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Eco-Business Special Report
Healthy forests, zero burning, prosperous economy: Can Indonesia have it all?

Indonesia’s agriculture sector is at once a major source of income for the country and one of the biggest threats to its valuable forests. Some of the biggest firms in the business are spending millions on sustainability and conservation; is this enough to break the link between profit and deforestation? Eco-Business visited Indonesia’s largest pulp and paper companies to find out.

For Sulaini, a farmer in Suka Jaya village—a cluster of 190 families living in rural Riau, Indonesia—life today is much better than it was a year ago.

For one thing, the fruit and vegetables she grows on the community farm, such as papayas, chillies, cucumbers, guava and spinach, are more productive and healthier than they used to be.

“Thanks to our new irrigation system, I no longer have to worry about watering the crops properly,” Sulaini, who like many Indonesians goes by one name, tells Eco-Business in a recent interview. “I also have more customers now who pay a good price for the vegetables”.

More crucially, Sulaini and her fellow villagers no longer need to burn land to grow crops like oil palm, a practice that has long been linked to the annual forest fires and haze that have plagued Southeast Asia for decades. Their agroforestry livelihoods are more lucrative now compared to a year ago.

Sulaini, an Indonesian farmer, stands in Suka Jaya village’s community farm. Image: Eco-Business

Suka Jaya’s change of lifestyle is the result of recent efforts by agribusiness giant Asia Pulp and Paper (APP) to put an end to burning in and around its concessions after it was heavily implicated in last year’s record haze and forest fire crisis in the region.

Even as data showed many of the fires were burning on the concessions of APP suppliers, the company, which is Indonesia’s largest pulp and paper firm - insisted that it was not responsible for it. The fires, according to them, had either started outside company land or were lit by people illegally encroaching onto its concessions. 

But after facing a severe backlash from the Indonesian public and the international community which included legal action by Singapore’s National Environment Agency and a boycott by Singapore retailers, the firm has since last October invested aggressively in fire-fighting measures.

The Singapore boycott, it said, had resulted in a S$100 million revenue loss.

Among the measures include an agroforestry programme launched last December where APP provides everything that villages in and around its concessions need to establish sustainable agricultural livelihoods.

This initiative, which APP aims to offer to 500 villages by 2020, includes seed funding, assistance to clear the land and build irrigation systems, livestock and even securing customers for the produce and setting price contracts with them.

Suka Jaya is one of the earliest participants and the company says it is encouraged by the changing attitudes of its residents.

Elsewhere, in a nearby village called Sering, a separate initiative called the Fire Free Village programme is being rolled out by APP’s competitor, Asia Pacific Resources International Limited (APRIL), the country’s second biggest pulp and paper firm.

The company mostly stayed out of trouble during last year’s crisis, but has had its fair share of altercations with environmental groups in previous years.

Burning, the cheapest and quickest way of clearing land, used to be a year-round practice in Sering, but the community has now promised to stay “fire free” from July 1 to October 31, the time of the year when the risk of fire spreading is the highest.

If the community is successful, they receive a reward of 100 million rupiah (S$10,400) of funding for infrastructure or firefighting equipment. This incentive is part of APRIL’s Fire Free Village Programme, which also offers sustainable agriculture support, training, and assistance to participating villages.

Sering, unfortunately, is one of the few villages that has missed out on the reward for two years in a row. But this year, it is taking no chances.

Haji Muhammad Yunus, Sering’s village chief, says that in the past, the fires which cost Sering its reward have been due to “outsiders” who own land in the village but do not live there.

While APRIL says this claim is difficult to verify, the practice of oil palm firms paying handsomely for cleared plots of land is common in Indonesia.

“It’s frustrating,” says Yunus. “We are being extra vigilant this year, and plan to use the reward to renovate the village office or build a new sports centre for the community.” The community has taken to erecting signs threatening jail or a fine for anyone who burns cleared vegetation. 

APRIL has expanded the programme’s outreach from nine villages last year to 20 in 2016; and has also roped in palm oil giants such as Wilmar and Musim Mas to join a new Fire Free Alliance that carries out similar initiatives across Riau and Sumatra.

As both firms intensify their outreach to communities in and around their concessions, the changing attitudes in Sering and Suka Jaya have the potential to evolve into a nationwide fire-free culture. This could permanently put an end to the belief that burning land is an unavoidable economic necessity. 

If successful, these programmes could offer a glimmer of hope for one of Indonesia’s most pressing struggles: How to grow its economy and lift millions out of poverty without leaving behind a trail of cleared, burnt and degraded forests. 

