• It recognises that the rapid deforestation occurring in Kalimantan is seriously affecting local livelihoods and that plantation development has often taken place without consultation with local communities.
• It recognises that negative impacts may be caused by oil palm plantations directly and indirectly.
• It acknowledges instances of bad practice by PT AI including land clearing too close to rivers and lakes, burning, an illegal sawmill and potential negative effects of agrochemicals and mill waste.
• It acknowledges that PT AI overlooked its consultant’s advice on environmental issues and local people’s concerns about these plus compensation and the stakeholder scheme.
• It also recognises that the company threatening to leave unless it has unequivocal support is not conducive to constructive dialogue about unresolved grievances.

However, it is disappointing because:

• Although PT AI/Agro Hope has misled its investors in the past, CDC accepts – for the most part uncritically – the information which the company provides on community relations and compensation negotiations.
• CDC misrepresents the NGO report by talking about allegations of widespread environmental and human rights problems, whereas the NGO report made clear it represented the specific concerns of some local people.
• Most of the community demands presented in the WALHI/DTE report have been ignored.
• CDC attempts to dismiss these concerns by claiming that WALHI/DTE behaved irresponsibly by not consulting with or representing the arguments of PT AI; that the people consulted by NGOs were unrepresentative; and that this generated unnecessary conflict.
• CDC still feel strongly that PT AI has not contributed directly to any increased deforestation, poverty or social conflict (in effect rejecting the evidence we presented or playing this down as minor incidents).
• The CDC document is contradictory. It agrees that local people need ‘to be offered a genuine choice between the establishment of PT AI and the status quo’ and recognises the importance of this for local people’s physical and psychological well-being (p5). It also admits it is likely that local people can see ‘no way of going back’. However, CDC still does not acknowledge that they were never given this option due to the establishment of the PT AI plantation.
• Only the ‘direct effects of PT AI’ were taken into account. CDC did not consider the broader aspects of this case and oil palm development in Indonesia in general.
• The CDC report was completed in December, but only sent to NGOs in early February with a request to meet within the next couple of weeks. The NGO report was sent to CDC by early Oct 2000.

WALHI, Down to Earth and the other NGOs involved are not ‘anti-big business’. We do, however, believe that businesses have a social responsibility and that companies which adopt ethical business practices should ensure that these are adhered to by themselves and all their partners.

SUMMARY OF POINTS RAISED IN WALHI/DTE’S REPORT, GILLBANK’S REPORT[1]& CDC’S REPORT

Issue	WALHI/DTE	Gillbanks	CDC
The partner company (PT Agro Indomas & Agro Hope Shd Bhd)	Agro Hope has strictly commercial objectives and considers environmental and social issues to be a burden. This is not compatible with CDC & Rabobank's commitments to ethical investment.	Agro Hope have made some 'politically incorrect' and inadvisable statements. The NGOs have an anti-liberalism, anti-profit agenda.	NGOs which dislike 'big business' simplify and focus on negative aspects of oil palm. NGOs may target particular companies because they do behave responsibly and/or are funded by socially responsible investors. NGOs are not prepared to listen to PT AI's side of the story.
Destruction of local livelihoods	The local community traditionally depended on a mixture of forests, farming and agro-forestry. Now they have no means of supporting themselves. People are worried about the future.	Palm oil development brings development benefits to the local and national economy. There were no extensive fields or agro-forestry areas. Only 98ha were in active use.	Alang-alang area does not provide any income. Questions whether other 50% of land was 'of real value to the villagers'. EIA showed 52% loggers; 27.5% farmers; 10% transport; 7.5% govt; 2.5% fishers. All commercially valuable timber had already been taken in concession. Also garden areas not tended and rubber trees not tapped.
Increased poverty/ food security	People used to be largely self-sufficient and make a reasonable living. Now they have almost no choices. They face poverty once their forests and land have been stripped/taken from them. Increased 'illegal' logging shows lack of alternative income sources. (see also Employment & Stakeholder scheme below)	PT AI provided free milk to infants at height of economic crisis.	Assessing quality of life is subjective. Choice is important in quality of life. People never had genuine choice as basis of old way of life had already gone. Most people they spoke to said they were better off due to PT AI; some people's incomes had stayed same; no-one was poorer. EIA shows baseline assessment of income. PT AI provided free milk to infants at height of economic crisis.
Land rights	The indigenous community has customary rights to the land in the Sembuluh lakes area. Their customary rights extend much further than the immediate area around present settlements. PT AI and its consultants have persistently misunderstood the nature of these rights.	This is state land. Local people are squatters on it and their claims to long-term land use are 'suspect'. Some villages settlements are relatively recent. Customary land is only land under rice or tree crop cultivation.
