Sarawak controversies

Global Witness, a corruption busting NGO focusing on resource-based industries, recently released a video sting on Sarawak land deals. The video features cousins of the long-time Sarawak Chief Minister Taib and two lawyers. They are shown explaining to the purported foreign investor how he might acquire oil palm plantation land and circumvent Malaysian regulations on foreign-ownership limits and evade real property gains tax by using nominees and effecting so-called secret payments via a Singapore entity.

source: http://www.youtube.com/user/GlobalWitness, accessed 11pm on 22 March 2013

Khor Reports comment:

Stories about timber and oil palm links to corruption are not new. Various NGOs have been featuring similar issues in Sarawak. These include the Bruno Manser Fund and the Sarawak Report (run by Clare Rewcastle Brown, a sister-in-law of UK ex-Prime Minister Gordon Brown). Global Witness is a prominent NGO and its film about Sarawak land dealings is attention-grabbing. Sarawak issues may gain more global attention, building on other NGO exposes. Global Witness notes on its website: "Our campaigning led to the creation of the precedent-setting Kimberley Process Certification Scheme and to our joint nomination for the Nobel Peace Prize. Three years later we contributed to research and campaigning around the 2006 Hollywood blockbuster, Blood Diamond."

Indeed, the Global Witness report, "Corruption in Malaysia laid bare as investigation catches Sarawak’s ruling elite on camera," (weblink: http://www.globalwitness.org/insideshadowstate/), has garnered over 900,000 views on youtube in just three days (in English and Malay languages).

Sarawak is Malaysia’s remaining frontier for oil palm expansion, and various controversies have arisen in recent years. These include:

a)    The IOI–Pelita landmark case: At end March 2010, the Miri High Court declared four natives the winner in a class action suit against the Sarawak government, Land Custody and Development Authority and IOI Pelita Plantation Sdn Bhd. Reports on the RSPO website indicates that IOI subsequently lost control of the estate.
b)    Hundreds of pending land dispute cases: A listing of land disputes for 1995 to 2010 is available on various Sarawak linked websites, including here: http://www.illegal-logging.info/uploads/ListofSarawaklanddisputesJOANGOHUTAN.pdf 
c)    Sime Darby case: A former CEO of the largest plantation company in the world, stands accused of CBT over a Sarawak oil palm land deal apparently gone sour.
d)    Recent expansion: Some academic satellite imagery studies show significant oil palm development in Sarawak in recent years (including on peat land). This supports recent comments by Dorab Mistry, a key speaker on palm oil market and prices, that there has been significant expansion in the Sarawak palm oil sector.

Sarawak NCR land - a new development model

News article, 29 Aug 2011: "Felcra-like model to develop native land in S'wak"
Sarawak has introduced a new land management system modelled after Federal Land Consolidation and Rehabilitation Authority (Felcra) Bhd to develop Native Customary Rights (NCR) land in the state..... According to state land development minister Tan Sri Dr James Masing, the pilot project involving the new land management model was carried out in Pasai Siong, near Sibu......"The agreement with Felcra was reached in June this year. This is the first time we used this model on the NCR land management. This model has been used by Felcra in other land areas under the Ladang Rakyat scheme, but this is the first time it was applied to NCR land.... "This is because, to develop NCR land, you need the consent of landowners. Felcra will manage this pilot project with a fee for 15 years," he said.... under the new land management model, NCR landowners would hold 90% shares, with the remainder to be held by Sarawak Land Custody Development Authority (LCDA). Felcra will source all the funding required and will only charge management and marketing fees.... (source: http://thestar.com.my/news/story.asp?file=/2011/8/29/nation/20110829111929&s)

Khor Reports comments:
a) This is a promising new proposal for NCR land development in Sarawak. This is an advancement from the Sime Darby land deal proposals in FY2009, where the plantation sought a 60% stake, while offering the native landowners 30% and LCDA/Pelita 10%.
b) Previously, oil palm land deals have been in the eastern state of Malaysia have been problematic in their general poor inclusion of native landowners. Such issues are exemplified in the IOI Pelita case where a secondary land purchase has been bogged down by controversy from the initial land deal.
c) This suggests that any plantation should be concerned about the level of inclusion of local and native peoples in their current and existing projects. This "social agenda" is likely to become a significant issue for plantations.
d) Investors in plantations might become more keen to ask plantation companies to better disclose such risks, as well as the conservation / environmental usability and risks of their land banks.

