillespie, Piers ^a,b,c,d  

^a AUSTRALIAN NATIONAL UNIVERSITY   (Australia)

^b UNIVERSITY OF MELBOURNE   (Australia)

^c FLINDERS UNIVERSITY   (Australia)

^d Institute of Arbitrators and Mediators Australia   (Australia)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 84856360736     PISSN: 13205323     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (117)

1. The words company and plantation will be used interchangeably in this article when it refers to the plantation company. Where it relates to plantation land, the word plantation will be used.
2. World Growth, The Economic Benefit of Palm Oil to Indonesia. A Report by World Growth (February 2010) http://www.worldgrowth.org/assets/files/WG_Indonesian_Palm_ Oil_Benefits_Report2_11.pdf
3. Laurene Feintrenie, Wan K Chong and Patrice Levang, 'Why Do Farmers Prefer Oil Palm? Lessons Learnt from Bungo District, Indonesia' (2010) 9(3) Small Scale Forestry 379-96.
4. For environmental commentary, see Lian Pin Koh and David S Wilcove, 'Is Oil Palm Agriculture Really Destroying Tropical Biodiversity?' (2008) 1 Conservation Letters 60-4
5. Emily Fitzherbert, M J Struebig, A Morel, F Danielsen, C A Brühl, P F Donald and B Phalan, 'How Will Oil Palm Expansion Affect Biodiversity?' (2008) 23(10) Trends in Ecology and Evolution 538-45.
6. For human rights, see Marcus Colchester, Norman Jiwan, Andiko, Martua Sirait, Asep Yunan Firdaus, A Surambo and Herbert Pane, Palm Oil and Land Acquisition in Indonesia: Implications for Local Communities and Indigenous Peoples (Forest Peoples Program, 2006).
7. See H K Gibbs, M Johnston, J A Foley, T Holloway, C Monfreda, N Ramankutty, and D Zaks, 'Carbon Payback Times for Cropbased Biofuel Expansion in the Tropics: The Effects of Changing Yield and Technology' (2008) 3(10) Environmental Research Letters 1-10
8. Lian Pin Koh, Jukka Miettinen, Soo Chin Liew and Jaboury Ghazoul,'Remotely Sensed Evidence of Tropical Peatland Conversion to Oil Palm' (2011) Proceedings from the National Academy of Science of the United States of America (in press).
9. The term 'oil palm' describes all aspects of the oil palm industry; palm oil is the finished vegetable oil product.
10. An excellent example of how environmental discourse is framed around 'coalitions' is in Maarten A Hajer, 'Discourse Coalitions and the Institutionalization of Practice: The Case of Acid Rain in Great Britain' in F Fischer and J Forester (eds), The Argumentative Turn in Policy Analysis and Planning (Duke University Press, 1993) 43-76.
11. Arturo Escobar also writes about 'environmental managerialism', where western scientists control the focus of specific issues through discourse: see Arturo Escobar, Encountering Development: The Making and Unmaking of the Third World (Princeton University Press, 2005) 4.
12. Plantation boundaries from the Indonesian National Land Board (2008) Sanggau District Plantation Map, Pontianak. The map is compiled from different sources and reproduced by permission of the CartographicGIS Services, CartoANU_09099b2, Australian National University.
13. Undang Undang Nomor 5 Tahun 1960 Pokok Agraria [Law No 5 of 1960 on Agrarian Affairs (Indonesia) (Basic Agrarian Law No 5/1960) (Indonesia)]. Hereafter BAL in text. Undang Undang hereafter UU in short titles.
14. John F McCarthy, 'Shifting Resource Entitlements and Governance Reform During the Agrarian Transition in Sumatra, Indonesia' (2007) 55 Journal of Legal Pluralism 65, 110. The term 'local landowners' denotes local community members who have commonly accepted ulayat rights over local land. Ulayat is the term used for the communal land rights of an ethnic community based on local customary beliefs.
15. I acknowledge that using the term adat without discussion of the term's intricacies is fraught with potential inaccuracies, but elaboration is beyond the article's scope. See Tania Murray Li, 'Articulating Indigenous Identity in Indonesia: Resource Politics and the Tribal Slot' (2000) 42(1) Comparative Studies in Society and History 149.
