SMART eyes palm oil expansion in Kalimantan

JAKARTA Thu Aug 5, 2010 12:53pm BST

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JAKARTA (Reuters) - Indonesian palm oil giant PT SMART Tbk, accused by green groups of clearing valuable forest, aims to expand its plantations by 50,000 hectares a year, the company's president director said on Thursday.

SMART last month rejected fresh claims by Greenpeace that the firm was clearing peatland and high conservation value forests, which shelter endangered species and trap vast amounts of climate-warming greenhouse gases.

SMART runs the Indonesia palm oil operations of its Singapore-listed parent company Golden Agri-Resources (GAR). GAR is controlled by the Widjaja family, whose business empire Sinar Mas has interests in pulp and paper, finance and property.

The bitter dispute between the palm oil industry and environmentalists has broader implications for Indonesia, the world's biggest palm oil producer.

It wants to expand CPO production and boost economic growth but has also promised to cut greenhouse emissions by as much as 41 percent from business-as-usual levels by 2020 -- largely through curbing deforestation.

SMART's president director, Daud Dharsono, told Reuters in an interview that the Greenpeace campaign had not affected the firm, which currently has around 430,000 hectares of plantation.

SMART's shares have risen 32.4 percent this year, beating the overall index which is up about 18 percent.

"SMART will grow and expand its palm oil plantations," said Dharsono, 54, adding that SMART and GAR had a total of 100,000 hectares in its land bank, mostly in Central and West Kalimantan.

"Our planting expansion rate is 50,000 hectares per annum. If we can get new allocations, we will maintain that rate," he said, adding that the firm planned to apply for additional land allocations from the government before the land bank ran out.

"We will not necessarily wait until it's gone. We will mainly concentrate on West and Central Kalimantan," he said.

DEGRADED LAND

Indonesia is seen as a key player in the fight against climate change and is under intense international pressure to curb its rapid deforestation rate and destruction of carbon-rich peatlands, which causes huge amounts of greenhouse gas emissions.

Big palm oil buyers Unilever and Nestle dropped SMART as a supplier, following the Greenpeace reports.

Industry giant Cargill has threatened to do the same if the accusations are proven correct in an audit due to be released on August 10.

The Indonesian government classifies all land as either forested estate or other-use areas, referred to in Indonesia as APL. Dharsono said all of its land allocations were in APL areas and were therefore seen as degraded land, but any high conservation value forest found would be conserved.

Under a $1 billion climate aid deal signed by Indonesia and Norway this year, Indonesia promised a two-year moratorium, as of January 2011, on the issuance of new permits to clear natural and peatland forests and to ask planters to switch to degraded land [ID:nJAK261856]

"SMART is not affected by the moratorium," said Dharsono, because it only operates on degraded land.

However, the definition of degraded land is still hotly debated and it is unclear how much there is in Indonesia.

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