Purchases in Malaysia by Wilmar, the world’s largest palm oil trader, are helping fund deforestation in neighbouring Indonesia, to the benefit of a criminal businessman involved in shady land dealings
Wilmar International is helping line the pockets of a firm linked to a high-level corruption case and ongoing deforestation in Indonesia via several of its palm oil purchases in Malaysia, a new Earthsight investigation reveals.
The world’s largest palm oil trader, which counts Nestle (manufacturer of KitKat chocolate bars), Mars, Unilever and Colgate-Palmolive among its clients, has been buying palm oil from two firms in Sarawak, Malaysian Borneo. The Malaysian firms are part-owned by a company that has cleared thousands of hectares of Indonesian forest for palm oil cultivation on land taken from local communities illegally.
Via a Sarawak processing mill, Bintulu Edible Oils Sdn Bhd (BEO), Wilmar purchased palm oil in 2017 from Solar Green Sdn Bhd and Kumpulan Kris Jati Sdn Bhd (KKJ). It continued to buy from KKJ in 2018.
Earthsight has discovered that the two firms are partly owned by CB Industrial Product Holding (CBIP) – a Malaysian firm caught up in a major land rights corruption scandal. Satellite images reveal CBIP destroyed 1,126 hectares of forest in 2018 for palm oil cultivation in Indonesia.
The corruption case, which involved Indonesia’s most senior judge, featured in Earthsight’s Indonesia for Sale – a series of in-depth investigative reports produced with Mongabay that exposed corrupt practices and land violations in its palm oil sector.
Between them, Indonesia and Malaysia are responsible for 85 per cent of global palm oil production and such a monopoly of the sector has led to a devastating loss of forest in the two countries.
Indonesia saw almost 340,000 hectares of primary forest wiped out in 2018, while Malaysia – roughly six times smaller than its southern neighbour – lost 144,000 hectares in the same period.
Now, Earthsight can link the Malaysian buying practices of industry giant Wilmar – a firm which enacted a no deforestation policy in 2013 – as helping fatten the revenues and potentially accelerate the deforestation being carried out by CBIP in Indonesia.
Gunung Mas lies in Central Kalimantan, one of five provinces on the Indonesian portion of Borneo.
Corruption & forest clearing
The frontline of CBIP’s deforestation drive is in Gunung Mas, a remote district on the island of Borneo.
It was there seven years ago that CBIP, formed in 1980 as an engineering firm, became involved in a shadowy deal to access Indonesia’s resource-rich land and found themselves intertwined with a politician vying for control of the region.
In Indonesia, ‘money politics’ is often at the heart of local elections. To help fund their campaigns as well as for personal enrichment, politicians commonly distribute favours in return for cash. In the country’s vast hinterlands, suspect land deals – mostly for palm plantations – are one of the most lucrative areas for such graft.
Gunung Mas is no different. Ghosts in the Machine – published in 2018, and one of three major stories which formed the core of the Indonesia for Sale series – laid bare corrupt dealings in the state, described how they reached the highest echelons of Indonesia’s judicial system and exposed the dubious actions of CBIP.
CBIP entered into an agreement with relatives and close associates of the then Bupati (elected head) of Gunung Mas in 2012 to purchase from them a majority interest in four shell companies they had incorporated.
These firms were immediately thereafter issued with oil palm permits by the Bupati, Hambit Bintih, for almost 60,000 hectares of land: an area three times the size of Washington DC. Much of the land was covered by dense forest, but the boundaries of the new permits also encompassed the traditional lands of thousands of local people.
The process of issuing such permits usually takes months, but by forgoing any environmental impact assessment and not consulting affected communities, the illegal deals were promptly passed. Locals were paid as little as 400 rupiah ($300) per hectare by CBIP for land which was reportedly worth much more. One local described the prices as ‘murder’.
CBIP, who entered the palm oil plantation business in 2009 and had already faced a bribery allegation over a permit deal, paid several million dollars for the Gunung Mas concessions.
Cornelis Nalau Antun – Bintih’s nephew and close business associate – helped broker CBIP’s permits and cannily retained a minority share in the shell companies. Once developed into full grown plantations, it is estimated he stood to profit to the tune of almost $20 million.
For Bintih, who was seeking a second term as head of Gunung Mas in 2013, the granting of permits to CBIP provided him with vital funds to cement his electoral victory. Bintih was re-elected in September 2013 but opposition parties cited foul play. To stave off opposition legal challenges, Bintih needed his associates to grease the palms of Indonesia’s highest judge.
Through the same individuals from which CBIP purchased the shell companies, Cornelis among them, three billion rupiah ($260,000) was to be delivered as a bribe to Indonesia’s Constitutional Court Chief Justice, Akil Mochtar, to rule in Bintih’s favour.
However, when Cornelis and an associate arrived at the judge’s residence in October 2013, they were not alone. Indonesian authorities had been trailing Mochtar for months and they swooped in before the $260,000 in cash could be handed over. The trio were apprehended and Bintih was arrested hours later.
Even as criminal proceedings swirled, CBIP maintained an active relationship with Cornelis, eager to finalise outstanding payments for the shell companies. While Cornelis was on trial, CBIP released $3.2 million to him and his partners to complete the purchase of the shell companies.
Three days later on 27 March 2014, Bintih and Cornelis were jailed for four years and three years respectively for their part in the corruption. In June, Mochtar was given a life sentence for money laundering and accepting bribes – he made at least $4 million – from political candidates. Notwithstanding Bintih’s conviction, his electoral victory was later upheld and his deputy Arton Dohong became Bupati.
