1 8 April 2014 KLK Response to RAN’s Report Titled “Conflict Palm Oil in Practice” We refer to the report by Rainforest Action Network (“RAN”) titled “Conflict Palm Oil in Practice” released on 2 April 2014 (herein referred to as ‘the Report”) allegedly exposing KLK’s role in rainforest destruction, land grabbing and child labour. We believe that the Report implicating KLK of such malpractices is misleading, wherein the facts have been misconstrued and taken out of context to undermine the integrity of KLK. Nevertheless, we welcome constructive criticism of any weaknesses so that we are able to effectively address the cause of such weaknesses, for our own betterment and that of the palm oil industry as a whole As a responsible corporate citizen practicing sustainable and responsible development, KLK has an uncompromising policy of compliance with the laws of the countries in which we operate. Being a member of the Roundtable on Sustainable Palm Oil (“RSPO”), our operations are therefore guided by the Principles & Criteria (“P&C”) of the RSPO, the standards of which may differ from the ideals of RAN. Issues raised in the Report are “recycled” ones but KLK takes the opportunity to once again address the four cases raised in the Report and clear all the grave misconceptions about KLK. Case 1 Allegation that KLK Fails to Respect Indigenous People’s Ancestral Land Rights in Collingwood Bay, Papua New Guinea (“PNG”) RAN’s article is headlined with the complaint that “KLK Fails to Respect Indigenous People’s Ancestral Land Rights in Collingwood Bay”. RAN’s stated opinion is that the following are at stake: (a) Rights and traditional livelihoods of the tribes of Collingwood Bay are threatened; (b) Deforestation, loss of irreplaceable biodiversity and degradation of High Conservation Value (“HCV”) areas; (c) Increased social conflict and erosion of cultural heritage; (d) Violation of constitutionally protected rights of its indigenous peoples to self-determination over development in their ancestral lands. RAN further alleges that the “PNG Government was found by a Judicial Commission of Inquiry to have misused its authority in its allocation of Special Agricultural Business Leases (“SABLs’) such as the ones obtained by KLK’s subsidiary CPPL.” Response from KLK (i) Validity of SABLs and Pending Court Case KLK had entered into an agreement on 4 October 2012 to acquire 51% of a Singapore- incorporated company, CPPL, which in turn holds 100% of Ang Agro Forest Management Ltd (“ANG”), a PNG-incorporated company. ANG is the sub-lessee of 38,350 ha of land in PNG (known as Portions 113C and 143C in an area known loosely as “Collingwood Bay”), all of it held under Special Agricultural and Business Leases (“SABLs”).
Transcript
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8 April 2014
KLK Response to RAN’s Report Titled “Conflict Palm Oil in Practice” We refer to the report by Rainforest Action Network (“RAN”) titled “Conflict Palm Oil in Practice” released on 2 April 2014 (herein referred to as ‘the Report”) allegedly exposing KLK’s role in rainforest destruction, land grabbing and child labour. We believe that the Report implicating KLK of such malpractices is misleading, wherein the facts have been misconstrued and taken out of context to undermine the integrity of KLK. Nevertheless, we welcome constructive criticism of any weaknesses so that we are able to effectively address the cause of such weaknesses, for our own betterment and that of the palm oil industry as a whole As a responsible corporate citizen practicing sustainable and responsible development, KLK has an uncompromising policy of compliance with the laws of the countries in which we operate. Being a member of the Roundtable on Sustainable Palm Oil (“RSPO”), our operations are therefore guided by the Principles & Criteria (“P&C”) of the RSPO, the standards of which may differ from the ideals of RAN. Issues raised in the Report are “recycled” ones but KLK takes the opportunity to once again address the four cases raised in the Report and clear all the grave misconceptions about KLK.
