Tuesday, March 4, 2008

[PBN] Indonesia: Biofuel - an imminent disaster?


Miracle solution or imminent disaster?
Jatropha biofuel production in Sumba, East Nusa Tenggara

Jacqueline Vel

With worldwide attention on global warming and extremely high fossil
fuel prices, interest in alternative energy is booming. The European
Union has targeted 5.75 per cent of the market share for fossil fuel
mixed with biofuel by 2010. While waiting for more sophisticated
techniques to be developed, biofuel is now produced on vast areas of
land, both in Western countries and increasingly in developing
countries. Indonesia is one of the relatively new biofuel-producing
countries. The national government aims to increase the share of biofuel
in domestic fuel consumption and to increase production for export. Oil
palm, sugarcane, cassava and Jatropha (known in Indonesian as jarak
pagar) are the four priority crops in Indonesia for biofuel production.

International companies are lining up to invest in new plantations.
Meanwhile criticism is growing. What will be the environmental impact?
What will happen to people's land rights? Will biofuel endanger food
production? How will the benefits of this booming business be
distributed within the value chains that run from Western investing
companies to farmers in Indonesia's marginal areas?

Jatropha can be cultivated on marginal lands. Sumba is full of
'marginal lands', but they are not 'empty'

Organisations like Sawit Watch have placed criticism of oil palm firmly
in the public debate. Compared with oil palm, Jatropha seems to be a
miracle crop that - according to optimistic websites like that of the
Centre for Jatropha Promotion and Biodiesel (in India)
(http://www.jatrophaworld.org ) - will not only produce biodiesel but
also contribute to wasteland reclamation and reforestation, as well as
generate income in previously unusable areas. In November 2007 I went to
Sumba, where I have been involved in rural development work and research
on the rural economy and local politics since 1986, to see how this
miracle works out in practice.
National biofuel policies and legislation

New legislation facilitates large-scale Jatropha plantations financed by
international corporations. Presidential Regulation No. 5 of 2006
regarding National Energy Production made production of biodiesel
official policy. Presidential Decree No. 10 of 2006 installed a national
team for biofuel development (Tim Nasional Bahan Bakar Nabati or Timnas
BBN). Its task is to make a blueprint for biofuel development, with an
accompanying roadmap delineating implementation. The terminology of the
decree indicates a top-down approach reminiscent of the New Order.
Biofuel promotion includes the creation of 'self-sufficient energy
villages', but the bulk of policy is geared towards the macro level,
where consumption targets are set and where national legislation should
be adapted for 'simplification of licensing issues'. The chairman of the
national team, Al Hilal Hamdi, announced on 9 January 2007 that
investment agreements totaling US$12.4 billion had been signed that day,
the biggest with China and Malaysia. The new Investment Law of April
2007 allows foreign investors to acquire land for an initial period of
60 years, offers tax incentives and the option of creating 'special
biofuel production zones.

Current legislation seems to favour large international companies
that can provide the capital required

Some national parliamentarians protested that the legislation meant
'Indonesia is for sale'. They argued that the law provides inadequate
protection to local entrepreneurs, and that the equal status it grants
to foreign and domestic investments shows the government's historical
apathy toward Indonesia's colonial past. In the nineteenth century the
Dutch East Indies government enforced cultivation of export crops to
benefit the Dutch treasury. Indeed, colonial history and that of the
more recent Green Revolution conveys two main lessons. First, an imposed
system of commercial agriculture can threaten the food security of
primary producers. Second, large-scale, high external input agriculture
- as introduced during the Green Revolution - can lead to indebtedness,
loss of tenure security and environmental damage. The production of
Jatropha oil in the province of East Nusa Tenggara runs the risk of
ignoring these lessons.

Pure Jatropha plant oil, obtained from the seeds, can be used directly
in some engines or mixed into biodiesel. The Jatropha shrubs can be
cultivated on marginal lands (grasslands, wastelands) that are not
suitable for other types of cultivation. Sumba is full of 'marginal
lands', but they are not 'empty'. They are sparsely populated, but the
local population considers them part of their ancestral lands, held
either communally under adat law or in some cases even state-registered
as cultivation land. The marginal character of these lands is caused by
poor soil, shortage of rainfall and other sources of water, difficulty
of access, shortage of labour, or combinations of these factors.

This Jatropha project in Tana Modu on Sumba failed because farmers
lacked information and markets.
J. Vel

During short exploratory research in November 2007, I found four types
of Jatropha cultivation on Sumba. First was the 'demonstration plot',
close to East Sumba's district capital Waingapu. Located only half an
hour's drive from the district government offices was a one-hectare site
planted in May 2006 by the state corporation Rajawala Nusantara
Indonesia (RNI). The condition of the plants was very poor. Local
farmers told me that the timing of planting had been wrong (just before
the dry season), the site was wrong (too sandy so close to the beach),
water was in short supply (in spite of irrigation with water driven in
by truck), and there was minimal care for the crop. Yet this plot was
considered suitable to demonstrate to investors that Jatropha could grow
on Sumba.

The second type I would call the 'corruption plot'. One of these is
located far away in the interior on ancestral land of the clan of a
member of the district parliament. This MP received ample funds from
government subsidies (channeled through the district government and RNI)
to produce Jatropha seedlings. Opinions about the condition of the crop
varied between 20 per cent failed (according to the MP himself) and
60-80 per cent failed (according to local farmers and the head of the
government Plantation Service). The plot was poorly controlled.