In June 2014, CBIP agreed to buy a fifth shell company owned by Cornelis, then in jail, and the deal was completed in 2015. The permits awarded to CBIP and the source of the $260,000 of cash intended for the bribe were outside the scope of the investigation.
As the authorities turned their attention elsewhere, CBIP ploughed ahead with deforestation in Gunung Mas.
The Wilmar connection
In order to reap the full profits of his land dealings in Gunung Mas, Cornelis needs CBIP’s vast tracts of forest and farms to be covered with mature crops producing profitable palm oil for international markets. But to get there costs money. And some of that money is potentially coming from Wilmar, and indirectly from consumers buying KitKats and Mars bars made with its products.
CBIP sold a majority stake in three of its five plantation firms in Gunung Mas in 2016, but the firm still owns two of the plantations. According to its annual report, in 2017 CBIP spent RM 45 million ($10.4 million) on bulldozing forests and farms at these plantations. Earthsight analysis shows this included primary forest and ‘intact forest landscape’, and that a further 1,126 hectares of land was cleared in 2018. With its earliest plantings coming close to bearing fruit, CBIP has also recently opened a palm processing mill nearby.
In order to fund the upfront costs of the land clearing in Gunung Mas, the company can use the profits from its businesses elsewhere, including the joint venture and associated companies in Sarawak from which Wilmar is sourcing palm oil.
CBIP holds a 50 per cent stake in Solar Green and 30 per cent in Kumpulan Kris. According to its annual report, in 2017 CBIP made RM 12.9 million ($3 million) through the sale of palm oil from its shares in its Sarawak plantations (including a third firm, Bahtera Bahagia Sdn Bhd): a crucial source of hard currency with which to fund its Indonesian expansion.
The processing mill which Wilmar buys palm oil from in Sarawak, BEO, continued to source from Solar Green in 2017 and from Kumpulan Kris throughout 2018, Wilmar’s own supply chain data reveals.
In continuing a buying relationship with Malaysian palm oil providers part-owned by CBIP, Wilmar is likely helping to fund the continued deforestation of primary forest in Indonesia. It is also indirectly benefiting an individual found guilty of high-level corruption and involved in the illegal theft of the land from local communities.
Indonesian corporate records show that Cornelis Nalau Antun retains a minority stake in the two shell companies still majority owned by CBIP, and therefore stands to profit from development of plantations on the land.
Loopholes in ethical purchasing policy
The indirect relationship with CBIP raises serious questions about the strength of Wilmar’s much publicised No Deforestation, No Peat, No Exploitation (NDPE) policy that it enacted in 2013.
Wilmar promised not to do business with firms which are involved in clearing forests, developing plantations on peatland, or developing plantations in contravention of the rights of indigenous and local communities. Supplier companies can be blacklisted if any of their operations involve the banned activities, even if those operations do not themselves produce palm oil sold to Wilmar.
Implementation has been patchy. NGOs have repeatedly highlighted apparent breaches, leading Wilmar to drop individual suppliers. In 2018, Greenpeace pulled together evidence of numerous cases and alleged that Wilmar had still not fully investigated its supply chains, five years after promising to do so. In response, in December 2018 Wilmar published an action plan stating it will fully map and monitor all suppliers by the end of 2019. It also promised other improvements in enforcement of its NDPE policy.
But no amount of improved implementation will address the Gunung Mas case, since the policy does not cover it.
When presented with Earthsight’s findings, in a written response Wilmar’s sustainability manager stressed that “CBIP is not and has never been a supplier to Wilmar” and that KKJ is “not part of the same group as CBIP”. They also stress that KKJ has been very supportive of Wilmar’s NDPE policy and its operations in Sarawak verified with ground visits. Wilmar acknowledge that CBIP holds a 30 per cent share in KKJ, do not deny that CBIP is clearing forest in Indonesia, or deny that it may be helping fund that using the profits from its share in KKJ. The problem is that none of this contravenes Wilmar’s existing policy.
Sam Lawson, director at Earthsight, said: “This case shows that Wilmar’s existing policies do not go far enough. If it really wants to avoid driving deforestation either directly or indirectly, it needs to stop buying from firms like those in Sarawak, where a company involved in deforestation elsewhere holds a significant but not controlling stake.
“The case also suggests that palm oil traders like Wilmar, and the consumer goods firms like Nestle, need to consider expanding their policies on deforestation, peat and exploitation to encompass corruption. Even if no forests were being bulldozed in this case, it still wouldn’t be right.”
In a follow-up phone call with Earthsight, Wilmar executives struck a more conciliatory note. They stated that, alongside industry parties, they are considering possible revision of the definition of corporate ‘group’ (on which the scope of their policy rests), though it remains unclear whether any such changes will address cases such as the CBIP one. Wilmar also stated that they intend to examine general corruption concerns over its palm oil purchases but do not have the capacity to do so at this point.
Earthsight also reached out to CBIP and Nestlé for responses. Nestlé replied that it “is committed to Zero deforestation and to achieve this we are working with all stakeholders including suppliers. Wilmar is one of our palm oil suppliers and adheres to our Responsible Sourcing Standard. After clarifying with Wilmar, CB Industrial Product Holding (CBIP) is not and has never been a supplier to Wilmar.” CBIP did not respond.