Indonesia's palm oil export ban heats up vegetable oil market

Yahoo – AFP, Thomas URBAIN, with Manel MENGUELTI in Paris, 30 April 2022 

Indonesia's decision to suspend palm oil exports is designed to bring down prices
and limit shortages domestically, but it comes amid skyrocketing prices of edible
oils and global supply shortages (AFP/Azwar Ipank) (Azwar Ipank)

Indonesia's decision to suspend palm oil exports in the face of domestic shortages has pushed vegetable oil prices to new highs, further tightening a market already on edge due to the war in Ukraine and global warming. 

The prices of palm, soybean, European rapeseed and even its Canadian GMO counterpart, canola oil, have reached historic highs following Indonesia's announcement on Wednesday. 

"We already had problems with soybeans in South America, with canola in Canada," said Philippe Chalmin, an economics professor at Paris-Dauphine University in France, stating that both crops had been severely affected by extended droughts. 

Then came devastation for the "sunflowers in Ukraine" due to Russia's destructive invasion, he added. 

Palm oil is the most consumed vegetable oil in the world, and Indonesia accounts for 35 percent of global exports, according to James Fry, chairman of LMC consulting firm. 

Indonesia's export ban is designed to bring down prices in the country and limit shortages, according to authorities. 

But Chalmin said the move "comes at the worst time." 

"The rise in prices dates back to last year already and it is exacerbated by the Ukrainian conflict," he explained. 

Rich Nelson of the agricultural market research and trading firm Allendale said "the industry believes it'll last maybe for one month, perhaps two." 

But in the meantime, prices are skyrocketing in a market that was "already accelerated," he said. 

Unlike other oilseeds, palm fruit does not keep once picked and has to be processed immediately, Fry said. 

Indonesia's palm oil storage system, which was already holding substantial reserves, is now under further stress, Fry said. 

Vicious cycle 

Even though the price of vegetable oil, in addition to multiple other agricultural commodities, has been rising for months, demand has yet to slow. 

"It's difficult to ration demand for food commodities with higher prices," said Arlan Suderman, chief commodities economist at StoneX Financial. 

Palm oil, which is used heavily in processed food such as instant noodles and baked goods, is also present in other consumer products, such as personal care items and cosmetics. 

"Eventually it will trickle down," said Paul Desert-Cazenave of consulting firm Grainbow, "but it's still too early to measure price increases to consumers." 

In the short term, the only oilseed that might be able to provide some relief on the vegetable oil market is the soybean. 

The United States and Brazil, the world's two top soybean exporters, still have available stock, even though more shipments from the countries would only have a marginal impact on edible oil prices. 

The United States Department of Agriculture (USDA) announced last month that it expects soybean acreage to increase more than 4 percent from last year, while corn would shrink by a comparable amount. 

The world's top rapeseed exporter, Canada, meanwhile said Tuesday that it expected a seven percent decline in acreage devoted to the GMO rapeseeds used in canola oil. 

Analysts and economists say they see a need for public policy concerning the food crisis, since in addition to food, vegetable oils are also widely used in biofuels. 

Based on the current crisis "we're going to see more pressure on countries to reduce their biodiesel blending mandates, and renewable diesel mandates," Suderman said. 

"That's going to take time," he warned, "but that's ultimately where you're going to get your biggest demand destruction." 

Europe passed a directive in 2018 excluding palm oil from renewable energy targets by 2030. Some of the bloc's countries, including France, have already stopped using it. 

Despite the current turmoil, Indonesia and Malaysia, the world's second-largest exporter, have maintained their respective programs blending palm oil in their biofuels. 

To make matters worse, many of the major palm oil importers, mainly Egypt, Bangladesh and Pakistan, have seen their currencies depreciate significantly in recent months, said Michael Zuzolo, president of Global Commodity Analytics and Consulting. 

Some major oilseed exporters such as the United States and Brazil have, meanwhile, experienced the opposite, with the dollar reaching multi-year highs. 

"This is kind of the worst-case scenario starting to develop," said Zuzolo. 

Putting importers in a "negative feedback loop where they're going to have more and more difficulty keeping supplies ample, that's the potential tragedy we're walking ourselves into."

