UPDATE 4-Indonesia forest moratorium softens blow for planters

Fri May 20, 2011 7:15pm BST

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 * Excludes permits given in principle, permit extensions
 * Excludes geothermal, oil, gas, power plants, rice, sugar
 * Two-year moratorium does not offer compensation
 * Palm oil stocks mostly rise, SMART up 6 pct
  (Adds Norway comment)
 By Olivia Rondonuwu and Michael Taylor
 JAKARTA, May 20 (Reuters) - Indonesia revealed a long list
of exemptions to a two-year moratorium on logging on Friday, a
concession to the hard-lobbying plantation industry in the
world's top palm oil producing nation.
 The moratorium, taking effect on Friday after a five-month
delay, will exempt permits already given in principle by the
forestry ministry and extensions of existing permits, as well as
projects to develop supplies of energy, rice and sugar.
 The exemptions were wider than expected after pressure from
firms worried about expansion and a forestry ministry concerned
about losing billions each year in revenue from chopping down
forests in Southeast Asia's biggest economy.
 "There was lots of pressure on the Indonesian government
from the palm oil industry about this ban since we bring in
significant investments," said a Malaysian planter with assets
in Indonesia, who declined to be identified.
 "Today's final details show that agreeable concessions have
been made."
 However, the moratorium will not provide compensation for
firms unable to expand into protected land. It ordered a freeze
on new permits to log or convert 64 million hectares (158
million acres) of primary forests and peatlands.
 The deal is aimed at reducing greenhouse gas emissions from
deforestation under a $1 billion climate deal with Norway, which
praised the accord.
 "The launch of the moratorium is one important step forward
for Indonesia," Norwegian Environment Minister Erik Solheim said
in a statement.
 "What Indonesia is embarking on is a very serious
development choice. Indonesia's efforts to combine the goal of 7
percent economic growth with reducing greenhouse gas emissions
by 26 percent by 2020 are commendable," he said.
 The final version was a let down for environmentalists
hoping for wider protection of carbon-rich peat and endemic
 "This is a bitter disappointment. It will do little to
protect Indonesia's forests and peatlands," said Paul Winn of
Greenpeace Australia-Pacific.
 "Seventy-five percent of the forests purportedly protected
by this moratorium are already protected under existing
Indonesian law, and the numerous exemptions further erode any
environmental benefits."
 Industry body the Roundtable on Sustainable Palm Oil (RSPO)
praised the signing of the moratorium, as it targets annual 10
percent increases in green palm supplies.
 "It is an affirmative step in the right direction that
upholds the integrity of sustainable practices towards the
production of palm oil, and reaffirms the country's commitment
in this area," Darrel Webber, secretary general at the RSPO,
said in a statement.    
For factbox on the moratorium:              [ID:nL4E7GK1C5]
Special report on Indonesia deforestation: 
Stories on palm vs environment: r.reuters.com/hej64n
Interview with palm firm Gozco on moratorium:[ID:nL4E7GJ24D]
For Indonesian policy risks:                    [ID:nRISKID]
 President Susilo Bambang Yudhoyono on Thursday also signed a
decree to allow underground mining activities in protected
forests for 20 years, provided conditions such as an
environmental assessment have been met.
 The move is likely to upset green groups further but provide
relief for miners such as Newmont (NEM.N), Eramet (ERMT.PA) and
Bumi Resources (BUMI.JK).
 Yudhoyono's adviser on climate change, Agus Purnomo, said
the forest moratorium will not hinder planters' expansion.
 "There is no limitation for those who want to develop
business-based plantations. We are not banning firms for palm
oil expansion. We are just advising them to do so on secondary
forests," Purnomo told a news conference.
 Joko Supriyono, secretary general at the Indonesian Palm Oil
Association (Gapki), told Reuters that uncertainty over the plan
had slowed expansion last year to 300,000 hectares of palm oil
plantations, from a minimum of 500,000 hectares in recent years.
 "It won't put a lot of downward pressure on the (palm oil)
sector. There is plenty of land available to plant palm oil or
other crops. The land is there -- you can plant plantations in
environmentally agreeable areas assuming there is access to
infrastructure," said Andreas Bokkenheuser, Singapore-based
commodities analyst at UBS.
 Shares of Indonesia-listed plantation firms mostly rose on
Friday to outperform a steady Jakarta index .JKSE. Astra Agro
Lestari (AALI.JK) was up 0.6 percent and SMART (SMAR.JK) climbed
6.3 percent, though Gozco (GZCO.JK) fell as much as 1.3 percent.
 Gozco's palm oil output is set to rise more than 30 percent
this year and it has permits for 56 percent of its landbank, but
expansion in the rest could be hit by the moratorium, an
executive told Reuters on Thursday.
 The forestry ministry has defined primary forest as forest
that has grown naturally for hundreds of years, of which there
is estimated to be around 44 million hectares in a sprawling
tropical archipelago where illegal logging is common.
 The exclusion of rice, sugar, oil, gas and power plant
projects shows the importance of food and energy security to the
government of the G20 member, aiming to feed the world's
fourth-largest population and fuel GDP growth of more than 6
 The country's efforts to achieve self-sufficiency served it
well in the financial crisis, since a lack of reliance on
exports -- unlike many Asian countries -- kept its economy
growing and led to it becoming an investor darling on the brink
of a coveted sovereign investment grade rating.
 The country still surprised markets with bumper rice imports
early this year, and relies on sugar imports. Firms such as top
listed palm oil planter Wilmar (WLIL.SI) and investment firm
Rajawali Group are planning to grow sugar plantations in the
lushly forested eastern Papua province.
 The moratorium's long delay came as government ministries
wrangled over how much forest to include, a symbol of the
long-running tension between a nationalistic business old guard
and more internationally minded reformers in the government. 
The dispute showed how difficult it will be for Indonesia to
reach a target of slashing emissions by at least 26 percent by
2020 while still spurring economic growth.
 The moratorium was still seen as a step in the right
direction for efforts to develop projects to cut emissions of
climate-warming greenhouse gases, in the absence of an agreement
on a new global climate pact following years of U.N. talks.
 "There are a lot exclusions there but there is a conscience.
It gives the basis from which they can build on to reduce their
emissions," said Jonathan Barratt, managing director of
Commodity Broking Services in Sydney.
 (Additional reporting by Niluksi Koswanage in KUALA LUMPUR,
David Fogarty in SINGAPORE and Alister Doyle in OSLO; Writing by
Neil Chatterjee; Editing by Ramthan Hussain/Maria Golovnina)