16. Interview with a retired Sanggau Court Judge, June 2009.
17. For a crossprovince comparison, see John McCarthy, Piers Gillespie and Zahari Zen, 'Swimming Upstream: Local Indonesian Production Networks in "Globalized" Palm Oil Production' (2011) World Development (forthcoming).
18. The list is based on discussions with smallholders and relevant Indonesian nongovernment organisations.
19. Cheng Hai Teoh, 'Key Sustainability Issues in the Palm Oil Sector' (Discussion Paper Number 7, World Bank, 2010). Palm oil is the finished produced product; oil palm is the crop grown.
20. C Carter, W Finley, J Fry, D Jackson and L Willis, 'Palm Oil Markets and Future Supply' (2007) 109 European Journal of Lipid Science and Technology 307, 314.
21. Srij J Santosa, 'Palm Oil Boom in Indonesia: From Plantation to Downstream Products and Biodiesel' (2008) 36(5-6) Clean Soil, Air, Water 453, 458, Copyright WileyVCH Verlag GmbH & Co. KGaA; Reproduced with permission. Both CPO and CPKO are derived from oil palm during the production process.
22. Although there are independent oil palm farmers as well across Indonesia, this article will focus on the tied plasma smallholders. See Zahari Zen, Piers Gillespie and John F McCarthy, 'Linking ProPoor Policy and the Oil Palm Boom' (Policy Brief No 5, Australia Indonesia Governance Research Partnership, 2008).
23. For a detailed history on these schemes, see M Badrun, Tonggak Perubahan: Melalui PIR Kelapa Sawit Membangun Negeri [The Milestone of Change: Developing a Nation through Oil Palm] (Citra Widjaya, 2010).
24. Zahari Zen, Colin Barlow and Rita Gondowarsito, 'Oil Palm in Indonesian SocioEconomic Improvement: A Review of Options' (Working Paper No 11, Research School of Pacific and Asian Studies, Australian National University, 2005).
25. Wayan R Susila, 'Daya Saing Dan Efisiensi Penggunaan Sumber Daya Minyak Sawit Mentah' [Competiveness and Efficiency in the Resource Use of Crude Palm Oil] (1998) 2(2) Indonesian Jurnal Agribisnis [Indonesian Journal of Agribusiness] 16-30.
26. Bayu Krisnamurthi, 'Sustainably Developing the Further Growth of the Indonesian Oil Palm Industry' (Speech delivered at a presentation to the Roundtable on Sustainable Oil Palm Conference, Bali, 22 November 2007).
27. Peraturan Menteri Pertanian No 26 Tahun 2007 Tentang Pedoman Perizinan Usaha Perkebunan (No 26/Permentan/OT 140/2/2007) [Minister of Agriculture, Ministerial Regulation No 26 of 2007 Concerning Guidance for Plantation Permission (Indonesia)].
28. McCarthy, above n 12, 5.
29. Indonesian Palm Oil Commission figures cited in World Growth, above n 2, 11.
30. Jonathan Rigg, Southeast Asia: The Human Landscape of Modernisation and Development (Routledge, 1997).
31. Doug Sheil, The Impacts and Opportunities of Oil Palm in Southeast Asia: What Do We Know and What Do We Need to Know? (CIFOR Publication, 2009) 67.
32. K Bird, A McKay and I Shinyekwa, Isolation and Poverty: The Relationship between Spatially Differentiated Access to Goods and Services and Poverty (December 2010) Overseas Development Institute, 4 .
33. See John F McCarthy and Zahari Zen, 'Regulating the Oil Palm Boom: Assessing the Effectiveness of Environmental Governance Approaches to Agroindustrial Pollution in Indonesia' (2010) 32(1) Law and Policy 153-79.
34. Santosa, above n 16, 459, Copyright WileyVCH Verlag GmbH & Co. KGaA; Reproduced with permission.
35. UndangUndang Nomor 5 Tahun 1960 Pokok Agraria [Law No 5 of 1960 on Agrarian Affairs (Basic Agrarian Law No 5/1960)] (Indonesia). Note: Undang Undang hereafter UU.