Indonesia hits European Union with WTO lawsuit over palm oil

Yahoo – AFP, December 16, 2019

Indonesia has accused the European Union of discrimination against its palm
oil exports (AFP Photo/Mohd RASFAN)

Indonesia has filed a World Trade Organization lawsuit against the European Union over plans to phase out palm oil-based biofuel for cars, the trade ministry said.

The action could escalate a trade dispute between Indonesia -- the world's top palm oil producer - and the EU, which plans to end its use of biofuels by 2030, citing concerns over widespread deforestation caused by the sector.

The EU earlier imposed duties on imports of subsidised biodiesel from Indonesia saying it was needed to level the playing field for its producers.

In response to what it called "discriminative" policies against its key palm oil exports, Indonesia said it filed a complaint with the WTO last week.

"Indonesia officially sent a request for consultation on December 9, 2019 to the EU as the initial step for the lawsuit," Trade Minister Agus Suparmanto said in a statement Sunday.

Neighbouring Malaysia, the world's second-biggest palm oil producer, has also threatened WTO action against the EU.

Teresa Kok, the minister overseeing Malaysia's palm oil sector, told AFP on Monday that she will head to Europe in March, and a challenge will not be filed until after then.

She said she wanted to try to convince European officials to change course on her trip.

"I want to give my trip a chance and see whether I can avoid filing the case at the WTO," she added.

Palm oil is the world's most widely used vegetable oil and a key ingredient in a wide range of products from food to cosmetics.

But environmentalists say it drives deforestation, with huge swathes of Southeast Asian rainforest logged in recent decades to make way for palm plantations.

Iman Pambagyo, Indonesia's director general for international trade negotiations, said Jakarta had previously tried other bilateral avenues to reach an agreement, without success.

"We need to assert Indonesia's stance on EU policy," Pambagyo said, referring to the WTO complaint, and adding that he hoped for a "best solution".

Joko Cuts Short US Trip to Deal With Fire, Haze Crisis

Jakarta Globe, Basten Gokkon, October 27, 2015

President Joko Widodo inspects a firefighting operation on burning peat forest in
Pulang Pisau district, Central Kalimantan, on Sept. 24. The president has cut short
 his inaugural visit to the United States to coordinate a response to the worsening
forest fires. (AFP Photo/Romeo Gacad)

Jakarta. President Joko Widodo has decided to cut short his first official visit to the United States as a forest fire crisis blazes out of control back home.

“The president has received recent updates from the minister for politics, legal and security affairs minister regarding the haze that has affected more Indonesian people,” Arrmanatha Nasir, a spokesman for the Foreign Ministry, told the Jakarta Globe late on Monday.

He said Joko and part of his delegation would immediately return home on Tuesday after attending scheduled events in Washington, D.C., where the president met with President Barack Obama, congressmen and US executives on Monday.

Joko’s return means he will not attend much-anticipated meetings with technology executives from Apple, Google and Microsoft, among others. Representing him in Silicon Valley instead, Arrmanatha said, will be the communications and trade ministers, as well as the head of the Investment Coordinating Board (BKPM).

Arrmanatha said the president would fly to either South Sumatra or Central Kalimantan once he arrives back in the country. Both provinces are among the hardest hit by forest fires generating intense volumes of health-threatening haze.

A top legislator earlier on Monday lashed out at the president for going abroad just as the fire and haze crisis worsens. Up to three-quarters of Indonesia is affected to varying degrees by the haze.

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Singapore banks urged to curtail loans to haze-linked firms

#INFOGRAPHIC Updated map and pollution data on the Southeast Asian haze @AFP pic.twitter.com/rIWRmxjas1

— Agence France-Presse (@AFP) October 27, 2015

Singapore banks urged to curtail loans to haze-linked firms

Yahoo – AFP, Martin Abbugao, 9 Oct 2015

A worker waters a field as downtown buildings are shrouded in smog in
Singapore on October 5, 2015 (AFP Photo/Roslan Rahman)

Singapore (AFP) - An umbrella group of local and foreign banks in smog-hit Singapore has urged members to make "sustainable development" part of their lending requirements, stepping up pressure on companies linked to land-clearing fires in Indonesia.

The 158-member Association of Banks in Singapore (ABS) on Thursday issued guidelines for the inclusion of greenhouse gas emissions, deforestation, forest degradation and biodiversity loss among the criteria for approving commercial loans.

