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THINKING beyond the canopy Large scale land acquisition for agro-development in Papua, Indonesia: implications for policies and investment practices Krystof.

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Presentation on theme: "THINKING beyond the canopy Large scale land acquisition for agro-development in Papua, Indonesia: implications for policies and investment practices Krystof."— Presentation transcript:

1 THINKING beyond the canopy Large scale land acquisition for agro-development in Papua, Indonesia: implications for policies and investment practices Krystof Obidzinski, CIFOR World Bank Conference on Land Policy and Administration Washington, D.C., 26-27April 2010

2 THINKING beyond the canopy Structure of the presentation  Large scale land acquisition in Papua – introduction  What is MIFEE?  Objectives of the MIFEE project  Means of implementation  Incentives for investors  Discussion  Recommendations and research steps needed

3 THINKING beyond the canopy Large scale land acquisition in Papua – introduction  1980s and early 1990s – expansion of logging (51 units, 11 million ha)  Late 1990s, entry of timber plantations (Texmaco pulp project)  Stagnation until 2005; interest re-ignited by emergent biofuel boom  Vast targets for oil palm – up to 3 million ha  Most plantations proposed in the Southern part of Papua  By 2008, only one investment under way; the rest on hold again (global financial crisis)  In 2009, plantation investment reinvigorated under MIFEE – Merauke Integrated Food and Energy Estate

4 THINKING beyond the canopy Proposed oil palm plantations

5 THINKING beyond the canopy What is MIFEE?  A mega agro-development project for food and energy production  Under the control of the Ministry of Agriculture  Ministry of Forestry crucial to make available the necessary forest land  Overall target area between 1.6 million and 2.5 million hectaresarea  “Feed Indonesia, then feed the world”… (Ministry of Agriculture, 3 April 2010)  MIFEE became part of the 100 day agenda of the cabinet  Special government regulation (PP) on food estate in preparation  PP on special economic zone in this area, in preparation as well  Similar to the (in)famous Central Kalimantan 1 million ha rice project

6 THINKING beyond the canopy Map of Mega-rice project in Kalimantan (Borneo)

7 THINKING beyond the canopy Map of Mega-rice project in Kalimantan (Borneo)

8 THINKING beyond the canopy Objectives of the MIFEE project  Increase food and energy production in Indonesia Rice by 10 million tons annually Sugar by 1.2 million tons per annum  Self-sufficiency in rice and surplus for export  Stimulate development in Papua  Increase welfare of local population Employment Opportunities for local businesses  Maximize the use of the land currently seen as “idle”  Compensate for the loss of agricultural land in Java (approx 100,000 ha per year)

9 THINKING beyond the canopy Means of implementation  Massive undertaking. Consortia, JVs prioritized  20,000 ha land parcels for investors  Government regulations on food estate development and special economic zone  Start-up investment approx. USD 600 million. Foreign investment important  Full development of the project will require several billion USD. Indonesian and foreign lenders to figure prominently  The Ministry of Forestry will re-classify and release at least 1 million ha of forest estate

10 THINKING beyond the canopy Incentives for investors  Financial benefits Tax holiday Reduced tax on land and real estate Reduction or exception from local fees and taxes Reduction /exclusion of value added tax Reduction of tax on imported goods No tax on materials considered operational supplies

11 THINKING beyond the canopy Incentives for investors  Other benefits: Assistance with land acquisition Land concession rights valid for 60 yrs; extendable to 90 yrs Residual timber can be used as collateral for loans Residual timber can be cleared to generate capital Assistance with immigration matters  Currently about 33 investors interested – Indonesian and international (Japan, Brazil, US, EU, Middle East)

12 THINKING beyond the canopy Discussion  MIFEE based on sweeping assumptions and limited information  Production targets  How can this be done in a remote part of Papua?  Self-sufficiency in rice and surplus for export  Is it possible? Is it economically sound? Does Indonesia possess the comparative advantage?  Large swaths of land in Papua are “idle”  No current economic significance nor local ownership structure?  Economic development and welfare local people  What exactly? GDP? What levels of employment? What terms of benefit sharing? What terms of investor-community cooperation? Land compensation? Etc…

13 THINKING beyond the canopy Discussion  Impacts – important but information scant  MIFEE region still 71% forested  Deforestation likely as at least 1 million ha of forest estate to be cleared  If full 2.5 million ha cleared, 410 million m3 of timber will be extracted valued at USD 12.7 billion-27 billion (source: Greenomics).  GHG emissions  Social impacts  landowners are split on MIFEE; there is significant opposition  Nearly all MIFEE commodities are exotics. Will local communities have opportunities to learn, participate, and not be marginalized?  Tens of thousands of laborers will be needed. Can the influx of migrants be managed well?  Land compensation for local landowners so far woefully inadequate.

14 THINKING beyond the canopy Discussion  Investment Risks  Moral hazard. Environmental impacts and social implications potentially significant.  A possibility of illegal profiteering from timber (only)  Due diligence of exceedingly high importance, especially in connection to environmental and social impacts.  Investors or funding agencies need to know inside-out the locations and impacts of the projects they fund, not potential profits only.  Disclosure of information. Limited so far by the government & corporate sources

15 THINKING beyond the canopy Recommendations and research steps needed  Agro-investment is important for the development of Papua and better livelihoods of local population  Allocate land so that minimal deforestation/degradation ensues Prioritize “degraded land” category in Indonesia’s land use system. Prioritize grasslands where available. Reduced MIFEE land targets (at least initially) to accommodate more rigorous land allocation process Consider land swaps and plantation mosaics for investment ventures

16 THINKING beyond the canopy Recommendations and research steps needed  Facilitate investment that emphasizes local acceptance  Company-community agreements facilitated by key stakeholders (government, NGOs, private sector) to ensure openness, transparency, and fairness  Land acquisition agreements must be legally binding  Compliance monitored by NGOs, communities, and local gov’t  Transparent mechanism for transfer and distribution of land compensation funds (facilitated by NGOs and local government)  Clear provisions for local employment  Regulations in place to control the landuse by arriving migrants

17 THINKING beyond the canopy Recommendations and research steps needed  Ensure that “serious investors” are part of the venture  Emphasis of not only benefits but also risks/impacts and a clear plan to minimize the latter  Significant amount of “own investment”  Flexibility in terms of concession landcover and willingness to consider non-forest land  Sensitive to social acceptance and to social benefit requirements

18 THINKING beyond the canopy This is the approx area of MIFEE concessions Back

19 THINKING beyond the canopy www.cifor.cgiar.org


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