Case 1
Allegation that KLK Fails to Respect Indigenous People’s Ancestral Land Rights in
Collingwood Bay, Papua New Guinea (“PNG”)
RAN’s article is headlined with the complaint that “KLK Fails to Respect Indigenous People’s Ancestral Land Rights in Collingwood Bay”. RAN’s stated opinion is that the following are at stake:
(a) Rights and traditional livelihoods of the tribes of Collingwood Bay are threatened; (b) Deforestation, loss of irreplaceable biodiversity and degradation of High Conservation Value
(“HCV”) areas; (c) Increased social conflict and erosion of cultural heritage; (d) Violation of constitutionally protected rights of its indigenous peoples to self-determination over
development in their ancestral lands.
RAN further alleges that the “PNG Government was found by a Judicial Commission of Inquiry to have misused its authority in its allocation of Special Agricultural Business Leases (“SABLs’) such as the ones obtained by KLK’s subsidiary CPPL.”
Response from KLK
(i) Validity of SABLs and Pending Court Case
KLK had entered into an agreement on 4 October 2012 to acquire 51% of a Singapore-
incorporated company, CPPL, which in turn holds 100% of Ang Agro Forest Management Ltd (“ANG”), a PNG-incorporated company.
ANG is the sub-lessee of 38,350 ha of land in PNG (known as Portions 113C and 143C in an area known loosely as “Collingwood Bay”), all of it held under Special Agricultural and Business Leases (“SABLs”).
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There was a Commission of Inquiry formed in July 2011 with wide-ranging powers to investigate the SABL process and to report on its findings within 3 months therefrom. The Commission failed to do so. In the meantime, KLK was presented with an opportunity to develop oil palm plantations with Sibo Management Ltd (“Sibo”) and Wanigela Agro Industrial Ltd (“Wail”) (which, it is emphasized, are both registered landowner companies/groups recognised by the PNG Government). These companies (which represent the landowners of Portions 113C and 143C) had freely, of their own accord and even before KLK’s acquisition of CPPL, granted the SABL sub-leases to ANG. We had conducted our due diligence prior to our investment in PNG and examined the relevant PNG Government National Gazette dated 27 July 2012 confirming the grant of the SABLs to Sibo and Wail. We had also taken advice that the actual issuance of physical certificates of title to Sibo and Wail constitutes prima facie and conclusive evidence of the validity of the SABLs. We are therefore satisfied that:- (a) the issuance of SABLs by the PNG Government to Sibo and Wail; and (b) the subsequent sub-leases to ANG by Sibo and Wail, having been correctly executed,
stamped and registered; are valid transactions registered in accordance with PNG land laws. There was also no moratorium at all relevant times, prohibiting the issuance of SABLs pending the report of the Commission. The Commission of Inquiry on SABLs eventually came out with its final report on 24 June 2013. The Commission had been tasked to investigate 77 “suspect” SABLs and found that the SABL process, from the application stage right to the granting of SABLs, had, in most cases, not been implemented properly. This ineffective implementation of the SABL process has resulted in questions over the validity of the majority of SABLs that have been issued. Despite these findings, the Commission has not recommended that the SABL process be abolished, rather it has proposed changes to improve its management. Recommendations by the Commission remain recommendations, and not law, until the PNG Government passes legislation to that effect, or a court of law decides as such.
It should be noted that the SABLs issued to Sibo and Wail were not ones that the
Commission had investigated. There was no statement by the Commission to the effect
that the Sibo and Wail SABLs were in any way defective, and no recommendation that
these SABLs be revoked.
Certain quarters are now challenging the decision of the PNG Government to issue the SABLs to Sibo and Wail. These SABLs are currently the subject matter of a judicial review application which is scheduled for hearing in the PNG National Court. KLK wishes to reiterate that it will abide by any Court decision (whether or not in our favour), and all parties should allow the judicial process to take its course. Nevertheless KLK recognises the fact that without the acceptance and co-operation of the landowners of Portions 113C and 143C, there will be no end to challenges over KLK’s right to operate in Collingwood Bay. KLK remains committed to transparency and support the right of landowners and the local community to self-determination. In the event the Court decides to quash the SABLs issued to Sibo and Wail, KLK will abide by such Court decision. KLK will also not interfere should the landowners decide to apply for registration of ownership of their customary land. Once the landowners obtain certificates of title to their land, it will be up to them to decide whether they wish to partner with KLK to develop oil palm plantations on their land. We believe that this way forward will dispel all shadow of doubt and uncertainties over whether or not the landowners want the form of sustainable development offered by KLK.
