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Impact of Malaysian Corporate Investment in Overseas Oil Palm Plantations

In 2013 Aidenvironment was contracted by Sahabat Alam Malaysia / Friends of the Earth Malaysia to assess the scale of Malaysian Overseas Foreign Direct Investment (OFDI) in the oil palm plantation land bank, describe the sustainability impacts of ten selected investors, and assess how rogue overseas investors can be held accountable through legal and voluntary mechanisms.

The study identified 50 separate Malaysian company groups that have acquired over 200 estate companies holding some form of rights over a total overseas land bank of 3.4 million hectares. The dominant recipient of Malaysian OFDI in the oil palm plantation land bank is Indonesia (54%), followed by Papua New Guinea (29%). The bulk of this land bank remains to be planted because many Malaysian investors have yet to secure a full legal and social license to operate. The ten Malaysian groups with the largest overseas land banks are Sime Darby, Kuala Lumpur Kepong, WTK Holdings, Genting Plantations, Wah Seong, Prosper Oil Palm, Rimbunan Hijau, Joinland Group, Sazean Holdings and TSH Holdings. Together they account for 64% of Malaysia’s overseas plantation land bank.

While recognizing that in many instances Malaysian OFDI in oil palm has positive impacts on recipient economies, the case studies presented in the report affirm civil societies’ observations across the tropics that there are serious legal, environmental and social injustices associated with these overseas investments, such as:

 

• Encroachment in protected forestland, and other forms of illegal logging
• Plantation development without approved Environmental Impact Assessments
• Encroachment in and occupation of land without the consent of local communities
• Failure to develop smallholder plots as required by law
• Paying local villagers and plantation workers to hunt protected species, including orangutans
• Paying special police forces for security services

 

Rampant land grabbing has nurtured strong anti-Malaysian sentiments in several recipient countries because affected stakeholders have little or no power to get their concerns duly addressed, either in their home countries or in Malaysia. Excesses have led the governments of Indonesia, Papua New Guinea, Liberia and Cambodia to declare moratoria on plantation development. Unfortunately, these moratoria are merely soft policies that can be circumvented, also by Malaysian investors. The case studies presented in the report reaffirm that existing national and international governance and accountability mechanism are woefully inadequate to address the sustainability impacts of globalized investment and commodity trade.

Interestingly, the Singapore government is currently consulting the public about a unique piece of legislation that would hold Singaporean investors legally accountable for their involvement in causing the recurrent air pollution (“haze”) from Indonesia, which affects millions of citizens around the Malacca Straits. Legal liability for extraterritorial illegal actions remains poorly regulated internationally, but if the Singaporean Bill is passed it will set a precedent that could have global implications.

Aidenvironment will release the full report on its website in May.

For more information contact Eric Wakker.