NGOs alert UN to furtive 2-million-hectare carbon deal in Malaysian Borneo

A deal to sell carbon credits from 2 million hectares of forests has been under fire from civil society groups, who say local communities were kept out of the loop.

orang utan in borneo
Only 120,000 orangutans remain alive in their forest habitats of Sumatra and Borneo. Image: Francoise Gaujour, CC BY-NC-ND 2.0.

Organisations in the Malaysian state of Sabah have filed a complaint with the UN Special Rapporteur on the Rights of Indigenous Peoples about a once-secretive deal aimed at locking up the rights to credits for carbon and other “natural capital” from the state’s forests.

Several leaders in Sabah signed the natural capital agreement, or NCA, with representatives from a Singaporean firm called Hoch Standard Pte. Ltd. on Oct. 28, 2021. The NCA laid out a revenue-sharing plan that covered the right to sell credits from the ecosystem services provided by 2 million hectares (4.9 million acres) of forest for at least the next 100 years. Proponents of the deal said it would provide funding for economic development to the state and ensure the covered area is protected from logging and other destructive impacts.

But the terms were finalised by and large without the knowledge of Indigenous and forest-dependent communities living in Sabah, said Peter Burgess, an Australian businessman who said he was involved in negotiating the agreement, in a November 2021 interview with Mongabay.

Since Mongabay published an article on Nov. 9 that first made the details of the NCA public, attacks on the legality and ethical rigor of the arrangement have beleaguered the deal and its proponents. Many skeptics argue that the lack of transparency calls into question whether the deal is binding or enforceable.

“We are taking this issue to the United Nations because for some reason those behind the NCA are still claiming that they have successfully become the legal rights holders of all carbon and life in these forests at the secret stroke of a pen, and that there is nothing that the Indigenous Peoples of Sabah can do about it for one hundred years,” Anne Lasimbang, a Sabahan Indigenous leader and executive director of the Indigenous rights-focused Partners of Community Organisations in Sabah Trust (PACOS), said in a statement.

Nor Asiah Mohd Yusof, Sabah’s attorney general, said in February that the NCA was “legally impotent” as it currently stands and that moving forward with it was contingent on a thorough vetting of the parties involved and a more inclusive shaping of its provisions.

Currently, the Malaysian government is considering legislation that would regulate carbon trading in the country, according to online news site The Vibes, and would “develop a single carbon trading platform” by late 2022, Environment and Water Minister Tuan Ibrahim Tuan Man said.

The letter to the UN, which was signed by PACOS Trust and 10 other civil society groups that operate in Sabah, centers on the lack of meaningful involvement of Sabahan communities in drafting the agreement. The publicly available version of the agreement, shared anonymously on the website Reddit in late 2021, does not include any language referring to the state’s Indigenous communities. Al Jazeera reported in February that Sabah is home to 39 ethnic groups, and research from the UN Food and Agriculture Organization suggests that thousands of Indigenous people live in and around the state’s forest reserves.

Jeffrey G. Kitingan, Sabah’s second deputy chief minister, who has emerged as the most vocal supporter of the NCA, said during a November press conference that Indigenous communities did not need to be informed because the 2 million hectares under the agreement would overlap with Sabah’s “totally protected” forests.

The standard of free, prior and informed consent (FPIC), codified in the UN Declaration on the Rights of Indigenous Peoples, therefore didn’t apply, Kitingan said, as communities had already been adequately informed and given their consent prior to the designation of these areas.

Malaysia is a signatory to the Indigenous peoples’ rights declaration, meaning the country has an obligation to ensure that principles like FPIC are followed, the organisations say.

Stan Lassa Golokin, a Sabahan who signed the NCA on behalf of Hoch Standard and who is also the business partner of Peter Burgess, repeated the protected area justification for the lack of consultation at a February press conference held with Jeffrey Kitingan, according to The Vibes.