36. More recently this includes: Anton E Lucas and Carol Warren, 'The State, the People and their Mediators: The Struggle Over Agrarian Law Reform in PostNew Order Indonesia' (2003) 76(10) Indonesia 87-126
37. Nancy Peluso, Suraya Afiff and Noer Fauzi Rachman, 'Claiming the Grounds for Reform: Agrarian and Environmental Movements in Indonesia' (2008) 8(2-3) Journal of Agrarian Change 377-407
38. Jamie S Davidson and David Henley (eds), The Revival of Tradition in Indonesian Politics: The Deployment of Adat from Colonialism to Indigenism (Routledge, 2007)
39. Tania Murray Li, 'Masyarakat Adat, Difference, and the Limits of Recognition in Indonesia's Forest Zone' (2001) 35(3) Modern Asian Studies 645-76.
40. See the explanatory memorandum (EM) of the BAL (Basic Agrarian Law No 5/1960 (Indonesia) EM). An explanatory memorandum provides an explanation of a bill or a law.
41. Basic Agrarian Law No 5/1960 (Indonesia) EM. See also Daniel Fitzpatrick, 'Disputes and Pluralism in Modern Indonesian Land Law' (1997) 22 Yale Journal of International Law 171-205.
42. The consequences of this on adat land within forestry boundaries is outlined in McCarthy, above n 9, 110.
43. Herman Slaats, 'Land Law in Indonesia: Changing Approaches' (2000) IIAS Newsletter Online 22 .
44. Daniel Fitzpatrick, 'Land, Custom and the State in PostSuharto Indonesia: A Foreign Lawyer's Perspective' in Jamie S Davidson and David Henley (eds), The Revival of Tradition in Indonesian Politics: The Deployment of Adat from Colonialism to Indigenism (Routledge, 2007) 130, 139.
45. McCarthy, above n 12, 7. A similar State Ministerial Decree of the Minister of Agrarian Affairs/Head of National Land Agency has also been released, namely Minister of Agrarian Affairs/Head of National Land Agency, Decree No 5 of 1999 on Guidelines to Resolution of Matters Concerning Hak Ulayat of Customary Law Communities.
46. Fitzpatrick, Land, Custom and the State, above n 37, 130.
47. Fitzpatrick, Land, Custom and the State, above n 37 136.
48. st sess, 30 July - 8 August 2007 (6 July 2007) 7 . Law No 5 of 1979 has since been replaced by Law No 32 of 2004 on Regional Government which retains the discriminatory subordination of local adat to Javanese customary institutions. Other laws that limit indigenous peoples' rights, most notably for the purposes of this report, include Law No 41 of 1999 on Forestry and Law No 18 of 2004 on Plantations.
49. Ulayat is the term used for the communal land rights of an ethnic community based on local customary beliefs.
50. nd ed, 2008) 146, 190.
51. nd ed, 2008) 146 147.
52. Fitzpatrick, Disputes and Pluralism, above n 34, 140.
53. The Indonesian decentralisation process initially centred around two pieces of legislation: UndangUndang Nomor 22 Tahun 1999 tentang Pemerintah Daerah [Law No 22 of 1999 Concerning Regional Governance (Indonesia))], and Undang Undang Nomor 25 Tahun 1999 Perimbangan Keuangan antara Pemerintah Pusat dan Daerah [Law No 25 of 1999 on the Fiscal Balance between the Central Government and the Regions (Indonesia) (Law No 25 of1999 on Fiscal Balance (Indonesia))].
54. Davidson and Henley, above n 32, 7.
55. David Henley and Jamie S Davidson, 'In the Name of Adat: Regional Perspectives on Reform, Tradition, and Democracy in Indonesia' (2008) 42 Modern Asian Studies 815-52.
56. David Bourchier, 'The Romance of Adat in the Indonesian Political Imagination and the Current Revival' in Jamie S Davidson and David Henley (eds), The Revival of Tradition in Indonesian Politics: The Deployment of Adat from Colonialism to Indigenism (Routledge, 2007) 112, 117.