Addressing a legacy of loss 

The challenge of how to balance growth and environment protection is one that has played out for decades across Indonesia’s patchwork landscape of villages, community farms and industrial plantations.

The changing attitudes in Sering and Suka Jaya have the potential to evolve into a nationwide fire-free culture. This could permanently put an end to the belief that burning land is an unavoidable economic necessity. 

Indonesia’s agricultural industry accounts for 13 per cent of Gross Domestic Product (GDP), and in 2015 employed 33 per cent of its workforce, or about 52 million people. This number is likely higher after factoring in informal employment.

But these economic contributions have come at the expense of Indonesia’s forests, which have been disappearing at a rate of three football fields per minute since 2009, according to green group Forest Watch Indonesia. In total, the country has lost almost 30 million hectares (ha) of forest since 1990.

Land used for agriculture in Indonesia has correspondingly risen from 25 per cent (about 47 million ha) to 31 per cent, or almost 60 million ha. The oil palm sector has been fingered for much of this loss. About 8 million ha of Indonesia’s land, or 4 per cent, are used for oil palm cultivation and this is set to grow by another 4 million ha by 2020

In comparison, the pulp and paper industry, dominated by APP and APRIL holds 3.6 million ha of concessions in Sumatra and Kalimantan.

The two firms, which account for 80 per cent of Indonesia’s pulp production, recently invited Eco-Business to visit their concessions in Riau.

Both companies in the past have had acrimonious clashes with environmental campaigners such as Greenpeace and sustainability watchdog Forest Stewardship Council, the latter having dissociated with the companies. 

But in recent years, both firms have embraced ambitious zero deforestation pledges and rolled out a multitude of programmes to address their environmental impact and promote a model of sustainable agricultural development.

The schemes, costing hundreds of millions of dollars, include: sustainability policies that promise zero deforestation; consultations with independent auditors on future developments and community rights; including their harshest critics to serve on newly established advisory committees; ecosystem restoration projects; and publicising their concession boundaries.

But last year’s haze crisis - which happened in spite of these efforts, suggests that major gaps still need to be addressed.

The crisis also highlighted what is perhaps the thorniest, most intractable issue for Indonesia’s forest sector—peat.

Peat vs Profits

A swampy, waterlogged soil, peat is at once Indonesia’s biggest climate asset and the largest obstacle to agricultural expansion.

About 10 per cent of Indonesia’s total land area—or 15 and 20 million hectares—is made up of peat. 

Some 60 per cent of APP’s 1.2 million hectares of plantations and half of APRIL’s 480,000 hectares of cultivated land are developed on peat. Wetlands International estimates that an additional 1.7 million hectares of oil palm plantations are also on the carbon-rich soil.

In its natural state, peat is too wet to support oil palm or acacia and eucalyptus, the crops of the pulp and paper industry. This means that companies must dig canals to drain the soil before planting.

This process, however, sparks a chain reaction where the peat dries out and becomes extremely flammable. It begins to decompose and subside—that is, it starts to become more compactly packed as the water leaves the soil, and sinks.

Once it is exposed to oxygen, it releases massive amounts of carbon in the process. As the height of the peat shrinks, especially in coastal areas, it also becomes more vulnerable to seawater intrusion and flooding. 

APP and APRIL have sought to minimise this by practicing what they call peat management, or maintaining the water table in plantations at 40 centimetres (cm) below the surface so that it is dry enough for acacia to thrive, but not so low that the soil sinks and turns into a tinderbox.

Since 2015, in the wake of criticism from green groups, APRIL declared a moratorium on future development on peat, in addition to permanently capping its plantation area at 480,000 hectares.

APP, meanwhile, says that it takes a more research-based approach to peat management, and has promised that within its suppliers’ concessions, it will not build canals or other infrastructure on undeveloped peatland until it has been assessed by peat and conservation experts. 

Whose land is it anyway?

Even as progress is made on tackling Indonesia’s deforestation issue, experts in Indonesia say the lack of a central map is preventing the responsible parties from being held accountable for their actions.

Spanning 190 million hectares and some 13,000 islands, Indonesia is not an easy country to map. The process is complicated by the fact that currently, maps made by national and provincial governments do not match with one another. 

Many of them are also not available in shapefile format, the digital file type required by mapping software. Instead, they are a mosaic of printouts, pictures, and PDF files.

As a result, land boundaries are blurred and contested; this makes it difficult for the government to enforce land use regulations. 