Also view: http://khorreports-palmoil.blogspot.com/2011/04/native-customary-rights-ncr-issues-at.html

Native customary rights (NCR) issues at IOI Pelita escalate

The RSPO steps up pressure on IOI Group to address native customary right complaints at IOI Pelita.

In accordance with the RSPO grievance procedure:
1. The current and ongoing certification process of all IOI group’s activities will be suspended with immediate effect.
2. IOI group will be given a period of 28 days from the date of this letter to revert with an acceptable solution to these matters, which preferably should be mutually agreed by parties involved.
3. IOI group is expected to with immediate effect and agreed in advance with RSPO, to publish a statement on their corporate website indicating the two measures stated above.

Failure to deliver the required proposal by the due date of May 2, 2011 will result in the RSPO considering further sanctions against your company, which may include the suspension of your license for new transactions involving Certified Sustainable Palm Oil materials including GreenPalm certificates.

Background summary: After a 12-year legal battle, the Miri High Court nullified the lease of some plantation estates owned by IOI Corp in Sarawak. The Miri High Court declared four natives the winner in a class action suit against the Sarawak government, Land Custody and Development Authority (Pelita / LCDA) and IOI Pelita Plantation Sdn Bhd, end March 2010. The land leases used by IOI were “null and void” as they had been issued by the Sarawak state government in an illegal and unconstitutional way. Read more here, http://hornbillunleashed.wordpress.com/2010/04/04/6268/, where “...the Bruno Manser Fund welcomes the Miri High Court decision and expects IOI to stop its jungle clearance activities and move out of the disputed lands in the Tinjar region with immediate effect....”


Background info:
i) News report: http://biz.thestar.com.my/news/story.asp?file=/2011/4/7/business/8431450&sec=business.
ii) RSPO's announcement on grievance against IOI Group: http://www.rspo.org/?q=content/announcement-ioi-rspo-grievance-panel-breach-rspo-code-conduct-23-certification-systems-424-.
iii) IOI Group's past comment on the IOI Pelita - NCR issue: http://www.ioigroup.com/home_more.cfm?id=62D76BA9-1438-5066-5C1C4FCD256FE2D3; and links to "IOI Pelita" search on the company's website: http://www.ioigroup.com/search.cfm?searchid=44820&searchtxt=ioi%20pelita&CFID=4319922&CFTOKEN=39987901.
iv) NGO report on IOI Pelita issues: http://understory.ran.org/wp-content/uploads/2011/03/Industry_Oppresses_IPs2.pdf


Khor Reports comments:

a) Social HCVs is an emerging issue and is likely a longer term matter of concern to plantation companies. This would impact development in both forest and non-forest lands.

b) Plantation companies should prepare for better inclusion of native landholders with: i) free and/or pre-funded equity ownership with low / fair interest cost, ii) a larger proportion of smallholder schemes and iii) larger set-aside of land for HCV areas in their future developments.

c) Those who make secondary purchases of land of native customary right (NCR) areas should be concerned about the legitimacy of the land concessions. Khor Reports has viewed land deal documents that raise strong ethical questions about the lack of free prior and informed choice (FPIC) of the natives in these transactions. It appears that they were verbally promised a stake, but later they found they were unable to subscribe (pay for) their interest in the plantation developments. In the meantime, they had already assigned their interest in the land. In the strict sense, the natives had given up their right to subscribe. However, the natives would likely have been lacking in financial understanding and resources to participate in the transaction.

d) Such land dispute cases number in the 100s and many have dragged on into a decade.