Banks behind Indonesian palm oil tycoons revealed
Communication Officer - TuK INDONESIA
Communication Officer - TuK INDONESIA
New research from TuK INDONESIA and Profundo has identified the bankers behind Indonesia's controversial palm oil sector. International banks including HSBC of the UK and OCBC of Singapore are identified as the main lenders to a group of 25 palm oil businesses, all of which are controlled by wealthy tycoons, often via holding companies in tax havens.
The rapid expansion of Indonesian oil palm plantations creates serious
environmental and social problems: vast amounts of valuable forests are
converted into plantations; habitats of protected species are endangered;
significant greenhouse gas emissions are caused by peatland development; and
many communities lose access to land which is crucial for their subsistence and
to which they have held legal or customary rights for generations.
To solve these problems, the driving forces behind the strong growth of the palm oil sector - its owners and financiers - need to take their responsibility. A new study, "Tycoon-controlled oil palm groups in Indonesia", analyses the ownership and financing of 25 corporate business groups active in the Indonesian palm oil sector, which account for a large part of the existing plantations and which are developing very sizable landbanks into new plantations.
conducted by TuK INDONESIA and Profundo, also reveals how the tycoons control
the business in the palm oil sector and how they get funding to develop their
businesses moving very rapidly, as well as financial institutions who provide
financing to the tycoons.
TuK INDONESIA's Program Director, Rahmawati Retno Winarni explained: "There are 29 tycoons who control 25 business groups in the Indonesian palm oil business, and in 2013 they possessed landbanks (planted and unplanted) of 5.1 million hectares of oil palm land. This is a huge number, especially if compared to total planted area of 10 million hectares. Of the land area that is owned by the tycoons, as many as 3.1 million hectares, or sixty per cent, are already planted.
"The rapid pace of oil palm plantation expansion and ease of land acquisition by these tycoons is facilitated by both domestic and foreign financial institutions. With their support, tycoons are able to do expand plantations faster and on a larger scale.
"This research identifies a total of US$ 17.8 billion of new debt that has been provided to these 25 palm oil groups in the period of 2009-2013. The biggest financiers are international banks, with the largest being HSBC of the United Kingdom and OCBC of Singapore. Among the domestic Indonesian banks, Bank Mandiri is the largest lender," she concluded.
Business in this sector has generated numerous problems ranging from human rights violations and land conflicts to extensive deforestation, and on top of this, tax evasion and avoidance has also become a major concern. Wiko Saputra of Prakarsa explains, "Indonesia is ranked seventh in the illicit financial flows and the palm oil industry has been one of the contributors, booking USD 3.82 billion out of the total figure of USD 187.8 billion in the last 10 years. Illicit financial flows result from tax evasion and tax avoidance among other factors."
The report also highlights the need for further research into the strong ties of the palm oil tycoons with political parties and governments at various levels, whose growing power may be linked to corruption, tax evasion and the poor functioning of democracy.
Banks providing loans to tycoon-controlled groups, 2009-2014
Banks which have provided loans to 25 tycoon-controlled oil palm groups in the past five years, including the total loan amounts provided per bank (source: report summary, figure 10).