The letter to the UN also takes issue with the agreement’s mention of the UN’s sustainable goals. The invocation of the 17 SDGs, put forward in 2015 as “an integrated roadmap for sustainable development,” as well as the terms’ adherence to the Kyoto Protocol, a climate agreement adopted in 1997 that has been superseded by the 2015 Paris climate accords, may represent efforts to bolster the agreement’s legitimacy. But their mention also implies support from the UN.

The signatories of the letter also contend that allowing private interests to control shared natural heritage sets a dangerous precedent internationally.

Requests for an interview with the UN special rapporteur went unanswered.

The letter comes as other complaints have besieged the NCA. Indigenous leader Adrian Lasimbang sued the state of Sabah in December over the agreement. In early March, a leader of the Warisan political party, the largest opposition party in the Sabah state assembly, made a formal complaint about Hoch Standard to Singapore’s ambassador in Malaysia, according to The Borneo Post. The complaint related to claims by Jeffrey Kitingan that the company was backed by billions of dollars in private equity financing.

Kitingan is a member of the Star party, which is itself part of the ruling coalition in Sabah’s state assembly.

The ambassador told Warisan representatives that the government of Singapore is not connected to the NCA.

Financial records from Singapore’s Accounting and Corporate Regulatory Authority (ACRA) obtained by Mongabay reveal that Hoch Standard has only $1,000 in paid-up capital, meaning shareholders have contributed that amount to the company’s accounts. The records also show its shareholder to be Lionsgate Ltd., a company based in the British Virgin Islands, where company ownership is not a matter of public record.

Environmental and human rights organisations have expressed concerns that Hoch Standard, which does not have a verifiable track record in carbon or natural capital markets, is not adequately resourced to carry out its role under the terms of the agreement. The company’s responsibilities include consulting with the Sabah government to ensure that the work to monetise the state’s natural capital is in accordance with the SDGs and another UN-backed development and conservation program called REDD+. REDD+ stands for reducing emissions from deforestation and forest degradation in less-industrialised countries.

Kitingan has frequently attested to the character of Hoch Standard’s founder, Singaporean surgeon Ho Choon Hou, saying that he should not be subjected to due diligence investigations — investigations that would normally be part of vetting a deal like the NCA. Al Jazeera reported in February that emails show Peter Burgess intervened to stop that sort of inquest months prior to the signing.

In the same email, which was also leaked to Mongabay, Burgess attested to “multi-billion investments that Dr Ho can mobilise to stimulate Sabah’s economy.”

At Kitingan and Golokin’s press conference in early February, Ho made a brief virtual appearance, according to The Vibes. Ho confirmed he was the lone funder of Hoch Standard, though he seemed to suggest that he could tap into more funding than the $1,000 in capital listed on Hoch Standard’s financial documents.

“I think anyone can attest that no one could drive this NCA for only $1,000,” Ho said.

He did not respond to Mongabay’s multiple requests for comment and clarification on his funding relationships.

The terms of the agreement allow Sabah to nullify the contract if work on marketing the state’s natural capital doesn’t begin within two years from the date of signing, Golokin said.

Still, several weeks after the press conference, Kitingan seemed optimistic in comments reported by the newspaper New Straits Times.

“It is going good,” he said. “Those who make noise, they do not understand or because they have some personal or private interests, that is why they said something.”

Kitingan did not respond to requests for comment from Mongabay.

Sabah’s civil society organisations, however, contend that Kitingan and the project’s other proponents are the ones who have been less than forthcoming, particularly as to who or what entities are behind the project and whether that group includes a body like the UN

“We are therefore asking the UN the truth,” Cynthia Ong, chief executive facilitator of the Sabahan group Land Environment Animals People (LEAP), said in the organisations’ statement.

This story was published with permission from Mongabay.com.

Did you find this article useful? Help us keep our journalism free to read.

We have a team of journalists dedicated to providing independent, well-researched stories from around the region on the topics that matter to you. Consider supporting our brand of purposeful journalism with a donation and keep Eco-Business free for all to read. Thank you.

Most popular

Featured Events

Publish your event
leaf background pattern

Transforming Innovation for Sustainability Join the Ecosystem →

Strategic Organisations

Reneum
Danfoss
Trucost
ESG Book
Olam
City Developments Ltd