Cultivate 10

Indonesia’s haze crisis hits record levels

Indonesia Publication February 2016

Indonesia is once again battling forest fires in Sumatra and Kalimantan (Indonesian Borneo), exacerbated by an unusually severe dry season this year. The haze enveloped Singapore and Malaysia, and also wafted into Thailand and the Philippines.

The recent crisis seems to be the worst and longest on record. According to Bloomberg, average daily emissions of carbon dioxide for Indonesia in September 2015 were 22.5 megatons, rising to 23 megatons in October (1- 28). Figures from the World Resources Institute indicated that Indonesia normally emitted 2.1 megatons of carbon dioxide per day before this year’s forest fires. Other reports mention that Pollutant Standard Index (PSI) levels recorded in Central Kalimantan exceeded 2,000 and even reached 3,300 μg/m3 TPM at times, while anything above 300 is considered hazardous.

The finger of blame has been pointed at the usual culprits – plantation companies in one of the world’s two largest palm oil producing nations, and small-scale farmers using slash-andburn as an economic means of land clearing.

And the Indonesian Government is again under fire for not doing enough.

International criticism

As the air pollution index soared to hazardous levels, Singapore and Malaysia closed schools, distributed masks and advised residents to stay indoors. Some flights in and out of Indonesia were cancelled, putting at risk Indonesia’s lucrative tourism industry, with the peak season approaching.

In response to Indonesian Vice- President Jusuf Kalla’s statement that neighbouring countries should stop complaining and be grateful for the clean air they enjoy for the rest of the year, the diplomatic spat of previous years has continued. 

Singapore’s Foreign Minister said: 

‘The Indonesian government has said that it is taking steps to deal with the problem… Yet at the same time, we are hearing some shocking statements made, at senior levels, from Indonesia, with a complete disregard for our people, and their own… How is it possible for senior people in government to issue such statements, without any regard for their people, or ours, and without any embarrassment, or sense of responsibility?’

But the accusation that Indonesia was not taking the issue seriously was perhaps a little harsh.

President Joko Widodo deployed 30 aircraft and 22,000 troops to fight the fires on the ground. Several warships were placed on standby off Kalimantan, ready to evacuate victims, if needed. Malaysia, Singapore, Australia and Japan all sent assistance to help end the fires.

To avoid repeat outbreaks, the key is to prosecute the offenders. Pressure has risen as Indonesia has to face up to its climate commitment to cut carbon dioxide emissions by 29 percent by 2030 made at the United Nations Climate Change Conference in Paris, December 2015.

Local response

The Indonesian government has promised to immediately impose sanctions on the perpetrators (without disclosing names), provided there is a ‘clear’ legal basis. It has identified the key suspects as palm oil plantation companies, many of which, coincidentally, are backed by Singaporean and Malaysian interests.

While rare in the past, Indonesian courts are increasingly finding palm oil companies guilty of causing the haze. Indonesian courts prosecuted at least four plantation companies for the 2013 forest fires. Hefty fines by Indonesian standards have been imposed in West Kalimantan, Riau, South Sumatra and Aceh over the last couple of years. Reports indicate that the police are currently investigating at least 16 cases in South Sumatra, 11 in West Kalimantan and 121 in Central Kalimantan.

Indonesia’s National Agency for Disaster Management has reported that the fires have cost the government more than US$30 billion. At least 19 people have died from haze-related illnesses and more than half a million cases of acute respiratory tract infection have been reported since July 1 in the most impacted areas of Kalimantan and Sumatra – and the toll is still climbing. The forest fires have also destroyed much of the natural habitat of Indonesia’s orang-utans, and there are concerns that businesses could use the government action to declare force majeure on deals in sectors ranging from palm oil to banking.

Six Indonesian provinces

declared a state of emergency The annual conference of the Roundtable on Sustainable Palm Oil in Indonesia this year highlighted the culpability of small-scale farmers in causing haze, since they still use slash-and-burn methods and lack the education or means to engage in social and environmental sustainability. Meanwhile, the governments of Malaysia and Indonesia – the world’s top two palm oil producers – have announced plans to form a Palm Oil Council as a joint effort to combat forest fire haze and educate smallholders on sustainable land-clearing practices, among other things.

Investment in plantations

Forest fires aside, the Indonesian government has vowed to tackle monopolies and excessive foreign investment in the plantation industry in recent years.

In 2014 a regulation was issued that reduced the total palm oil area permitted for a ‘group of companies’ to 100,000 hectares. While there had been various attempts in the past, this was the first serious shot by the government at breaking up plantation monopolies. And it appears to be in the process of implementation.

A controversial new plantations law was rushed through Indonesia’s parliament in September 2014. The original draft had proposed that foreign investment in plantations be limited to 30 percent, and required existing foreign investors to sell down their shareholdings within five years. Against a rumbling of potential international arbitration, the 30 percent limitation was not included in the final law.

While the foreign investor limitation remains at 95 percent, the new law provides for a further foreign shareholder limitation to be set within two years, on the basis of ‘national interest’. The argument over excessive foreign monopolisation versus insufficient domestic funds to invest in the capital-intensive plantations industry is likely to continue into next year, when the limitation is meant to be settled.

In the meantime, the issues facing the Indonesian plantation industry can be expected to continue for some time to come.

Recent publications

Subscribe and stay up to date with the latest legal news, information and events...