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(ii) Support for Sustainable Development by Landowners and Local Community
At this juncture, we wish to remind all that the Joint Communique by the landowners and
community stating that they do not want development in Collingwood Bay was issued back in
24 January 2010. But yet, the Sibo and Wail SABLs were registered in July 2012, and the subsequent sub-leases to ANG were registered in August 2012, proving that these landowner companies had expressly given their consent for oil palm development to take place on Portions 113C and 143C. Based also on the feedback from our recent (November and December 2013) Free, Prior and Informed Consent (“FPIC”) process on Portion 143C and our interaction with the people on the ground, the landowners and the community are very receptive to the development that KLK can bring to their community. These include employment and educational opportunities as well as improvements in health services and safety for their families and communities. KLK’s FPIC process on Portion 143C was in fact successful in demonstrating an overwhelming consensus amongst the landowners and clan leaders favouring sustainable development. The FPIC process that KLK had commenced on Portion 113C was however disrupted by saboteurs motivated who had threatened the safety of KLK’s Management thereby leading to a halt in the on-going FPIC process.
FPIC meeting in progress for Portion 143C
25 November 2013
Oyan Clan Leader in Portion 143C Pledging
Consent and Support
Odio Clan Leader in Portion 143C Pledging
Consent and Support Gegeyo Clan Leader in Portion 143C Pledging
Consent and Support
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Nevertheless, the landowners and clan leaders remain firm in claiming their right to sustainable development. They have taken steps to inform the world that they too have rights to development which deserve to be respected. They have recently on 20 December 2013, communicated to RSPO, their support of KLK’s development plans. They have also (in December 2013 and January 2014), advertised in the PNG local newspapers their full support for KLK, and had questioned the agenda of NGOs in trying to block development in Collingwood Bay. A copy of the newspaper advertisements took out by clan owners of Portion 113C is
attached in Appendix I.
Quoted from Letter by Gilbert Joke, representing Clan Leaders of Portion 113C,
Collingwood Bay to RSPO dated 20 December 2013
“…..We have been taken for a ride by Adelbert Gangai and Lester Sari. They are liars and do not represent us. They don’t have any right over Portion 113. Why are they saying that they are representing us? They are representing themselves and enriching themselves in the pretense of safeguarding our interest. If they are real concern about the communities, then, they should come down to the village and speak to us, landowners. We have been deprived of development and our people are suffering. Only through this development, our people can look forward for better future. We all the landowners from Portion 113, Sinapa, Airara, Marua, Konyasi and Sinipara have given full support and consent for this development. We have no other means except to highlight to you because we came to know that they are using you to block KLK from developing our areas. The people from developed countries will be living like us if no development has taken place in their country. How long do they want us to live in poverty? No proper education for our children, poor health facilities which also out of our reach, no employment and missing other opportunities.”
The extract above clearly demonstrates that it is the landowners and local communities themselves who welcome sustainable development and the benefits accruing thereto. As such, it refutes RAN’s allegation that KLK has violated the local people’s rights to self-determination over development on their lands. We would urge all parties to respect the rights of the local communities on their choice of livelihood and type of development that they want. KLK had in fact made several overtures to certain NGOs which claim to represent the interest of the landowners, by inviting them in good faith to participate in the FPIC process and to witness for themselves the situation on the ground. We believe that a meaningful dialogue between all stakeholders would go a long way towards resolving any conflicts, and eventually lead to a form of sustainable development beneficial to the Collingwood Bay community as a whole. However, up to now, we have yet to receive any response from these groups.