The lack of clear maps also makes it difficult to ensure accountability for forest fires. Indonesian law requires firms to allocate a fifth of their concession areas to community use, but maps do not distinguish between company and communal land on a land parcel. 

Arief Wijaya, climate and senior forests manager at World Resources Institute Indonesia, the local unit of the Washington-based think-tank, observes: “When there is a fire, locals and communities blame each other.”

The lack of clear boundaries makes it near impossible to resolve the finger-pointing between companies and rural people over who is responsible for the fires, he adds.

Enter the One Map initiative. This is the centralised map that the Indonesian government has been trying create since 2011 under the previous administration. But it has been woefully behind schedule. Originally slated for completion last year, the project, overseen by the country’s Geospatial Information Agency, is now due to be completed only in 2019

Critics have blamed the delays on government inefficiency, corruption and a deliberate effort to obfuscate land boundaries and protect business interests.

Mapping tools developed by green groups try to circumvent the problem. WRI’s Global Forests Watch platform, for example, allows users to monitor land use change, fire hotspots, as well as the location of palm oil, paper, and rubber plantation operations, among other things. 

Greenpeace’s Kepo Hutan, or Curious About Forests, meanwhile, pieced together map outlines from PDF files, hard copies and available data for the most accurate company concession maps possible.

However, both efforts are also constrained by a lack of high-quality official data and government information on whether land is meant for conservation, commercial, or other uses.  

One Map is the only thing that can address these gaps. But as WRI Indonesia’s Wijaya, explains, the process of creating the map is unavoidably long and painful due to the scale and complexity of the task. 

Collating the geospatial data is only half the challenge. After the basic outlines are consolidated, the team still needs to convene a forum that brings together government agencies, companies, and communities to work through conflicting land claims and resolve every single boundary overlap, explains Wijaya.

So the map becomes an occasion for “various stakeholders to resolve land tenure conflicts”, he says. 

The Geospatial Information Agency in July announced that it has finished the first stage of the project, which involved the compilation of maps from all government agencies. The process of verifying and integrating the data across the country’s major provinces is expected to take till 2019.

WRI Indonesia, meanwhile, is working with stakeholders such as the government and civil society organisations to carry out a pilot One Map implementation in Riau province. If successful, this template can be replicated nationwide.

Wijaya notes: “Once we have One Map ready, it will address many issues on land use including deforestation, illegal logging, and the legality of oil palm.”


Both firms have also launched several projects to restored damaged peatland outside plantation areas. APP has established an ecosystem restoration area in Riau’s Giam Siak Kecil and APRIL has done so in Kampar Peninsula.

Last August, APP also said it would retire 7,000 hectares of plantations on peat and restore them to natural forest. This is about 1.1 per cent of the total 600,000 hectares of peatland in its concessions. 

These efforts are not enough, say green groups and scientists, who question if any plantation can be developed on peat at all. 

As Aditya Bayunanda, World Wide Fund for Nature (WWF) Indonesia forest commodity leader, says in a recent interview: “As long as you have to drain peat, it is not sustainable”.

Efforts to maintain the water table at 40cm below the surface will only delay the inevitable subsidence and decomposition of peat, adds Bayunanda, adding that APP’s decision to retire 7,000 hectares of peat plantation is welcome, but “a drop in the bucket” compared to the scale of rewetting that is needed.  

Greenpeace Indonesia forest campaigner Yuyun Indradi echoes the fact that healthy peat and current pulpwood species are fundamentally incompatible.

“Either the plantation is alive and the peat is dry, or the peat is wet and their acacias fall over,” he explains. 

Viable alternatives

While peat management may work for now, companies must in the long-term re-wet their existing peat plantations, a process that involves damming up or completely infilling canals, and swap out acacia for alternative species, say campaigners.

“If companies switch to wetland species and want to harvest those for pulpwood, we can live with that,” says Yuyun. “But peatland that has not yet been handed over to companies for development needs permanent protection instead of temporary moratoriums.”

This is unlikely to go down well with the companies since rewetting peat inevitably requires a massive overhaul of the two firms’ business models, given the extent of peat plantations they own. But it’s no longer just activists who believe that this is the right thing to do. 

In January, Indonesia’s President Joko Widodo set up a Peatland Restoration Agency (BRG) tasked with restoring 2 million hectares of the most severely damaged peat by 2020. 

