Indonesia revealed a long list of exemptions to a two-year moratorium on logging on Friday, a concession to the hard-lobbying plantation industry in the world’s top palm oil producing nation.
The moratorium, taking effect on Friday after a five-month delay, will exempt permits already given in principle by the forestry ministry and extensions of existing permits, as well as projects to develop supplies of energy, rice and sugar.
The exemptions were wider than expected after pressure from firms worried about expansion and a forestry ministry concerned about losing billions of US dollars each year in revenue from chopping down forests in Southeast Asia’s biggest economy.
Photo: AFP
“There was lots of pressure on the Indonesian government from the palm oil industry about this ban since we bring in significant investments,” said a Malaysian planter with assets in Indonesia, who declined to be identified. “Today’s final details show that agreeable concessions have been made.”
However, the moratorium will not provide compensation for firms unable to expand into protected land. It ordered a freeze on new permits to log or convert 64 million hectares of primary forests and peatlands.
The deal is aimed at reducing greenhouse gas emissions from deforestation under a US$1 billion climate deal with Norway, which praised the accord.
“The launch of the moratorium is one important step forward for Indonesia,” Norwegian Environment Minister Erik Solheim said in a statement.
“What Indonesia is embarking on is a very serious development choice. Indonesia’s efforts to combine the goal of 7 percent economic growth with reducing greenhouse gas emissions by 26 percent by 2020 are commendable,” he said.
The final version was a let down for environmentalists hoping for wider protection of carbon-rich peat and endemic wildlife.
“This is a bitter disappointment. It will do little to protect Indonesia’s forests and peatlands,” Paul Winn of Greenpeace Australia-Pacific said. “-Seventy-five percent of the forests purportedly protected by this moratorium are already protected under existing Indonesian law, and the numerous exemptions further erode any environmental benefits.”
Industry body the Roundtable on Sustainable Palm Oil (RSPO) praised the signing of the moratorium, as it targets annual 10 percent increases in green palm supplies.
“It is an affirmative step in the right direction that upholds the integrity of sustainable practices towards the production of palm oil, and reaffirms the country’s commitment in this area,” RSPO secretary-general Darrel Webber said in a statement.
Indonesian President Susilo Bambang Yudhoyono on Thursday also signed a decree to allow underground mining activities in protected forests for 20 years, provided conditions such as an environmental assessment have been met.
The move is likely to upset green groups further, but provide relief for miners such as Newmont, Eramet and Bumi Resources.
Yudhoyono’s adviser on climate change, Agus Purnomo, said the forest moratorium would not hinder planters’ expansion.
“There is no limitation for those who want to develop -business-based plantations. We are not banning firms for palm oil expansion. We are just advising them to do so on secondary forests,” Purnomo told a news conference.
Joko Supriyono, secretary-general at the Indonesian Palm Oil Association (Gapki), said that uncertainty over the plan had slowed expansion last year to 300,000 hectares of palm oil plantations, from a minimum of 500,000 hectares in recent years.
“It won’t put a lot of downward pressure on the [palm oil] sector. There is plenty of land available to plant palm oil or other crops. The land is there — you can plant plantations in environmentally agreeable areas assuming there is access to infrastructure,” said Andreas Bokkenheuser, Singapore-based commodities analyst at UBS.
Shares of Indonesia-listed plantation firms mostly rose on Friday to outperform a steady Jakarta index. Astra Agro Lestari was up 0.6 percent and SMART climbed 6.3 percent, though Gozco fell as much as 1.3 percent.
Gozco’s palm oil output is set to rise more than 30 percent this year and it has permits for 56 percent of its landbank, but expansion in the rest could be hit by the moratorium, an executive said on Thursday.
The forestry ministry has defined primary forest as forest that has grown naturally for hundreds of years, of which there is estimated to be around 44 million hectares in a sprawling tropical archipelago where illegal logging is common.