Public support for the plantation	Varied. How much other land people still have is an important factor. Intimidation was common in the Suharto era and may continue. People have no alternative, especially once any compensation has run out.	Photo on p1 of 'happy village workers' in 1998. People of Terawan offered PT AI a nursery plot on village land. Local people are 'willing participants'. Customary leader agreed local people are generally happy about the plantation (Attach 1)	At meetings during CDC's visit, relations between 2 village heads and PT AI management seemed good. Village heads said the vast majority of people support the company. Difficult to seek out the truth. People express different views under different circumstances.
Land claims	Not all people willingly gave up their land. There was direct and indirect intimidation from the civil and military authorities. PT AI/Agro Hope have hidden behind the local authorities' skirts. Only limited compensation was paid out (total Rp1.2bn). There are allegations of corruption, in some cases involving local officials responsible for payments. In the past, the company denied there were any outstanding claims. There are now over 1000 claims relating to over 4,000ha as the company has progressively cleared land. Compensation paid in 1997 was at unfairly low rates, enforced by local government. PT AI's suggestion that dissatisfied claimants should take court action is unrealistic and insensitive. Local people suspect the company is prolonging compensation settlements. An investigation by a government-established team has yet to yield results. It has not been as transparent and participatory as hoped.	Allegations of pressure from the military are completely untrue. The company complied with approved procedures. A total of Rp1.2bn (approx US$120,000) was paid in compensation. Roughly half to appointed representatives; half directly to claimants. There are comprehensive records of all transactions. Simple people were attracted by NGO claims that they could get more money. Opportunists abound. There are some outstanding part genuine claims and a huge volume of false ones. These are being settled by a joint government team. There is a map of claims, apart from the original ones. The company denies that there are any claims 'outside the original claimed area'. The company should offer a lump sum ex-gratia in cash to each of the 3 villages as a gesture of good will.	PT AI insists that the company never used force to remove people from the land. It is hard to tell if people were ever in a position to give informed consent. Hard to tell if their claims are genuine - especially because of shifting cultivation - or if they are 'trying it on'. Agrees that original procedures for assessing & settling claims were set up by govt and did not always properly represent claimants' interests. The EIA (1997) recommended importance of settling compensation properly and quickly. An inventory of land-owners planters was compiled prior to land acquisition. Procedure for new round of compensation is more representative. A joint govt, company and community team has assessed all 1,400 current claims and rejected over 1,000. PT AI agreed in late Nov 28th to pay out US$110,000 to cover all outstanding claims – based on the team's final report. This is appropriate, although there may still be some compensation disputes. Compensation to communities in villages 'outside the concession area' has caused conflict with communities living inside the concession area. PT AI will not re-open discussions over individual claims.
Relationship with local government	The company has relied on local officials to do its bidding on land procurement and settling compensation claims. Agro Hope expects local government support.	The company conformed with the 'requirements of the day' better than most. A foreign company must act through the local government.	Company could not have 'circumvented the regulatory process'. Local representation is now more democratic because village heads have been elected not appointed. PT AI was part of Team of Nine and Inventory Team to settle land claims.
Lack of transparency	The community has not been shown accurate maps showing the total concession area and areas actually planted / to be planted. Details of Phase I compensation were never made public. Company has been unwilling to discuss concerns about environmental impacts. Local people and NGOs have not had access to the EIA.		Villagers confirm that there were extensive meetings between PT AI and locals at the start of the development. There were workshops/meetings between management and local planters throughout 1997 on a bi-monthly basis.
Forest destruction	Investors were wrongly led to believe no forest was destroyed to establish the plantation. Remaining forest and scrub had important social, environmental and economic functions. Some forest was cleared before most consultants visited and well before EIA was done and approved. PT AI or its contractors have illegally cleared forest cover outside the concession area, along river banks and lake shores. This forest was particularly valued by local people. PT AI have violated regulations restricting the distance between oil palms and streams, rivers and lakeside, in some cases planting nearly to the water's edge.	Strenuous denial of 'substantial and ongoing misdoings'. All consultants describe the area as dominated by climax grassland due to logging and shifting cultivation. Over half had some forest cover but this was degraded, isolated, shrinking and the company could not prevent logging. PT AI voluntarily excluded 2,300ha of forest from its concession. The company cleared 460ha of this by mistake. 5km of forest either side of the R. Purun and (unspecified) forest along the R. Rungau was cleared to the water's edge (not clear if this is the same). Land has been 'sensitively cleared to give housing sites and a golf course in a woodland setting'. Only acknowledges that land clearance and planting outside permitted limits has occurred in a very few locations.	'The original state of the forest is central to the analysis of PT AI's social and env. impact'. 'Many independent studies were carried out at time of land clearing'. All agree that about half land was alang-alang and remaining forest was mostly degraded (quotes Quencez, Gillbanks and EIA). Current land use outside concession is 'undeveloped land', dominated by alang-alang with small amounts of degraded forest. A satellite image shows much of concession was degraded before land clearance. Company excluded forested area along R.Rungau from plantation development. Acknowledges PT AI should have instructed contractors more carefully so forest along minor rivers was not removed. Better to leave palms there to stabilise soil (but does acknowledge replanting natural vegetation is an alternative). Acknowledges construction of plantation roads facilitates illegal logging. There is an illegal sawmill on PT AI's concession. PT AI cannot stop use of its roads or land for illegal operations.