57. Uang derasah is the common term, although uang ganti rugi and derasah taman tumbuh are also used.
58. HGU is the Indonesian acronym for Hak Guna Usaha, or land use right licence. See below n 56.
59. Nancy Peluso, 'Seeing Property in Land Use: Local Territorialisations in West Kalimantan, Indonesia' (2005) 105(1) Danish Journal of Geography 1, 1. Affirmed by various discussions with regional adat leaders.
60. Interview with district adat leader, July 2009.
61. Interview with district adat leader, July 2009.
62. Interview with West Kalimantan smallholder, April 2008.
63. Undang Undang Nomor 18 Tahun 2004 Tentang Perkebunan [Law No 18 of 2004 concerning Plantations (Indonesia) [Law No 18/2004 on Plantations (Indonesia))] art 11(1)-(3). Parts of Law No 18 Concerning 2004 Plantations has been superseded by the Undang Undang Nomor 25 Tahun 2007 Tentang Penanaman Modal (Undang Undang No 25/2007 Tentang Penanaman Modal) [Investment Law No 25 of 2007 on Investment (Indonesia) (Law No 25/2007 on Investment (Indonesia))]. Article 22 of this law states that HGU licences can be accessed for an initial 60 years, which can be extended for a further 35 years. For an outline of the HGU plantation licensing process, see Iyung Pahan, Kelapa Sawit: Manajemen Agribisnis Dari Hulu Hingga Hilir (Penebar Swadaya, 2008) 46-68.
64. See also A Reksodiputro, Indonesia: New Investment Law (September 2007) International Finance Law Review .
65. Derasah is not directly mentioned in the national or district regulation on oil palm. See Peraturan Daerah Nomor 3 Tahun 2004 tentang Penyelenggaraan Perkebunan Kelapa Sawit Pola Kemitraan (Sanggau Regional Regulation No 3 of 2004 on the Development of Oil Palm Partnership Plantations (Indonesia) (Sanggau Regional Regulation No 3/2004 (Indonesia))] art5(c) explains in general terms the amount of compensation for local crops and that the amount is to be discussed and then approved by the district Regent.
66. Interview with Sanggau Estate Manager, August 2009.
67. Interview with Provincial Plantations Official, June 2009.
68. Colchester, above n 3, 128.
69. McCarthy, above n 9.
70. UU No 18/2004 Tentang Perkebunan.
71. Pahan, above n 56, 46.
72. Law No 18/2004 on Plantations (Indonesia) EM art 9(2).
73. Law No 18/2004 on Plantations (Indonesia) EM art 9.
74. Law No 18/2004 on Plantations (Indonesia) art 9(1).
75. In this respect, art 9(2) of Law No 18 on Plantations (Indonesia) continues on from legislation such as Presidential Decree No 55/1993, which establishes the need for discussions with local communities but limits community participation to the process of reaching consensus on compensation for relinquishing rights over land.
76. Interview with Sanggau Plantation Estate Manager, July 2009.
77. Law No 18/2004 on Plantations (Indonesia) art 10.
78. Law No 18/2004 on Plantations (Indonesia) art 10(1)-(2).
79. In 2009, widespread confusion remains endemic across many of the stakeholders that I met to discuss this process.
80. Interview with Provincial plantations official, June 2008.
81. Editorial, 'MK Lanjutkan Uji UU Perkebunan' Bisnis Indonesia (online) 24 April 2011, http://www.bisnis.com/hukum/hukum-bisnis/21261-mk-lanjutkan-uji-uu-perkebunan
82. 'Plantation Law Lacks Detail: Executive', The Jakarta Post (Jakarta), 15 July 2004, 12.
83. Law No 18/2004 on Plantations (Indonesia) art 20.
84. Interview with provincial adat leader, May 2009.
85. Peraturan Menteri Pertanian Nomor 26 Tahun 2007 Tentang Pedoman Perizinan Usaha Perkebunan (No26/Permentan/OT 140/2/2007) [Minister for Agriculture, Ministerial Regulation No 26/2007 Concerning Guidance for Plantation Permission (Indonesia)].
