THE POLITICS OF EXTINCTION
Executive Summary  
Introduction  
A Future Without Forests?  
The Orangutan Crisis  
The Timber Barons  
Palm Oil  
  • Summary
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  • Global Market
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  • Indonesian Expansion
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  • Social/Environ. Impacts
    		•  
  • Corporates
  • Malaysian Investment
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  • Future Prospects
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    Palm Oil - Corporates - Fanning the Flames of Extinction


    Like many areas of the Indonesian economy, the palm oil sector is dominated by croneyism and nepotism. The profits and lucrative foreign exchange earnings derived from the palm oil sector have attracted a host of conglomerates with close links to the ruling class of Indonesia. Many of these firms also have timber interests and receive government subsidies for establishing plantations. It is no surprise that several members of ex-President Suharto's family have been able to secure concessions and contracts.

    Of the plantation firms accused of setting fires in October 1997, many are owned by some of Indonesia's wealthiest individuals and their corporate groups. Those with a stake in palm oil include the Salim Group of Soedono Salim (alias Liem Sioe Liong), Eka Tjipta Wijaya's Sinar Mas group, and Mohammad "Bob" Hasan's Astra International. Companies owned by an army foundation were also named.

    According to the Indonesian Government, Soedono Salim was the largest individual taxpayer in 1996, followed by Eka Tjipta Wijaya at number two, Salim's son Anthony at five and Bob Hasan at 21. The Bakrie Brothers, the top pribumi (non-Chinese) business family in Indonesia, run a business empire stretching from telecommunications to palm oil and timber. Aburizal Bakrie was the 50th highest taxpayer in 1996.

    The Bakries own around 90 000 hectares of oil palm estates in Sumatra and are developing a similar-sized operation in Kalimantan. In 1997 the firm announced its intention to build a US$30 million crude palm oil plant in West Java to compete in the cooking oil market against Salim and Sinar Mas, and to export palm oil products overseas.

    Hasan, temporarily Trade Minister between March and May 1998, controls Astra International, a conglomerate spanning a vast range of business areas, including cars and plantations. The company is banking on its oil palm interests to keep it afloat during the economic crisis which has badly affected other core businesses. It predicts increasing its output of crude palm oil by 38% in 1998, from 254 000 tonnes to 350 000.

    Both the Salim Group and Sinar Mas are involved in all stages of the palm oil production cycle, from owning plantations to producing and marketing the resulting commodities. Sinar Mas subsidiary PT Smart is in the process of establishing a 40 000 hectare estate in East Kalimantan to augment its existing 64 000 hectares of plantations across Sumatra and Kalimantan and feed into its own cooking oil and margarine production plants.

    Another big player accused of starting fires is PT London Sumatra (LonSum), a former subsidiary of British-based firm Harrisons & Crosfield which has extensive plantation holdings in Malaysia. The company has been involved in the Indonesian plantation sector since 1906 and launched on the Jakarta Stock Exchange in 1996. The firm is expanding rapidly with a 100 000 hectare project in South Sumatra and 15 000 hectares in East Kalimantan. In 1997 it posted a 17% rise in profits based on sales of 78 514 tonnes of palm oil.

    LonSum claims to have the highest crude oil palm yield in the world, at 5.2 tonnes per hectare, and works closely with Unifield, a British-based joint venture with Unilever, carrying out work to improve palm tree quality and growth rates.

    The activities of the Uniseraya Group illustrate how timber firms have switched into the plantation business. After 25 years experience in the timber industry, the firm moved into palm oil in 1993 with its first plantation of 4000 hectares, and has plans to expand to 32 000 hectares with the creation of three more plantations.

    Three generations of Indonesia's former ruling family have interests in plantations, palm oil processing and marketing. In the mid-1980s joint ventures were formed between Salim Group, Sinar Mas and two of Suharto's sons - Sigit Harjojudanto and Tommy. Sinar Mas went on to create its edible oils division in conjunction with the ex-President's third son Bambang, who also has a stake in the Bakrie Brothers plantation business.

    Yet another sibling, daughter Siti Hadiati Harijadi, got involved, forming a joint venture with a Malaysian business to create a 44 000 hectare plantation in South Sumatra in 1994.

    The younger generation's stake is held by Sigit's son Ari Harjo Wibowo. He picked up a quota to market 70 000 tonnes of crude palm oil per month from the state logistics board (Bulog), and was also awarded the government contract to develop an 80 000 hectare plantation in East Kalimantan as part of a transmigration project.

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