Sibo Maisins Chiefs of Portion 113C
From left to right: Silas Numbibi, Clifford Taniova, Samson Joke, Chief Franklin Taniova, Chris Taniova and Gilbert Joke
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(iii) Non-Commencement of Planting Activities
KLK will only commence oil palm planting activities upon the satisfactory conclusion of the requisite studies, among others, an independent social and environmental impact studies which include HCV studies, and the FPIC of the area intended for oil palm development. We have not started clearing, nor have we planted a single oil palm seed or seedling on the said areas under
dispute. Orders for equipment and materials were placed as part of the Company’s routine advance planning and when these arrived in PNG, KLK leased a separate plot of land which is under a State Lease to store these items pending, inter alia, completion of the FPIC process.
Case 2
Allegation that KLK Uses Child and Forced Labour in Indonesia
Response from KLK In 2007, we had engaged CV Sinar Kalimantan (“CVSK”) to provide weeding, field spraying and manuring services in PT 198, in East Kalimantan and not as a labour supplier for KLK. Engaging or outsourcing of such services to third party contractors is a common practice for plantations operations in Indonesia.
In August 2010, it was brought to our attention that CVSK was using under-aged persons and illegally with-holding wages of its workers, actions which are not tolerated in KLK. Despite not having any conclusive evidence, we acted promptly to terminate the contract with CVSK in September 2010. In addition, KLK had requested CVSK to fulfil its obligation to settle all wages owing to its workers before the termination of its contract.
During a roundtable conference in Jakarta in November 2010, Sawit Watch (“SW”), an Indonesian social NGO, mediated a meeting between three aggrieved workers of CVSK and KLK. An amicable conclusion was reached at the end of the meeting where KLK had undertaken to settle unpaid wages owed by CVSK to its workers, if any. It was agreed that SW would be the contact point if the workers were unhappy with the settlement. Upon checking with CVSK thereafter, we were given assurance and documentary evidence that all wages owing had been paid. To-date, KLK has not received any complaints or requests for payments either through SW or from the allegedly affected workers and had therefore, considered the matter resolved and closed. CVSK, its owner and the supervisor who allegedly practiced the illegal acts, Mr Handoyo and Mr Zendrato respectively, remain blacklisted in KLK’s record.
Picture 1 : Mediation Process at Roundtable
Conference in Jakarta in Novemeber 2010
Picture 2 : After Amicable Agreement
- Ibu Vivian and 3 other representatives from Sawit Watch
facilitated the meeting between KLK and complainants.
From left Mr Chong Kam Swee (KLK), Pak Edi Sutrisno (Sawit Watch), Sin Chuan Eng (KLK Berhad) and Mr Pondi (harvester) took photograph after amicable settlement of the issue.
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Additional Steps taken by KLK:
(i) Hiring practices and strict implementation of “No Child Labour Policy” At the initial stage of development of an estate, KLK, like majority of companies, will need to engage third party contractors during initial stage of plantation work. These “Project Basis” types of work refer to works such as clearing of land for purpose of new planting and replanting of oil palm, roadworks, construction of buildings and drainage. They are one-off and normally take place at the start of the project, are time-specific, seasonal and situational, and normally involve use of heavy machinery and equipment. Special skilled workers are required to handle these machinery and equipment such as the bulldozers and excavators. As an estate starts to mature, KLK will intensify its direct hiring for Routine Works such as harvesting, manuring, weeding and pruning, and reduce dependency on third party contractor to
do the Routine Works. KLK directly hires workers to undertake such works and does not
depend on third party labour contractors to source for workers. This enables KLK to control and ensure that all its workers are of legitimate age, based on the identification produced during recruitment. These workers will be employees of KLK and are directly listed on our payroll. In hiring, all regional directors, general managers and managers of estates are guided and reminded via internal policy circulars to ensure that no underage labourers are employed in our estates. Any complaints or reports of non-compliance are referred to the HR personnel (Humas), after which investigative work will be undertaken. To the best of our knowledge, there have not been any complaints of such nature from any party. For purpose of audit, estate managers and internal auditors will conduct regular checks on employment records to ensure no employment of underage workers. Likewise, representatives from the labour office (Disnaker) will also check on compliance during their routine inspections of the estates.