Land clearance by burning	PT AI have instructed or allowed its contractors to burn to clear land. This has been illegal since 1994, but still continues. Evidence at a number of locations in mid-2000.	Burning was normal practice before 1997. Government regulations was almost universally ignored. Consultant advised PT AI to stop burning in 1997 to protect soil. There has been some deliberate arson and accidental fires. The last reference to burning by contractors is in late 1998.	Acknowledged this happened in the past, but says land clearance by burning stopped in 1997. Incidents where contractors burnt in 1998 were quickly stopped. No evidence that any PT AI fires spread outside its concession area and damaged crops. Some fires outside PT AI's concession have damaged oil palm. A recent case of burning was arson by a local seeking compensation.
Local employment	The plantation depends largely on transmigrant labour. Agro Hope regards locals as unskilled. Plantation labourer wages (Rp10,500) cannot support a family at the same level as forest farming (need Rp15,000-30,000/day). Only a few locals are employed. This is on a casual basis and is very recent.	New business opportunities are created e.g. contracted trucks, bridge building carpentry and labour. Employment and training opportunities (unspecified) are available. Priority is given to local people with suitable skills. Quite large numbers (unspecified) are employed as casual workers. Figures show 92 of 1,175 company workers come from local villages. 'PT gives priority to local people with suitable skills'. 92 of 1,175 permanent workers are from local villagers.	Wages set at legal minimum piece-rate bonus (total approx Rp15,000/day) '..many local people work as casual labour' (no numbers, wages or period of employment given). Project intended to create 'direct employment for 3000+ without major displacement of the local population' (1997).
Smallholder scheme	Local people's main hope for making a living in future. Much confusion and rumour. The company has not presented any draft stakeholder scheme to the community five years after it started operations	It is true this has been slow. The financial crisis is one reason. The company intends to set up an outgrower scheme. There are no firm plans. There are financial and logistical questions still to be addressed. Neither a village co-operative company nor a 'plasma scheme' would meet the peoples' needs. The consultant has proposed a different scheme and urged the company to start formally or informally.	This could be a source of conflict as well as a possibly reducing conflict. PT AI's delays in starting a scheme has caused discontent. People's opinions will differ over the details of the scheme. PT AI have had cash constraints. It is hoped there will be progress within 12 months.
Desecration of graves	7 graves were desecrated. PT AI will not offer land to relocate another 29 graves .	There have been compensation payments and ceremonies for disturbed graves.	Some graves were disturbed during land clearance. PT AI 'facilitated' reburial. A burial site near the river crossing has not been disturbed. PT AI does not know about any further community concerns.
Appraisal of environmental & social impacts	There was no independent prior social & environmental assessment EIA was carried out retrospectively, after much of the land had been cleared. There is no government monitoring. There has been inadequate supervision of field clearance.	CDC visited the project 'in advance of any substantial clearing'. Gillbanks visited in Aug 1997 and then 6 times, first for CDC then as a consultant engaged by the company. He has met with some villagers. The EIA started in April 1997 and was approved in Dec 1997. The company complied with the law much more promptly than most. Mistakes happen.	EIA recognised that unsettled compensation issues would have a negative effect on the community. Monitoring has been by 6 monthly visits of Gillbanks – an independent 'consultant'. Gillbanks identified many of the env. issues raised by WALHI/DTE and management took action. PT takes implementation of good practice seriously. PT AI recently appointed an environmental expert (mainly for the mill). CDC will monitor environmental performance regularly.