Besides rehabilitating damaged peat, BRG also has a mandate to protect untouched peat domes and restore peat where canals have been dug. The agency has echoed the call for a moratorium on undeveloped peat areas in company concessions. This in addition to an ongoing moratorium on new licenses for peat. 

And in plantations where peat canals have been dug, the agency is in favour of reviewing or revoking plantation permits, and says companies should lead the efforts to rewet the peat. 

Not zero sum

Unsurprisingly, companies and some observers alike have balked at these suggestions, arguing that doing so would be economically infeasible and set back Indonesia’s poverty eradication and development efforts.

But green groups and the BRG are unfazed, saying that while rewetting peat may shrink company profits, they don’t necessarily threaten the economic welfare of communities.

BRG’s deputy of education, socialisation, participation and partnership Myrna Safitri explains in a recent interview in Jakarta that BRG is helping companies and communities by conducting research into wetland-compatible crops that communities can grow as an alternative to oil palm.

Two such crops are dragonfruit — which is already attracting interest from investors — and coconut.

“Currently the global price for coconut oil is actually much higher than palm oil,” she notes. A cursory check on data portal IndexMundi shows that in September this year, coconut oil sold for US$1,550 per metric tonne, while palm oil fetched US$692.

As for agriculture companies whose business models are locked into oil palm and pulpwood crops, Safitri says: “We do not want to challenge their licences because they are legally held concessions.”

“We just want them to adapt their operations to be compatible with peatland rewetting and restoration,” she adds. 

This will be challenging for some companies, she acknowledges, but adds that they have till the end of their current harvest cycles to make adjustments. For the pulpwood sector, this is about five years; oil palm trees have to be replanted every 25 years. 

“There is no doubt that restoration needs adaptation,” says Safitri. “BRG is committed to helping companies find viable alternatives.”

Either the plantation is alive and the peat is dry, or the peat is wet and their acacias fall over.

Yuyun Indradi, forest campaigner, Greenpeace Indonesia

Business beyond peat

APP and APRIL say they are working towards this, but stress that this is not an easy or quick process.

Both firms have accelerated research and development of more productive strains of pulpwood trees that can be grown on flooded peat. 

Kavickumar Muruganathan, APP’s sustainability and stakeholder engagement manager, agrees that “in the long run, that is the ideal target”.

But the company needs to take “slow steps”. “About 60 per cent of our plantation areas are on peat, so we are heavily dependent on it,” he adds. 

Lucita Jasmin, APRIL’s director for sustainability and external affairs, recognises that peatland is a “critical area of concern for many stakeholders”.

She adds that while APRIL is trying to improve its productivity and identify wetland compatible species, the long-term key to APRIL’s success lies in developing a more diverse, high-value product range.

This would help decouple the company’s long-term profitability from the need to grow its plantation base or maintain its plantations on peat. 

The company is doing so with a 4 trillion rupiah (S$421 million) paper production facility set up last year, where it plans to manufacture premium grade paper products.

APRIL is also exploring other opportunities in the commercial newspaper and magazine printing business.

The company is also installing a technology called flux towers in their concessions and conservation areas that measure the amount of greenhouse gases emitted and sequestered by each landscape. 

“Sustainability is about long-term value creation,” she says. “Anything that you invest in sustainability in the near term is not being seen as a cost, or something that prevents us from immediately growing.”

Research into new species of acacia and eucalyptus in an APP laboratory. Image: Eco-Business

Long road ahead

To some extent, it is still early days for the paper giants on their sustainability journey. APRIL’s zero deforestation commitment is barely a year old, while APP’s pledge was made three years ago.

But while they say these efforts take time, this is a resource they are running out of.

Recent research commissioned by Wetlands International, for instance, points out that even the best “management” of plantations in Riau’s Kampar Peninsula, where APP and APRIL both have concessions, will not save the peat landscapes from eventual subsidence and flooding.

Wetlands International notes that in 25 years’ time, 71 per cent of plantations will be rendered economically unviable thanks to constant flooding and drainage problems—the result of sinking peatlands being flooded by seawater. This figure will rise to 98 per cent within a century.

“Companies should absorb the short term productivity decline in order for longer term survival,” says Bayunanda. “There is no choice.”


Check out our accompanying photo essay: In pictures: Indonesia’s forests, plantations, and people.

Eco-Business visited APRIL and APP’s operations in Riau for this story, and interviewed government agencies and civil society organisations in Jakarta. Both companies provided accommodation during plantation visits, and APP paid for Eco-Business’s travel to and from Indonesia. All costs in Jakarta were borne by Eco-Business. 

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