(ii) Additional and specific clauses in contract terms In agreements signed with 3
rd party contractors for works in the estates such as for weeding or
land clearing, there are specific clauses that oblige the contractors to comply with the relevant laws and regulations of the country at all times. Such regulations would include complying with the requirements of labour laws. Those found to have been in breach of these terms shall have their services immediately terminated and will be blacklisted.
With the obligations and responsibilities of contractors clearly spelt out in the agreements, KLK has not since received any official complaints relating to the use of child/slave labour requiring blacklisting of errant contractors.
(iii) Training programmes in preparation for third party certification KLK wishes to reiterate that being a responsible plantation company and one that is en-route for RSPO certification of all its plantations operations in Malaysia and Indonesia, critical areas such as the welfare of employees and prohibition of child labour are comprehensively dealt with in our RSPO preparation training programmes. Concurrent with RSPO, KLK is also preparing to obtain Indonesia Sustainable Palm Oil certification, where similar areas of concern are emphasised during training programmes.
(iv) Industry Leader in Occupational Safety and Health (“OSH”) Standards
We are proud of our high OSH standards which are regarded as one of the best in the industry. Our OSH standards place strong emphasis on the welfare of employees in matters relating to health and safety at the workplace. Our ability to maintain high standards in OSH has won us numerous national - level accolades in Malaysia.
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These standards are applied uniformly across all plantation operating centres and consistency is guided by the industry-specific OSH Manual and guidelines carefully drafted by our own OSH Department. All operating centres would also undergo an annual audit of its OSH procedures and compliances to ensure that the high OSH standards established over the years are upheld.
(v) Provision of Medical Services at Operating Centres
KLK employs fully qualified doctors with practicing certificates to serve our workers in our operating centres and we also operate ambulance service in some centres to ensure the welfare of our workers are looked after.
KLK would never knowingly take part in illegal labour practices and other degrading treatment
of its workers.
Actual Working Conditions in PT 198
Housing
New Houses for workers, with electricity and water supply View of typical new house for workers
Amenities
Crèche for workers’ young children Place of worship for workers
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Recreational Facility
Badminton court for recreational activities Upcoming Football Field
Medical Facility – Clinic
Worker Being Attended By Qualified Medical Assistant Worker Receiving Treatment
Case 3
Allegation of KLK’s Involvement in Land Grabbing and Assault in Liberia
Response from KLK The community dispute concerning plantations in Liberia took place prior to KLK’s acquisition. For purpose of background, the community dispute and allegations of human rights abuses were raised by Sustainable Development Institute (“SDI”) and Global Witness against our newly acquired subsidiary company, Equatorial Palm Oil Ltd (“EPO”). The complaint against EPO (and which later included KLK) by SDI filed with RSPO, details alleged violations of the RSPO Principle & Criteria in relation to new plantings and compliance with applicable laws and regulations. The allegations, in our view, were baseless and irresponsible; and duly refuted by EPO. We have investigated and firmly believe that EPO does not engage in acts of threats, assault or intimidation towards the community. Below are the responses by EPO refuting the allegations set out by RAN.
(i) Allegations that EPO Clears Forest and Customary Lands
Response by EPO The aspect of EPO operations that is under RAN’s scrutiny, is the resurvey and demarcation of the concession area as per the approved resurvey map of Nov-Dec 2012. As agreed and stipulated by the Liberian Government, the resurvey of the concession land and boundary demarcation is strictly to be conducted within the old concession area of 34,500 acres.
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The resurvey exercise is one of the requirements of the concession agreement between the Government of Liberia and EPO. The current existing concession was surveyed and demarcated by the Liberian authorities in 1965 and more recently (2012) surveyed by Bureau of Lands and Survey of the Ministry of Land, Mines & Energy using GPS methodology. However, the local communities requested EPO’s management to conduct the resurvey by physically ‘cutting of line’ along the entire boundary of the concession for better transparency. This was approved by the Minister of Land, Mines & Energy. Further the Grand Bassa County Authority of the Ministry of Internal Affairs had duly authorised EPO to begin the resurvey after a decision was reached following a meeting held with the County authority and the local communities on August 19
th 2013.