The move came in the wake of fires illegally started to clear land for plantations on Sumatra island and the Indonesian part of Borneo, which have shrouded Singapore and Malaysia in acrid smoke since early September.

"The banking sector in Singapore wants to play a bigger role in driving responsible business and long-term sustainable development," ABS director Ong-Ang Ai Boon said in a statement.

The smoky haze has also reached the popular Thai holiday islands of Phuket and Samui, forcing several planes packed with beach-bound tourists to turn back.

Palm oil and pulp and paper companies are believed to be the main culprits behind the use of burning to clear massive tracts of land for their plantations, but prosecution by Indonesian authorities has been rare, prompting affected countries like Singapore to resort to economic pressure.

Singapore's biggest supermarket chain, NTUC Fairprice, this week withdrew from its shelves all paper products sourced from Indonesian-owned Asia Pulp & Paper (APP), which has corporate offices in the city-state.

The company's suppliers are suspected of starting forest fires in Indonesia.

The Fullerton Hotel is blanketed in thick haze, in Singapore, on September 24,

2015 (AFP Photo/Roslan Rahman)

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Suspended Riau Governor Gets Six Years in Bribery Case

Jakarta Globe, Jun 24, 2015

Annas Maamun, the suspended governor of Riau province in Sumatra, was
sentenced to six years in jail on Wednesday for issuing permits to a businessman
 to clear 140 hectares of protected forest. (Antara Photo/Agus Bebeng)

Jakarta. The Bandung Anticorruption Court has sentenced the suspended governor of Sumatra’s Riau province, Annas Maamun, to six years in prison for taking bribes to issue forestry concessions to a local businessman.

The court on Wednesday also fined Annas Rp 200 million ($15,040) after finding him guilty of taking a Rp 2 billion bribe for the permits to clear 140 hectares of ostensibly protected forest in the province. The sentence was the same as that sought by prosecutors from the Corruption Eradication Commission (KPK), although the fine was less than the Rp 250 million demanded by the KPK.

Gulat Medali Emas Manurung, the businessman said to have paid the bribe, has been charged in the same case.

The pair were busted red-handed transacting the bribe at a house in East Jakarta last September by the KPK.

World Bank Urges Better Resource Management in Indonesia

Indonesia loses $4 billion from its rain forests to illegal logging.

Jakarta Globe, Vanesha Manuturi, Jun 10, 2015

Farming is seen in the protected areas of the Kerinci National Park (TNKS),
in Kerinci, Jambi, in May. (Antara Photo/Wahdi Septiawan)

Jakarta. The World Bank has pressed Indonesia to improve resource management and governance as the country works towards more sustainable and environmentally-friendly economic growth over the next five years.

“Indonesia has enjoyed tremendous growth … but not all are benefiting from these achievements and they come with a high price of environmental degradation,” said Sri Mulyani Indrawati, managing director and chief operating officer at the World Bank, on the first day of the Indonesia Green Infrastructure Summit 2015 in Jakarta on Tuesday.

She pointed to Indonesia’s forestry industry as an example of the country’s murky governance track record.

“Every year, Indonesia loses some $4 billion through illegal logging. Meanwhile, revenue from forestry licensing amounts to only $300 million per year,” she said. “This is a problem of governance, manifested in poor performance that impacts the implementation of existing regulations or design of better laws.”

Sri Mulyani — who was a former finance minister in the Susilo Bambang Yudhoyono’s administration before resigning in 2010 — also noted “an information gap” among government agencies in Indonesia, which has led to a lack of transparency and efficiency in resource management.

“The energy sector, for example, needs more and better data on simple energy use and emissions,” she said.

Still, the World Bank managing director praised the government’s moratorium on new fishing permits for large operations as an “encouraging development.”

“A well-managed ‘blue’ economy can ensure food security, promote sustainable tourism and build resilience. But degradation through overfishing and dumped waste exacerbates poverty and undermines food security globally,” she said.

Improving governance of the fisheries sector coupled with large-scale investment in maritime transport and trade infrastructure could double fish production in the next five years, according to Sri.

During the same summit, Vice President Jusuf Kalla admitted the government’s stance to maintaining a sustainable economic growth has been lackluster.

“We’ve always thought about environmental issues after we’re faced with problems,” Kalla said.