The third type was domestic cultivation: Jatropha in hedges around home
yards. The Jatropha plant has been known here since the Second World
War, when Japanese soldiers introduced it to make oil for lamps. Many
Sumbanese still remember how their grandparents followed this example.
The leaves are also used as medicine. Jatropha for domestic use is now
promoted by some NGOs. With relatively simple equipment, a neighbourhood
community could produce their own biodiesel for certain kinds of engines
and thus save on expensive fossil fuel.

The fourth type I call the 'forced plot'. The Agricultural Service has
been promoting Jatropha cultivation in the area that is now Central
Sumba since 2005. In Tana Modu, farmers were urged to plant the crop on
an area that since 1994 had been a cashew plantation. Before 1994 the
land was not used for agriculture, but it was part of grazing land for
the local population's livestock herds. At the start of the cashew
project, the land was registered with the National Land Agency and
participating farmers received their land certificates. In 2005 the
Agricultural Service sent large tractors to clear all remaining cashew
trees and prepare the land for Jatropha. Afterwards the farmers were
supposed to plant and care for the Jatropha themselves. Every three or
four months, they received herbicides to clear the weeds in the Jatropha
field. But in November 2007 I learned that none of these farmers had
been given any information about the herbicide or how to apply it
safely. Nor did they have any information about current prices of
Jatropha seeds, nor about who would be willing to buy their crop. One
farmer brought a bag with Jatropha seeds to town, where he was surprised
to receive only Rp500 (about 6 cents) per kilogram. The costs of
transport to town and back were higher than his revenue. To produce one
litre of biodiesel requires five kilograms of seeds. The farmers in Tana
Modu were thus not motivated to continue cultivation, and that explains
the poor condition of their Jatropha fields in November 2007.
International investments and local interests

On 16 August 2007 a headline in the online edition of the Indonesian
daily Kompas announced: 'Swedish grow Jatropha: Investment of 1 trillion
rupiah. Land will remain property of population'. The article continued:
'Scan Oil Ltd, a company from Sweden, will invest 1 trillion in a
Jatropha plantation in Central Sumba, East Nusa Tenggara. Planting will
start from December 2007 covering 10,000-20,000 ha'. I was amazed by
this news, because from all the years I have been involved in this area
I knew that foreign investments of this size – over US$100 million -
were absolutely beyond the imagination of the inhabitants of Central Sumba.

Contacts with international companies with an interest in investing
in Jatropha had become an election tool

Not only the Swedish company showed an interest in Central Sumba.
Companies from the United States, Japan, Malaysia, and India have also
sent their representatives to assess feasibility. Central Sumba became
an autonomous district (kabupaten) in May 2007. The district government
is still busy organising itself. Its main target is to reach Rp 5
billion (US$540,000) in local tax revenues by 2010, because otherwise
the district will be absorbed into West Sumba again. The first district
head will be elected in June 2008, and in November 2007 competition
between candidates had already started. Contacts with international
companies with an interest in investing in Jatropha had become an
election tool, with each candidate presenting his own investor as
guarantee for a social program they now called 'corporate social
responsibility'. A fifth type of Jatropha cultivation on Sumba in
November 2007 could thus be called the 'imaginary commercial plantation'.

The farmers group in Tana Modu received a visit from an American
investor. He was accompanied by his Indonesian counterpart, PT
Cecilisarah Abadi from Jakarta, and an election candidate. The investor
offered the farmers a one-off price of US$110 per hectare for the whole
period of thirty years. The farmers felt themselves in a strong position
with their land certificates, and rejected the offer as too low.
However, the interim district head told me on the same day that the
district government had already issued the cultivation rights title to
PT Cecilisarah Abadi, because they held investment permits from national
and provincial levels of government. He felt all decisions regarding
Jatropha plantations should be part of a memorandum of understanding
between three parties: the government, the local producers/ land owners
and the companies. Yet, a sound procedure to make these MoUs in a way
that protects the interests of local producers was not yet available.

Large-scale biofuel plantations also require labour… either
external labour or mechanisation

Large-scale biofuel plantations not only require land, but also labour
and water. There is no precedent on Sumba for water management on this
scale. Figures from comparable situations in India show that a
well-maintained Jatropha plantation requires one full-time labourer per
hectare in the first year, and one for every four hectares thereafter. A
plantation of 10,000 hectares would thus need 10,000 labourers in the
first year. In Central Sumba that would be a third of the present
agricultural labour force. Given the perceived labour shortage in
agriculture as it is, it is not very likely that a third would shift to
Jatropha cultivation, nor that they could do so without harming the
existing food cultivation systems. Either external labour or
mechanisation would be required.

When even the remotest places in Indonesia - like Central Sumba - are
drawn into the global value chain of biofuel production, there should be
measures by the government to protect citizens involved in the chain.
Current national legislation seems to favour large international
companies that can provide the capital required. To find out how
legislation can be made more responsive to the interests of primary
producers, consumers and local entrepreneurs, as well as the
environment, will require more research.

As long as farmers have no information about the crops, techniques,
prices, laws and opportunities, Jatropha's miracle image remains
imaginary. The few examples available on Sumba in November 2007 suggest
that an equitable division of benefits in the Jatropha value chain
remains far beyond reach.

Jacqueline Vel (J.A.C.Vel@law.leidenuniv.nl ) is a researcher at the Van
Vollenhoven Institute for Law, Governance and Development of Leiden
University, the Netherlands.

Check for earlier Pacific Biofuel posts: http://pacbiofuel.blogspot.com/

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