The Palm Scribe

The Legal Dynamics in the Making of the Draft Bill on Palm Oil

*By Ir. Achmad Mangga Barani, M.M. – Dr. Ermanto Fahamsyah, S.H., M.H. from The Forum for the Development of Sustainable Strategic plantations/ FP2SB.

Plans to come out with a draft bill on palm oil has been there since 2015, and in 2016, when this became part of the National Legislation Program at the initiative of the House of Representatives (DPR). It has since remained on the list and it is now expected to be passed into law during the third session period of 2018-2019.

The plan for this draft bill has since early on drawn a variety of responses, pro or against, from the public. Some said the content of the draft bill only accommodated the interests of corporations or conglomerations. Some contend that the content of the draft bill was actually already contained in Law number 39 of 2017 on Plantation and a number of other laws. Its drafting was also seen as having failed to involve public participation.

The draft law was also tied to the sensitive issue of the use of peatland, and forest for palm oil and to the various conflicts in the management of palm oil plantations. Others wanted a number of issues included in the draft bills, such as the process of comprehensive testing human rights issues in plantations, the protection of local communities or customary societies, the issue on environmental destruction, the standardization of human right approaches, a firmer and stronger ISPO implementation, incentives for plantation workers, affirmation of the definition of environment-friendly land clearing methods, the protection of workers/labor; the issue of overlapping permits,  the funding and institutionalization of the Indonesian Palm Oil Management Board (BPPI) etc.

We deem that in responding to this dynamism, the draft bill must be considered under at least three aspects – philosophical, juridical and sociologic.

Philosophically, the draft bill on palm oil should be a legal instrument to achieve fairness, prosperity, and welfare for all stakeholders in the palm oil sector, and for the Indonesian nation in general.

Juridically, the draft bill should be aligned with the 1945 Constitution, and Indonesian laws and regulations. Its content should also reflect the principle of protection, humanitarianism, nationalism, brotherhood, unity in diversity, justice, equality in the eyes of the law and government, order and legal certainty and or balance and harmony. It should also be further elaborated by other laws and regulation and or should meet the legal needs of the society.

Its drafting and inclusion in the National Legislation Program should also be based on the Constitutions, especially chapter 33, the Decisions of the People’s Deliberation Council, other laws and regulations, the national development plan for the medium and long term, the government’s work plan and the strategic plan of the DPR, and the aspiration and legal needs of the society.

It should also in detail, consider the content of other laws such as Law number 39 of 2004 on Plantation, Law number 25 of 2007 on Capital Investment, Law number 3 of 2014 on the Industry, Law number 7 of 2014 on Trade, and others.

The draft law must have firm and clear concepts regarding its background and aims, its targets and scope, that are determined following studies and harmonizations contained in an academic paper.

Sociologically, article 52 of Law number 39 of 2014 on Plantation stipulates that what is defined by “specific strategic plantation commodities,” is plantation commodities that play an important role in the social, economic and environmental development, including among other, palm oil, coconut, rubber, cacao, coffee, sugar canes and tobacco.

The Strategic Position of Palm Oil for Indonesia

Palm oil has quite a high development potential that can be seen, among others from its suitability to the land and climate. Data from the Agriculture Research and Development Agency show that Indonesia has 46,904,116 hectares of land that is suitable for palm oil, 24,878,579 hectares of which highly potential and 3,377,106 hectares that have a medium scale potential while the rest had low potentials. The total area planted with palm oil in Indonesia, according to preliminary figures stood at 14,327,093 hectares in 2018 or only 30.5 percent of the potential.

Plantation statistics from the Directorate General of Plantation show that 5,811,785 hectares or 40.6 percent of palm oil-planted land in Indonesia in 2018 was owned and or operated by small scale farmers while state-owned companies operated 634,690 hectares or 4,4 percent and private companies operated 7,880,617 hectares or 55 percent of the total. Based on their locations, Sumatra had 9.6 percent of the total, Kalimantan 34.7 percent and Sulawesi 3.8 percent.

Indonesian Crude Palm Oil (CPO) production based on preliminary figures for 2018 stood at 40,567,230 tons with large private companies contributing 24,489, 625 tons or 60.4 percent, smallholders contributing 13,999,750 ton or 34,5 percent and state-owned plantation accounting for 2,077,854 tons or 5,1 percent. The data showed that the majority of Indonesian palm oil plantations were in the hands of smallholders which had their own characteristics, including that they must partner with companies owning mills. The biggest problems on the field concerned the management of people’s palm oil plantation.

Palm oil is important to the national interest, including as 1) a source of revenue and jobs with preliminary 2018 figures showing there were2,673,810 on-farm farmers and 4,422,226 other workers depending on palm oil for their livelihood. 2) a mean to mitigate and reduce poverty. 3) a mean to develop remote areas, rural areas, including in border areas. 4) based on a selection of winning commodities, palm oil is one of Indonesia’s main export commodities. 5) exports of palm oil and its derivative products that reached 34.71 million tons in 2018 brought in more than $14.4 billion, or eight percent up from 2017. 6) Gross Domestic Product from the plantation sector reached Rp 429 trillion in 2016, of which palm oil contributed RP 260 trillion compared to the Rp365 trillion contributed by oil and gas. 7) a source of export revenue. 8) Provides raw materials for domestic industries. 9) a food and energy source, by providing both cooking oil and biofuel. 10) there are no economic activities, especially at the commodity level that can provide such a large, inclusive, broad and competitive contribution such as palm oil.