86. Wayan Susila, 'Contribution of Oil Palm Industry to Economic Growth and Poverty Alleviation in Indonesia' (2004) 23(3) Jurnal Litbang Pertanian [Journal of Agricultural Research and Development] 107, 112.
87. Minister for Agriculture, Ministerial Regulation No26/2007, art 11(1)-(4). An IUP (Ijin Usaha Perkebunan) is a Plantation Estate Permit, the permit or licence for a plantation to be able to refine and produce a new product on site based on the plantation crop. IUPB (ijin usaha perkebunan-budijaya) is the licence to only operate a plantation for cultivation.
88. Interview with district government official, May 2009.
89. Instruksi Presiden Nomor 1 Tahun 1986 Tentang Pengembangan Perkebunan Dengan Pola Perusahaan Inti Rakyat Yang Dikaitkan Dengan Transmigrasi [Presidential Instruction Concerning the Development a Company Community Transmigrant Plantation No 1 of 1986 (Indonesia)] arts 2, 3(d), 4(b)(i)-(ii), 6(b)-(c).
90. Interview with provincial plantations official, April 2009. In terms of becoming part of the wider legislative narrative, the later 2011 Ministry of Forestry Regulation, Peraturan Menteri Kehutanan Republik Indonesia Nomor: P.17/MenhutII/2011 Tentang Perubahan Atas Peraturan Menteri Kehutanan Nomor P.33/MenhutII/2010 Tentang Tata Cara Perlepasan Kawasan Hutan Produksi yang dapat dikonversi [Ministry of Forestry Regulation No: P.17/ MenhutII/2011 Concerning Changes in the Regulations of the Ministry of Forestry No.33/MenhutII/2010 Concerning Procedures for the Conversion of Forest Lands], and the Peraturan Menteri Kehutanan Republik Indonesia Nomor: P.33/MenhutII/2010 Tentang Tata Cara Perlepasan Kawasan Hutan yang dapat dikonversi [Ministry of Forestry Regulation of the Republic of Indonesia Number: P.33/ MenhutII/2010 Concerning Procedures for the Conversion of Forest Lands] both reaffirm the land division outlined in the Agriculture Ministerial Regulation No 26/2007.
91. Article 33 of the 1945 Constitution explains that the Cooperative has an important part in the development of the nation. See also John R Bowen, 'On the Political Construction of Tradition: Gotong Royong in Indonesia' (1986) 45(3) Journal of Asian Studies 545-61.
92. Keputusan Menteri Pertanian No 940/Kpts/OT 210/10/97 Tentang Pendoman Kemitraan Usaha Pertanian, [Agricultural Ministry Decision No 940/Kpts/OT 210/10/97 Concerning Agricultural Partnerships (Indonesia)] art 4(1).
93. There is a some explanation about what a kemitraan should be both nationally in Undang Undang Nomor 9 Tahun 1995 Tentang Usaha Kecil (UU No 9/1995) [Law No 9/1995 Concerning Small Business (Indonesia)], in particular art 26, and provincially in a West Kalimantan government document entitled Kemitraan Dalam Konsep Pengembangan [Partnership in Development], but little about how to actually implement a successful partnership arrangement.
94. Agriculture Ministerial Regulation No 26/2007, arts 22(1)-(3). Other relevant partnership legislation includes the Keputusan Menteri Pertanian Nomor 940/Kpts/ot.210/10/1997 Tentang Pedoman Kemitraan Usaha Pertanian [Agricultural Ministerial Decision Number 940/Kpts/ot.210/10/1997 Concerning Guidance Regarding Agricultural Partnerships (Indonesia)] and the Surat Keputusan Menteri Pertanian Nomor 472/Kpts/TN.330/6/1996 [Agricultural Ministerial Letter Number 472/Kpts.TN.330/6/1996 (Indonesia)].
95. Agriculture Ministerial Regulation No.26/2007, art 23(1)-(2). Indeed, the Regulation has a clause whereby prior to obtaining a plantation licence, the applicant must include a statement confirming a preparedness to undertake a kemitraan with the local community, but again without specifying what the statement should include and what a kemitraan partnership actually is. Agriculture Ministerial Regulation No 26/2007, art 1(16); see also art s15(m), 16(k), 17(o).