The exclusion of rice, sugar, oil, gas and power plant projects shows the importance of food and energy security to the government of the G20 member, aiming to feed the world’s fourth-largest population and fuel GDP growth of more than 6 percent.
The country’s efforts to achieve self-sufficiency served it well in the financial crisis, since a lack of reliance on exports — unlike many Asian countries — kept its economy growing and led to it becoming an investor darling on the brink of a coveted sovereign investment grade rating.
The country still surprised markets with bumper rice imports early this year, and relies on sugar imports. Firms such as top listed palm oil planter Wilmar and investment firm Rajawali Group are planning to grow sugar plantations in the lushly forested eastern Papua Province.
The moratorium’s long delay came as government ministries wrangled over how much forest to include, a symbol of the long-running tension between a nationalistic business old guard and more internationally minded reformers in the government. The dispute showed how difficult it will be for Indonesia to reach a target of slashing emissions by at least 26 percent by 2020 while still spurring economic growth.
The moratorium was still seen as a step in the right direction for efforts to develop projects to cut emissions of climate-warming greenhouse gases, in the absence of an agreement on a new global climate pact following years of UN talks.
“There are a lot exclusions there, but there is a conscience. It gives the basis from which they can build on to reduce their emissions,” said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.
IN THE AIR: While most companies said they were committed to North American operations, some added that production and costs would depend on the outcome of a US trade probe Leading local contract electronics makers Wistron Corp (緯創), Quanta Computer Inc (廣達), Inventec Corp (英業達) and Compal Electronics Inc (仁寶) are to maintain their North American expansion plans, despite Washington’s 20 percent tariff on Taiwanese goods. Wistron said it has long maintained a presence in the US, while distributing production across Taiwan, North America, Southeast Asia and Europe. The company is in talks with customers to align capacity with their site preferences, a company official told the Taipei Times by telephone on Friday. The company is still in talks with clients over who would bear the tariff costs, with the outcome pending further
WEAKER ACTIVITY: The sharpest deterioration was seen in the electronics and optical components sector, with the production index falling 13.2 points to 44.5 Taiwan’s manufacturing sector last month contracted for a second consecutive month, with the purchasing managers’ index (PMI) slipping to 48, reflecting ongoing caution over trade uncertainties, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The decline reflects growing caution among companies amid uncertainty surrounding US tariffs, semiconductor duties and automotive import levies, and it is also likely linked to fading front-loading activity, CIER president Lien Hsien-ming (連賢明) said. “Some clients have started shifting orders to Southeast Asian countries where tariff regimes are already clear,” Lien told a news conference. Firms across the supply chain are also lowering stock levels to mitigate
NEGOTIATIONS: Semiconductors play an outsized role in Taiwan’s industrial and economic development and are a major driver of the Taiwan-US trade imbalance With US President Donald Trump threatening to impose tariffs on semiconductors, Taiwan is expected to face a significant challenge, as information and communications technology (ICT) products account for more than 70 percent of its exports to the US, Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) president Lien Hsien-ming (連賢明) said on Friday. Compared with other countries, semiconductors play a disproportionately large role in Taiwan’s industrial and economic development, Lien said. As the sixth-largest contributor to the US trade deficit, Taiwan recorded a US$73.9 billion trade surplus with the US last year — up from US$47.8 billion in 2023 — driven by strong
RESHAPING COMMERCE: Major industrialized economies accepted 15 percent duties on their products, while charges on items from Mexico, Canada and China are even bigger US President Donald Trump has unveiled a slew of new tariffs that boosted the average US rate on goods from across the world, forging ahead with his turbulent effort to reshape international commerce. The baseline rates for many trading partners remain unchanged at 10 percent from the duties Trump imposed in April, easing the worst fears of investors after the president had previously said they could double. Yet his move to raise tariffs on some Canadian goods to 35 percent threatens to inject fresh tensions into an already strained relationship, while nations such as Switzerland and New Zealand also saw increased