Environmental impacts	There have been no baseline studies. Wildlife and fish (important food sources) are less abundant. Community reports that water quality has decreased due to soil erosion. Community expresses fears of health impacts of herbicides and pesticides. Increased flooding and changes in micro climate are associated by locals with plantations. Local people are concerned about potential pollution from the oil palm processing unit.	It is in the company's interests to keep agrochemical use low. Any allegations of pollution of water supplies are completely rejected. Drought and overfishing have diminished fish populations. Company senior staff use lake water for all domestic purposes. Pesticides are used to clear land and protect oil palms, but minimised (to reduce costs). Herbicides of low toxicity e.g. Roundup are preferred. Rats are a problem, so rodenticides are used; early biological control methods were sabotaged by local people. Fertiliser use is kept down as far as possible, but needed to promote oil palm growth and soil cover protection planting due to inherent soil infertility. There has been increased sediment levels in rivers, flooding and local climate change. Forest destruction, not plantations, is to blame. Oil palm plantation will ameliorate these effects. Oil palm is not a monoculture: up to 100 species can be found on oil palms. There is absolutely no risk of pollution from the mill.	EIA contains laboratory analysis of air and water quality, noise levels and soil characteristics. PT AI will carry out baseline studies before the start of mill operations and will monitor regularly. Acknowledges potential negative environmental impact from agrochemicals and mill waste. It is in the company's interests to keep agrochemical use low. No risk of contamination of water supplies with 'normal techniques' but some 'sub-standard practice' by workers. More training and procedures needed. Mill wastes will be used on fields as organic fertiliser. BOD of discharged water from waste treatment ponds will be no higher than normal for tropical rivers.
Community relations	There is some tension between the company and at least certain groups in the community. The R. Rungau bridge incident is an example of this. There is a mismatch between community and company expectations. There has been a lack of consultation with the community. PT AI & Agro Hope have shown an insensitive or even confrontational approach to local communities and civil society groups. Any facilities provided are for employees, not ordinary villagers.	People always get a hearing from the company. Local people were consulted on the siting of the R. Rungau bridge. PT AI was considering replacing it, when villagers cut it down. PT AI has provided a primary school building at Terawan. Cash is always a restraint. There are disaffected people in any community. NGOs have stirred up spurious compensation claims and concerns about agro-chemical use and potential pollution from the processing plant. There are a number of outstanding issues to be resolved.	PT AI's management have made comments which could be considered insensitive and confrontational. Company had dialogue with community during compensation process. The claims process has 'inhibited proper dialogue between the company and villagers'. Now the govt team has made a final decision on claims, relations should improve. PT AI will be focusing on programmes that benefit the community in general. PT AI was considering how to raise the R.Rungau bridge when an illegal logger from Sembuluh cut it down. Evidence from meetings during CDC visit was that management has genuine interest in supporting local community. But company's threat to pull out may not be conducive to constructive dialogue about grievances. Company has constructed school buildings and provided teachers, a shop and clinic plus festival food. NGOs have generated unnecessary conflict by only talking directly to members of the community.
Socially responsible investment	Investors did not take thorough measures to ensure they were properly informed. CDC and Rabobank are not fulfilling their responsibilities to the community under their own guidelines.		CDC did not have any procedures in place for assessing social issues when its first PT AI investment was approved (Sept 1997). Social issues policy ready by Jan 1999. CDC did not do any work on social issues between these dates, but the EIA was approved in 1998 and this should have highlighted any problems. PT AI was intended to be a 'benchmark' project when approved in 1997.
Recommendations for action	Must fulfil local people’s demands. Compensation issues must be resolved quickly and fairly. PT AI must try to understand local land rights and land use issues. Investors must have better independent monitoring. Investors should fund mapping of community lands and area used by concession. Illegally cleared forest must be restored. Baseline studies of terrestrial and aquatic environments. Better pollution monitoring and prevention. Research and set up a community stakeholder scheme. Investigate possibilities of mixed cropping. Fund pilot projects which meet local people’s needs. Do not invest in any other developments in Indonesia which promote the conversion of forest to oil palm plantations.	Company should acknowledge minor infringements. Company should restore forest along R. Purun. Company should deny all possibilities of past and future pollution from the mill. Company should pay up whatever the joint government team decides on compensation. Company should consider making a non-cash donation (e.g. a road) to 3 villages as a good will gesture. Early start should be made to a pilot project for village oil palm growers. Possibly consider a specialist community relations person.	Maintain focus on social and environmental issues so ‘NGOs have no renewed ammunition’. Appointment of Environmental Manager. HSE training for new mill staff. Improved training for field staff, especially pesticides. Payment of agreed compensation in line with agreed timetable. Progress as soon as possible with discussions on an outgrower scheme. Appoint a community relations person to put PT AI’s viewpoint to NGOs and local media. Maintain a healthy dialogue with the villagers. Review internal community relations so that genuine concerns reach senior management. PT AI should review and comply with CDC’s Guidelines for Living and Working Conditions. PT AI should engage with selected NGOs, especially local ones. No need for a further independent review.

[1] Gillbanks was a consultant employed by CDC and later PT Agroindomas. His report was written for Rabobank in late 2000.