96. Interview with district government official, August 2008.
97. Keputusan Menteri Kehutanan dan Perkebunan No.627/KtpsII/1998 Tentang Ketentuan Penetapan Harga Pembelian Tandan Buah Segar Kelapa Sawit Produksi Petani [Ministry of Forestry and Plantations Decree No 627/KtpsII/1998 Concerning the Setting of the Sales Price of Farmer Fresh Oil Palm Fruit Bunches (Indonesia)] Referred to in text as the 1998 Decision.
98. Peraturan Menteri Pertanian No.395/Kpts/OT 140/11/2005 Tentang Pedoman Penetapan Harga Pembelian Tandan Buah Segar (TBS) Kelapa Sawit Produksi Pekebun [Minister of Agriculture Regulation No 395/Kpts /OT 140/11/2005 Concerning the Setting of the Sale Price of Plantation Farmer Fresh Oil Palm Fruit (Indonesia)] [hereafter Agricultural Ministry Regulation No 395/2005]. The 2005 Regulation is reaffirmed by Peraturan Menteri Pertanian Nomor 17/Permentan/OT 140/2/2010 Tentang Pedoman Penetapan Harga Pembelian Tandan Buah Segar (TBS) Kelapa Sawit Produksi Pekebun [Minister of Agriculture Regulation No 17/Permentan/OT 140/2/2010 Concerning the Setting of the Sale Price of Plantation Farmer Fresh Oil Palm Fruit (Indonesia)].
99. Agricultural Ministry Regulation No 395/2005, art 2(2).
100. Ministry of Forestry and Plantations Decree No 627/KtpsII/1998, arts 1(f), 3(2).
101. Rendement is the amount of oil content that can be procured from the production process divided by the actual weight of the oil palm fruit. This figure is determined by averaging rendement fruit oil amounts provincewide and is periodically nominated every five years by the Ministry of Agriculture.
102. The formula's components consist of Index K, the average sales price of CPO sold monthly, CPO rendement, the average monthly sales price of the palm kernel oil (PKO), and PKO rendement.
103. The current agreed credit pay back cost for a West Kalimantan oil palm smallholder is set according to the national regulations from the Ministry of Plantations Concerning The Implementation of Plantation Revitalisation Number 33/Permentan/OT/140/7/2006 and Finance Regulation Number 117/PMK/Kpts/1/2007. It is set at 24,980,000 Rupiah per hectare (IDR/ha). This figure fluctuates depending on the proximity of the plantation to sealed roads; the more remote the plantation, the greater the startup investment costs, the higher the smallholder debt.
104. Agricultural Ministry Regulation No 395/2005, art 9(2).
105. These will end up as part of overall operating costs which then need to be paid by smallholders. In this way, it translates into reduced smallholder FFB income.
106. Agricultural Ministry Regulation No 395/2005, art 9.
107. Interview with district plantations official, August 2009.
108. There is a monthly provincial assessment meeting run by the Ministry of Plantations as well which checks plantation figures.
109. Interview with District government official, August 2009.
110. Interview with Sanggau plantations official, May 2009.
111. Interview with district plantations official, June 2009.
112. Peraturan Daerah No.3/2004 Tentang Penyelenggaraan Perkebunan Kelapa Sawit Pola Kemitraan [Sanggau Regional Regulation No 3/2004 Concerning the Development of Oil Palm Partnership Plantations (Indonesia)].
113. Sanggau Regional Regulation No 3/2004, EM, (a) (b).
114. Discussion with exJudge of Sanggau, June 2008. It is unlikely however that such an interpretation is illegal as it remains within national legislative guidelines.
115. District government official, June 2009.
116. Sanggau Regional Regulation No 3/2004, art 11(1)-(4). The term represif has been often used in other Indonesian legislation.
117. See, eg, McCarthy above n 29; Piers Gillespie, 'The Challenge of Governance in Indonesian Oil Palm Plantations: Beyond Legalism?' (2012) Asian Studies Review (forthcoming).