This resurvey exercise will allow us to establish and clearly demarcate the legal boundaries of EPO’s concession area. It is one of the key processes for FPIC which will guide our work with the affected local communities within our concession area to resolve and avoid potential conflicts. We have consulted with and met the local community and Government leaders in these matters and obtained their general consensus to proceed with the work.
(ii) Allegations of Assault of the Jogbahn Community Members
Response by EPO In relation to the allegations that EPO security and members of the Liberian Police Support Unit (“PSU”) assaulted members of the Jogbahn community, EPO wish to reiterate that it has proper procedures for dealing with land disputes as members of RSPO and adhere strictly to the FPIC procedures laid out. EPO was not involved with and had no knowledge of this incident until allegedly so by SDI and also by Global Witness (albeit different number of people claimed to be assaulted on the day).
More information and EPO’s detailed written response to RSPO in connection with the complaint filed by SDI and to Global Witness are available at the websites below:- (i) RSPO website : www.rspo.org (ii) Global Witness website : www.globalwitness.org/Liberia/EPO \;
which stand to further clarify the matters raised by RAN.
Case 3
Allegation that KLK Deforests Orang-utan Habitat in East and Central Kalimantan
Response from KLK In executing best management practices, KLK had undertaken High Conservation Value (“HCV”) studies in PT Karya Makmur Abadi II and PT Jabontara Eka Karsa. The results of the HCV studies indicated that the concession areas were not primary forest and do not serve as an orang-utan habitat.
PT Karya Makmur Abadi II (“KMA”) in Central Kalimantan In the case of KMA, we have additionally received confirmation from the Department of Forestry that based on their survey using satellite pictures even for the period of 2005/2006, the concession area was not primary forest but comprising mainly of thick bushes and scrubs. Our HCV report did not identify any of the locations as part of the orang-utans habitat and there have not been any sightings of orang-utans in our estate or in the HCV area identified.
PT Jabontara Eka Karsa (“JEK”) in East Kalimantan Brief Background The concession area of JEK was an abandoned project when KLK took over in 2005. During the period from 1995 to 1997, the previous owner had already cleared close to 4,000 hectares of land and planted 1,500 hectares with oil palm. We started our planting activities in 2008 including replanting of the abandoned old palms. HCV Area Out of the 14,000 hectares of landbank in JEK, we have allocated approximately 4,600 hectares for purpose of conservation although the HCV report recommended close to 2,000 hectares for the same purpose. This conserved area represents 33% of the landbank in JEK. Our HCV report did not identify any of the locations as part of the orang-utan habitats and there have not been any sightings of orang-utans in our estate or in the HCV area identified.
KLK Participates in Sustainability Palm Oil In addition to KLK’s firm commitment to the RSPO principles and criteria, KLK has collaborated with a
few major and key players in the industry in signing a Sustainable Palm Oil Manifesto. This is a progressive journey beyond RSPO aimed at bringing sustainability to greater heights by working to ensure sustainability in the entire supply chain from cultivation to consumption. We will accelerate the journey to no deforestation and protect peat areas as well driving positive economic and social impact on the people and communities we work with. The signatories will lead, fund and execute independent research to determine high carbon stock (“HCS”) threshold and once defined these thresholds will be adopted. In the interim we will continue to implement RSPO criterion 7.8 to minimise GHG emissions associated with new developments. KLK commits to use best practices on existing peat areas and not to undertake any new development on peat land.
Concluding Remark KLK remains focused in its efforts to bring forth improvements to the palm oil industry and will be undeterred by these allegations. KLK will continue to be fully committed to achieve balanced development for the People & Planet. We are accountable for our actions and will continue our pursuit for progress in the industry, refinement in our processes and proactive engagement with our stakeholders to attain the ultimate goal of Business Sustainability.
**********End********** For more information, please contact:
Lim Poh Poh Senior Manager, Investor Relations & Corporate Communications Kuala Lumpur Kepong Berhad Tel : +605 – 241 7844 Email : [email protected]