“We’ve learnt and we are now learning with economic principles that are sustainable so that we can pass down this country for the next generation.”

Under President Joko Widodo, the government wants to boost growth to 7 percent over the next five years, bolstered by greater investment — both by the government and the private sector — in infrastructure development.

Joko’s infrastructure vision for the country includes the development of new power plants with a total capacity of 35,000 megawatts and nine million hectares of agriculture land across the country.

In a bid to encourage more environmentally-friendly investments, Indonesia currently offers tax allowances to nine business areas relating to environmental preservation, including geothermal power, refining and natural gas processing industry, organic basic chemical industry, and clean water reservoir and purification industry.

In April, Environment and Forestry Minister Siti Nurbaya said that the ministry plans to offer more incentives — such as soft-loan facilities, business permit extensions and free import duties — to local and foreign investors with technology which reduces pollution and conserves energy.

GlobeAsia

KPK Signs Memorandum of Understanding Over Natural Resources

Jakarta Globe, Mar 19, 2015

The KPK signed a Memorandum of Understanding with several government
bodies to increase oversight of the Indonesia's natural resources. (Antara Photo)

Jakarta. The Corruption Eradication Commission, or KPK, on Thursday signed a memorandum of understanding with related government ministries and institutions to boost corruption eradication in Indonesia’s natural resource sector.

“Signing this MoU is like a way for the KPK to look into each ministry and to help solve any natural resources-related problems they might have within them,” acting KPK chairman, Taufiqurrachman Ruki, told news portal detik.com.

KPK deputy chairman Johan Budi said new regulations would likely result from the MoU. He was unable to give a time frame or provide further detail.

“In this 2015 MoU we included the marine and plantation sectors,” he said. “Those two sectors were not included in 2014’s MoU. The ministries will make an action plan after the signing and we will monitor it.”

The purpose of the document is to beef up anti-corruption oversight of the country’s natural resources, from hydrocarbons to marine stocks.

“The MoU has to be realized,” President Joko Widodo said. “We should work together on eradicating corruption in the sector — it could lead to eradicating corruption for good.”

We Are Waiting for You to Invest in Indonesia, Jokowi Tells APEC in Speech

Jakarta Globe, Nov 11, 2014

President Joko Widodo delivers a speech at the APEC CEO Summit as part of the
 Asia-Pacific Economic Cooperation Summit at the China National Convention
Center in Beijing on Nov. 10, 2014. (AFP Photo/Pool/Andy Wong)

Jakarta. Indonesian President Joko Widodo addressed business leaders at the Asia-Pacific Economic Cooperation CEO summit in Beijing on Monday, where he put out a call for greater investment in the archipelago and promised a friendlier climate for doing business in the country.

The following is his speech:

Excellencies, distinguished guests, ladies and gentlemen and CEOs.

First, on behalf of Indonesian government and the people of Indonesia I would like to thank you for coming to my presentation. Today I am very happy to be among with you because you know I was a businessman years ago. So this morning I am very happy because we can talk about business, about investment with all of you.

This picture shows you our map of Indonesia. We have a population of 240 million and the distance is like from London in the UK to Istanbul in Turkey. And imagine, we have 17,000 islands.

Our national budget in 2015 is $167 billion and the fuel subsidy [allocation] is $27 billion. It’s huge. So we want to channel our fuel subsidy from consumption to productive activities. We want to channel [the money] to farmers for seed, for fertilizers, and also for irrigation. And we want to build dams — 25 dams in five years from our fuel subsidy to maintain the water supply to farming areas.

Some subsidy [funds] we want to channel to fishermen, to give them boat engines [and] refrigerators. We want to increase the income of the fishermen. Some fuel subsidy [funds] we want to [give to] micro and small enterprises in the villages. We want to help them raise working capital. And some subsidy [funds] we want to channel to the health program [and] the education program. And the subsidy [funds] we [also] want to channel to infrastructure.

In five years we want to build 24 seaports and deep seaports. We have 17,000 islands, so we need seaports and deep seaports. And this is your opportunity: 24 seaports and deep seaports.