Meanwhile, among palm oil’s global contributions are: 1) palm oil is the most produced and consumed vegetable oil in the world. In 2017/2018, palm oil accounted for 51,5 percent of total global vegetable oil output. Palm Kernel accounted for 5,58 percent, coconut oil 2,07 percent and soybean oil 40.85 percent. Consumption wise, palm oil consumption accounted for 50.32 percent of the total vegetable oil consumption. Palm kernel oil accounted for 5.63 percent, coconut oil 2.08 percent and soybean oil 41.98 percent. 2) Indonesian palm oil also contributed to energy by providing biodiesel, with export reaching 1.56 million tons in 2018. 3) Palm oil is at present consumed in more than 160 countries across the globe, and 4) palm oil is contributing to the improvement of the global environment.

Palm oil also has a number of potentials, such as 1) it can be used as cooking oil, oleochemical and for energy; 2) its liquid and solid waste can be used to produce feedstock, fertilizer, and energy; 3) the trunk of oil palm replaced in replanting programs can be used as a resource for the wood industry; and 4) palm oil plantation can contribute to food production by providing land  intercrops during the transition period after replanting.

Also important to remember is palm oil’s role in environment such as 1) in the cycle of C02, H2O, and O2 through photosynthesis and evapotranspiration; 2) its absorption of CO2 at about 64.5 ton per hectare per year; 3) oil palm plantation is part of the solution to global warming: 4) in conservation of germplasm; and 5) conservation of the multifunctionality of oil palm plantations.

Therefore the oil palm agribusiness, especially in Indonesia, can be said to be an agribusiness that is Pro-Growth, Pro-Job, Pro-Poor, Pro-ForeignExchange, and Pro-Environment. It is also in line with The Tripple Bottom Line, that is People, Planet, Profit. These are reflected in the various roles of the Indonesian palm oil be that for national or global interest and its multi-aspect nature such as economy, sociocultural and the environment.

Besides its important roles and advantages, Indonesian palm oil also has its weaknesses, problems, and serious challenges, economically, socio-culturally, environmentally and legally. And if these weaknesses, problems, and challenges are not addressed urgently and accurately, they have the potential to harm Indonesia’s palm oil.

One such issue linked to the development and management of palm oil in Indonesia is that legal certainty, fairness, and benefits have not been yet reached even though the laws and regulations are intrinsically to assure those aspects. We think that even though the development and management of palm oil are already arranged under Law number 39 of 2014 on Plantation as well as under a number of other laws and regulations and policies, they are not yet fully achieved their aims, especially regarding certainty, fairness and the benefits of laws.

This is because laws and regulations or policies do not yet comprehensively and integrally detail the management of palm oil in line with the needs of the society and the development in a legal matter. There are still many unclear and incomplete regulations and also those which cannot yet fully answer the many problems faced in the field.

As an example, law number 39 of 2014 on Plantation although the main law governing plantations, including in oil palm, is still very general in nature as it arranges 127 commodities and mostly on agriculture practices, and industries at the upstream and downstream sectors.

The regulations are also deemed to be inconsistent and therefore counterproductive and hindering the good management of palm oil. Those inconsistencies can be found when compared to Law number 32 of 2009 on the Protection and Management of the Environment, Law number 39 of 2014 on Plantation, Government Regulation number 24 of 2015 on the Collection of the Palm Oil Fund, Government Regulation Number 71 od 2014 on the Protection and Management of Peat Ecosystems; the requirements to facilitate the planted area for surrounding communities covering at least for 20 percent of its concession, Agriculture Minister Regulation number 5 of 2018 on the Clearing and or Processing of Land without burning, and regulation of the Minister for Agrarian Affairs number 7 of 2017 on the Issuance of Land use permits.

These conditions need to be addressed, among others by inventorying and identifying those regulations or policies related to palm oil, harmonizing them and prepare a law that would include the harmonized contents. Stakeholders in the palm oil sector should seize the opportunity provided by the DPR to work on a draft law on palm oil by being more responsive so that a law can be issued soonest. The DPR in opening its 2018-2019 debate period has also included the draft law on palm oil as a priority in the list of national legislation for 2019 and expect the draft law to be passed during the current debate period.

Therefore, the draft law on palm oil is expected to become a legal instrument to obtain fairness, prosperity and the welfare of all stakeholders in the palm oil sector and Indonesia in general, physically and mentally. The draft law should ideally also be a responsive legal instrument so that It can respond to various problems, hindrances, requirements, shortcomings, and serious challenges in the management of palm oil, seen from the perspectives of economy, socio-culture, environment, and legality. Finally, it is also expected to become an important legal instrument for the economy in Indonesia as part of efforts to achieve stability, predictability, and fairness in the economic development of Indonesia, especially through the management of palm oil plantations.

The draft law on palm oil must be of a Lex Specialist nature, detailing the Law on Plantation and other related laws as well as the six draft laws that are also related to palm oil management currently prioritized in the list of national legislation. It is expected to govern the grand strategy to strengthen the management of the Indonesian palm oil sector, from the cultivation phase to the service and marketing phase, going through the processing phase. The draft law is hoped to be able to lead to an Indonesia Palm Oil Incorporated so that it could be in line with the most important aim of Indonesian economic laws, that is to prevent the disintegration of the nation, encourages economic growth so that the country can successfully pull itself out of the crisis and to improve social welfare for all. All stakeholders of the palm oil sector should, therefore, be responsive in following up the dynamism of the debate over the draft law on palm oil, so that it can soon be passed into law.


























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