Down to Earth No.78, August 2008

Merauke mega-project raises food fears

A food mega-project planned for a vast area in the Papuan district of Merauke is causing concern that indigenous people's land will be taken and their livelihoods destroyed. As global food prices soar, there is also concern that food exports could be prioritised over domestic needs.


Hasannuddin Ibrahim, secretary general at the agriculture ministry, told reporters in early July that a consortium of 15 Saudi investors were in the 'late stages' of negotiations to lease 5,000 - 10,000 hectares each, at a total cost of at least US$65 million.1

The government has allocated a total 1.6 million hectares for the planned Merauke Integrated Rice Estate (MIRE) which is aimed at turning the district into a rice production centre supplying eastern Indonesia. The project also involves 2,200 kilometres of roads, three ports and irrigation systems. 2

Papua's rice harvest area in 2007 covered 20,788 hectares, according to Indonesia's Central Statistics Agency, from a national total of 12.16 million hectares.3

Indonesia, like other Asian countries, has been hit by rocketing rice prices in recent months and usually needs to import supplies from other countries.4

Disastrous record

During the Suharto era, ambitious attempts to expand rice production on unsuitable forest land, including transmigration schemes in Papua and the ill-fated rice mega-project in Central Kalimantan, led to massive environmental destruction and huge loss of land and livelihood for indigenous peoples. The Central Kalimantan project also released large amounts of carbon dioxide when peat swamp forests were cleared, as well as wasting huge amounts of cash.5

In the 1980s, Merauke itself was targeted for a large-scale pulp development by US company Scott Paper. Local and international campaigners drew attention to the threats to an 800,000 hectare area of indigenous land and the company made a last minute decision to withdraw.6

The new plans to develop Merauke sound similarly ominous for local people and their natural resources. Despite some positive developments recently, indigenous communities' right to veto such projects is still widely disregarded throughout Indonesia. In Papua, where special autonomy has the potential to protect indigenous Papuans' interests, implementing regulations have still not been passed, and central government retains a good deal of control over investment decisions (see also separate article on oil palm in Papua, below).


Food security

According to the Wall Street Journal, the Merauke project is the latest example of a new trend for developing countries to lease farmland to overseas investors in order to profit from rising global food prices. Farmers in the neighbouring Philippines protested last year against a series of deals with Chinese investors to grow food crops for export while they were struggling to feed their families. Middle Eastern countries are also reported to be looking for investment opportunities in African countries.

According to one Saudi businessman involved in these efforts, deals with foreign governments are likely to allocate a percentage of crops for sale in the local market to "ensure that these projects will go uninterrupted and so that the countries and the people there don't cause us problems." 7

Indonesian officials are playing down the export-oriented nature of the deal. Himan Manan, director general of land and water management at the agriculture ministry, said that local needs for rice will be met before any is exported and that "Indonesia must come first". The local media is also reporting that the MIRE project is aimed at supplying rice to eastern areas of the Indonesian archipelago, rather than at exporting food.8

Indonesia has already experienced protests over cooking oil prices, as producers direct palm oil to lucrative international markets and the new demand for agrofuels. 9

WSJ reports that the Merauke government came up with plans to make the district a food production hub last year. As food prices rose this year, Indonesian conglomerate Medco offered financial backing and help with finding foreign investors. Medco proposed that at least a million hectares in Merauke should be allocated for sugar cane, sorghum, rice, soybeans and maize production, and promoted the idea to President Susilo Bambang Yudhoyono who promised to market the plan with foreign investors.

At a January meeting in Merauke, the head of the district food crop agency, Ir Oma Laduani, invited more Indonesian investors to develop agribusinesses through MIRE. A report on the local government website said that apart from Medco, business groups run by the former transmigration minister Siswono Yudhohusodo and Suharto's son-in-law Prabowo were interested in projects in Merauke.10 The meeting heard that developing MIRE would not be without its challenges, including lack of infrastructure, limited human resources both in terms of quality and numbers, the soil - which needs inputs to improve its quality - and the need to settle the ownership status of land, including customary (adat) land.


Major new pulp projects in Merauke

As well as agribusiness, Medco has recently begun constructing a wood-chip mill in Merauke, according to a report in the Wall Street Journal Asia. The company is also planning to start building a 500,000 tonnes/year pulp and paper mill in 2012. Another company, Modern Group is reported to be looking for land for a Merauke pulp mill and International Paper, of Memphis, USA, has had 'exploratory' talks with Indonesia's forestry ministry about developing a mill either in Kalimantan or Merauke.

Medco says it won't buy wood from third parties for its mill, reducing incentives for illegal logging. According to its corporate secretary, in the seven years it will take to establish its own acacia plantations, the company will cut selectively in natural forests and will set aside 100,000 hectares of its concession for conservation. 11

What this onslaught will mean for local indigenous peoples and their livelihoods is not raised in the WSJ report, but going on past experience of forestry projects, the outlook is poor while protection of customary rights remains so weak.

Promises to log selectively have been consistently broken by forestry companies during the past three decades at least, contributing to Indonesia's ranking as the country with the highest rate of deforestation.

DTE's 2006 case study of a chip mill project in South Kalimantan highlighted key problems related to sustainability of wood supplies, social and environmental impacts. It concluded that foreign investors, equipment suppliers, engineering, forestry and risk consultants should screen carefully for sustainability in any future projects, and not invest in schemes in Indonesia likely to cause serious environmental damage, rights violations or social conflict.12


Bigger investment?

Indonesian press reports in August said that the Saudi Binladin group is thinking of investing in projects worth US$4.3 billion, covering 500,000 ha in Merauke. Tempo also said that five local companies were already involved in a 1.4m-2.4m ha food and energy scheme in Merauke: PT Sumber Alam Sutera, PT Wolo Agro Lestari, PT Comexindo, PT Medco and PT Bangun Cipta Sarana. (Tempo 13/Aug/08)



Notes
1 Gulf Times 6/Jul/08 (Dow Jones Newswires)
2 Jakarta Post 3/Jul/08
3 Jakarta Post 3/Jul/08
4 See DTE 76-77 for background.
5 See also DTE 76-77, box
6 See DTE 6:1 and previous issues for more details.
7 Wall Street Journal 11/Jul/08
8 Jakarta Post 3/Jul/08
9 See DTE 74
10 'Persiapan rencana Panen Raya Presiden RI di Merauke Tahun 2008', 27/Jan/2008 at www.merauke.go.id/. Prabowo is also the notorious one-time chief of the elite military command, Kopassus.
11 Wall street Journal Asia 28/Jul/08
12 No Chip Mill Without Wood, Betty Tio Minar, DTE, August 2006 at http://dte.gn.apc.org/cskal06.pdf


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