This picture shows our Jakarta port, Tanjung Priok Port. In 2009, the capacity was 3.6 million TEUs a year. And our plan in 2017 is around 15 million TEUs a year. This is the potential [for] ports in Indonesia. This is your opportunity. We want to build in Sumatra, Kalimantan, Java, Sulawesi, Maluku, also in Papua. And we plan to build our [railway network]. We already [have railway lines] in Java and we want to build in Sumatra, Kalimantan, Sulawesi and Papua. This is your opportunity.

Now we talk about mass transportation. We want to build mass transportation in six big cities in Indonesia. We started in Jakarta last year, and we want to build in Medan, Makassar, Semarang, Bandung [and] Surabaya. So, this is also your opportunity. Because you know our national budget is limited.

Now we [will] talk [about] our maritime agenda. We want to build [a] sea toll. What is [a] sea toll? [A] Sea toll is [a] maritime transportation system to make our transportation costs lower [and] more efficient. We want to build from the west to the east. We hope not only the vessels can enter our sea toll but also mother vessels can enter the sea toll. So the price, the cost of the transportation, [becomes] more efficient.

For example, the price of [...] one sack [of] cement in Java is $6 [...] But in Papua the price is $150 [...] Imagine, 25 times [as much]. So we hope with our sea toll the price in our islands [will be] the same.

Electricity. We need power plants. We need around 35,000 [megawatts] to build our industries, projects, industrial zones, [manufacturing] zones. So we need power plants. This is also your opportunity to invest in this project. Because we need our power plants for manufacturing, for industrial zones.

Many investors, a lot of investors, when they come to me most of them [...] always complain about land acquisition. I will push my ministers, my governors, my mayors to help clear this problem. I have experience with land acquisition when I was a governor. We [had the] Jakarta Outer Ring Road [project that] started 15 years ago but stopped eight years ago, because we had a problem. One point five kilometers [was] unfinished because there [were] 143 families [who did] not accept [...] the compensation price. So last year I invited them [...] to lunch and dinner. Four times. Ah, this is me. I invited them and then we talked about the problem. Four times. And the problem [was] cleared.

And now the toll road has been [in use since] seven months ago.

Now [let’s] talk business permits. We have a national one-stop service office that can help you, that will serve you, that will facilitate you, that will give you your business permit. For example, [a] principle business permit [will take] three days to process.

Finally, again on behalf of the Indonesian government and the people of Indonesia I would like to thank you for your listening my presentation. We are waiting for you to come to Indonesia. We are waiting for you to invest in Indonesia. Thank you.

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Draft of the Master Plan for National Capital Integrated Coastal Development. 
(JG Screen Grab courtesy of the website of the Coordinating Ministry of
Economic Affairs)

KPK Questions MPR Speaker Over Riau Forest Graft Case

Jakarta Globe, SP/Novianti Setuningsih, Nov 11, 2014

People’s Consultative Assembly (MPR) Speaker

 Zulkifli Hasan at the Corruption Eradication

Commission (KPK) building in Jakarta on

Tuesday. (Antara Photo/Vitalis Yogi Trisna)

Jakarta. The Corruption Eradication Commission (KPK) on Tuesday questioned the speaker of the People’s Consultative Assembly (MPR) as a witness in a graft case revolving around the clearance of a forest area in Riau.

“I will go to KPK at 10 am.,” MPR Speaker Zulkifli Hasan, who served as forestry minister in the administration of the previous president, Susilo Bambang Yudhoyono, told Tempo.co before the questioning session on Tuesday.

Zulkifli had originally been scheduled to be questioned on Monday, but did not show up. KPK spokesman Johan Budi said that Zulkifli had informed the anti-graft body of his absence beforehand.

“He had other plans at the same time at the MPR, so Zulkifli asked for the meeting to be rescheduled,” Johan said.

Zulkifli was questioned as a witness in the case against former Riau governor Annas Maamun.

Annas allegedly received Rp 2 billion ($164,000) to approve the conversion of 140 hectares of forest in Kuantan Singingi district, as requested by a local businessman, Gulat Medali Emas Manurung. Annas and Gulat were caught red-handed in the middle of a transaction last September.

Zulkifli is a politician from the National Mandate Party (PAN).

It is yet not clear what Zulkifli’s role was in the case, but Annas has claimed that the then-minister had agreed to the conversion.

“It has been approved by minister Zulkifli Hasan,” Annas said recently.

Zulkifli was earlier questioned by the KPK over a land conversion case in Bogor, West Java. Bogor district chief Rachmat Yasin has been named as graft suspect in this case.

