Bank Investment in controversial Palm Plantation, Central Sulawesi

Thursday, January 1, 2015

Indonesia - Palm oil plantation are considered as one of the main entrance for short and long term investments in Indonesia. This type of investment has developed in palm oil commodities trade, either in the form of bonds, derivatives, interest rates, or through foreign direct investment. Central Sulawesi is one of the palm oil growing area with more than 10 percent of its regions. The plantation area shows a significant trend compared to the previous 15 years. PT Wira Mas Permai, a subsidiary of Kencana Agri Group is one of the biggest palm oil plantation companies operating in Central Sulawesi. Some banks are involved in this company, not only as lenders but also as a shareholders. Some of the banks and financing companies involved are NOMINEES CITIBANK SINGAPORE (5.95 percent share), DBS VICKERS SECURITIES (1.64 percent share), DBS NOMINEES (1.13 percents share).

Protests over the impact of PT Wira Mas Permai's palm oil plantations, came when farmers who live around the plantation feel threatened. The farmers had to face harvest failure, because of drought and pest attack. The drought hit corn and soybean farming which promoted as superior commodity from transmigration community. Water supply stored around the village were dry due to land conversion from forest to extensive plantation. On the other hand, the remaining water were channeled to oil palm plantations. Water cases began to encourage public awareness due to company didn’t fullfill the agreement. The broken agreement not only a matter of giving low wage to employees, but also the threats toward food supply and availability of productive land. This is due to land conversion which become  source of the villagers livelihood.

The study found that the company had not built a plasma plantation at all, which was their obligation and the main requirement for the development of palm oil plantations. The company had deceived the government and funders by reporting that they have realized plasma plantation development. Kencana Agri's total investment (20 to 30 percent) used in plantation operational came from several banks, which are DBS, Danamon and BNI. Banks, as a source of capital have very large contribution in financing this palm oil plantation. But, they were forget of the impact caused by the company, especially in social and environment aspect.


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