ICW Calls for Scrutiny Over ‘Corruption-Prone’ Agriculture Ministry

‘Monitor It Closely’: Indonesia Corruption Watch says the government department is particularly prone to graft

Jakarta Globe, Yustinus Paat, Nov 03, 2014

The Ministry of Agriculture has had a number of graft allegations leveled

against it over the years. (JG Photo/Afriadi Hikmal)

Jakarta. Indonesia’s most prominent corruption watchdog has called for close scrutiny over the “corruption-prone” Ministry of Agriculture, citing its mounting suspected involvements in numerous graft cases.

“We think that the Agriculture Ministry is one of the ministries that must be closely monitored,” Emerson Yuntho, Indonesia Corruption Watch’s legal and justice monitoring coordinator, said on Sunday. “There have been many corruption cases at the Agriculture Ministry; it is prone to corruption.”

The ICW cited a number of corruption cases proven to have involved or allegedly involving the ministry.

The most recent case is a graft-ridden procurement of coffee beans in 2012. Hadi SP, the ministry’s head of the herb and refresher cultivation division, has been named a suspect in the case estimated to cost the state Rp 12 billion ($1 million).

Former agriculture minister Suswono was also allegedly involved in a beef-import graft scandal last year that has sent Luthfi Hasan Ishaaq, a former president of his party, the Prosperous Justice Party (PKS), to 16 years in prison.

Suswono was allegedly in charge of awarding the beef import tenders, although he has yet to be named a suspect in the case.

The ministry was also allegedly involved in another graft case concerning the procurement of seed stock by state-owned company Sang Hyang Seri during the 2008-2012 period.

“Corruption in the Agriculture Ministry have been conducted in two ways, namely bribing the minister or other high-ranking officials at the ministry, or corruption in the procurement of goods and services by marking up or down [the budget figures],” Emerson said.

ICW calls on the new minister, Amran Sulaiman, to focus on being a minister and step down from any positions he currently holds in order to avoid any conflict of interest.

Amran is the president director of the Tiran Group, a Makassar-based diversified business group engaging in agricultural, industry, mining and trade sectors.

Rabobank under fire over Indonesia palm oil investments

DutchNews.nl, Saturday 28 June 2014

A palm oil plantation (NOS/AFP)

Environmental group Milieudefensie has made a formal complaint against Rabobank with the OECD, saying the bank is breaking rules on deforestation.

Milieudefensie says the bank has some €47m invested in Indonesia palm oil company Bumitama which it says operates illegal plantations and is guilty of illegally cutting down forests. This, in turn, is threatening the habitat of orangutans, the organisation says.

Rabobank says it is in talks with Bumitama in an effort to improve its operations but Milieudefensie says this is taking too long. ‘Rabobank has showed itself to be extremely naïve in this and has a blinkered view,’ spokesman Geert Ritsema told the Volkskrant.

Illegal deforestation is not only against Rabobank’s own policy but against OECD agreements on socially responsible business.

If the OECD upholds the complaint, Rabobank could be excluded from taking part in trade missions and from some subsidies, the Volkskrant said.

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KPK Questions Forestry Minister Zulkifli Over Selling of Protected Forests

Jakarta Globe, Rizky Amelia, Jun 24, 2014

Zulkifli Hasan has been questioned by the Corruption Eradication Commission

Jakarta. The Corruption Eradication Commission (KPK) on Tuesday questioned the forestry minister Zulkifli Hasan as a witness in an alleged attempt to sell off 2,754 hectares of protected forests to a developer in Bogor, West Java.

“He will be questioned as a witness for one of the suspects, Yohay Yap,” KPK spokesman Priharsa Nugraha said on Tuesday, referring to Franciscus Xaverius Yohan Yap, the director of developer Bukit Jonggol Asri.

Bukit Jonggol Asria is alleged to have bribed Bogor mayor Rahmat Yasin to acquire a recommendation letter for the project — which would have eliminated one of the hurdles to transferring the protected forests.

Rahmat, a politician from the Islamic-based United Development Party (PPP), was named a suspect by the KPK in May for allegedly accepting Rp 4.5 billion ($390,000) from Bukit Jonggol Asri.

Zukifli arrived at the KPK headquarter at 10 a.m. He declined to comment to journalists.

KPK chief Abraham Samad previously said Rahmad was caught red handed with Rp 1.5 billion, but that other payments had been made prior to the arrest.

The KPK also named the head of Bogor’s agriculture and forestry agency, Muhammad Zairin, a suspect in the graft case.

Asian logging companies 'use British islands for tax dodging'

Calls for crackdown as investigation finds huge Indonesian corporations evading tax through network of secret shell companies in British Virgin Islands and other tax havens

The Guardian, The Observer, John Vidal, environment editor,  Saturday 10 May 2014

In the British Virgin Islands it is easy to set up shell companies, which makes
them popular with companies and the wealthy. Photograph: Neil Rabinowitz/Corbis

Giant Asian logging companies that make billions from destroying rainforests use a labyrinth of secret shell companies based in a UK overseas territory, the British Virgin Islands (BVI), which operate as a tax haven, according to documents seen by the Observer. The 13 companies own millions of acres in Indonesia, provide much of the world's palm oil, timber and paper, and use complex legal and financial structures to keep their tax liabilities low.

An unpublished two-year investigation by anti-corruption experts, and seen by the Observer, says Britain should launch a major investigation into the use of the BVI and other tax havens by "high-risk" sectors such as Indonesian forestry. This follows a court case in Jakarta in which one of the world's largest palm oil companies, owned by billionaire Sukanto Tanoto, was fined US$205m after being shown to have evaded taxes by using shell companies in the BVI and elsewhere. The company has agreed to pay the fines.

Documents arising from the case show that Tanoto's company, Asian Agri, systematically produced fake invoices and fake hedging contracts to evade more than $100m of taxes.

According to evidence contained in more than 8,000 papers, the company, which employs 25,000 people in 14 subsidiaries and owns 165,000 hectares of plantations, was engaged in "routine and systematic fraudulent accounting and book-keeping practices" using British jurisdictions.

It is easy to set up shell companies in the BVI, and this makes them a favourite destination for Asian corporations and individuals. A cache of leaked documents obtained by the International Consortium of Investigative Journalists showed last year that nine of Indonesia's 11 richest families had used tropical tax havens.

Although there are legitimate uses for offshore companies, critics say tax havens fuel corruption and allow corporations and individuals to dodge taxes. "Powerful forest and palm oil conglomerates have set up shell companies in the BVI, Cayman Islands and Bermuda, but lack of transparency – including public access to the names of the actual owners of shell companies – makes it difficult for governments to monitor the legality of their activities," said Stephanie Fried of Ulu Foundation, a US organisation that tracks international financial flows. "Clearly, a full international investigation is needed not only by Indonesian authorities, but also by those in the BVI, the UK and other jurisdictions."

A government spokesperson said: "The government put tax and transparency at the heart of the UK's G8 presidency. As a result, the UK's overseas territories are consulting on establishing a central registry of beneficial ownership and on whether it should be publicly accessible. We believe a registry of this kind would provide the best outcome for sound corporate behaviour and for helping authorities, including those in developing countries,prevent misuse of companies for illicit purposes." 

Offshore Secrets

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France's President Hollande: Eradicate tax havens
Dutch MPs call for action on tax havens, plan should be ready by summer
EU deal to tackle mining corruption
French ministers to declare assets publicly

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China Offshore Secrets

Asian logging companies 'use British islands for tax dodging' - New
Wealthy in China need new tax haven as Switzerland U-turns on banking privacy - New
Offshore tax-dodging piece shows anti-Chinese bias: report
Chinese oil giants make use of offshore shell companies in Caribbean
China's cash haven in the British Virgin islands – the key points
China's princelings storing riches in Caribbean offshore haven

EU Offshore Secrets

Swiss bank accused of helping clients evade US taxes
Gibraltar tries to lure London hedge fund bosses with promise of low taxes
Dutch savers have €1.1bn in Luxemburg and Austria: tax office
Dutch finance ministry denies Starbucks tax secrecy claims
100 of UK's richest people concealing billions in offshore tax havens
The 'who's who' of European tax havens
Accountancy firms 'use knowledge of Treasury to help rich avoid tax' – MPs
The nation at the heart of the offshore scandal: Britain
Leaks reveal secrets of the rich who hide cash offshore