The Driving Force of Indonesia's Catastrophic Forest Fires 
Article for the Inaugural Edition of the Eco-Politics Journal 

October 5, 2000
By George J. Aditjondro, M.S. (Cornell), Ph.D. (Cornell) Department of Sociology and Anthropology, University of Newcastle, Australia

INTRODUCTION

Widespread forest fires, covering significant proportions of Sumatra and Kalimantan, with its smoke and haze drifting to Singapore and Peninsular Malaysia, have become an almost annual occurance in archipelagic Southeast Asia. Ironically, while the area devastated by the fires has rapidly increased during the last decade, and despite the frequent meetings of the member states of the Association of Southeast Asian Nations (ASEAN) to address these forest fires, the Indonesian government has not taken drastic steps to prevent the recurrence of these forest fires. Why is there such a low level governmental concern in the region about these recurrent forest fires, which have destroyed millions of hectares of lowland forests, have badly affected the health of tens of millions of people in the region, and have drastically reduced Indonesia's tourist dollars?

After summarising the adverse impacts of the forest fires, I will present the political economy of the oil palm industry in Indonesia and its links to the Suharto family, whose businesses have in turn been deeply intertwined with state-owned companies and private companies owned or controlled by the political elites of Singapore and Malaysia. I will argue in that the political strength of the palm oil industry in Indonesia, which has been blamed as the main culprits of the recurrent forest fires, relies on two factors. Firstly, it is still controlled by relatives and business associates of the former Indonesian president, Suharto, who still enjoy tacit support in the top echelons of the Indonesian political and economic system. Secondly, the influence of the Suharto oligarchy extends way beyond the boundaries of Indonesia into the two neighbouring countries, Singapore and Malaysia, which have been the most affected by the haze caused by the forest fires.

THE IMPACT OF THE FOREST FIRES

Let me first refresh our memory on the growing scope of the forest fires in Indonesia and its disastrous social, economic and environmental impact. During the 1990s, the scale of the burning grew each year as the forest land converted into tree plantations in Sumatra and Kalimantan also expanded each year, where plantation firms and the land-clearance contractors they hired use fire almost extensively for land clearance (Schweithelm and Glover 1999: 6). According to satellite mapping efforts of the US National Oceanic and Atmospheric Administration (NOAA) and the European Satellite Pour l'Observation de la Terra (SPOT), in 1991 the forest area covered by the fires was 118,881.18 hectares, in 1994 it expanded to 161,798.00 hectares, in 1997 it expanded further to 263,991.21 hectares and in 1998 it nearly doubled to 515,026.00 hectares (Tempo , March 26, 2000: 71). That was only the forest areas in fire, shown on satellite maps as 'hot spots,' and not the total land area destroyed by the fires. A preliminary r emote sensing assessment of the area burned in 1997 indicated that approximately 1.5 million hectares were affected in Sumatra and 3.06 million hectares in Kalimantan. Scientists assessing the forest fire damage have rounded it up that approximately five million hectares of land was burned in 1997. Of this, 20 per cent was estimated to be forest, 50 per cent agricultural land, and 30 per cent non-forest vegetation and grasslands. This implies that one million hectares of forest lands, and 2.5 million hectares of agricultural and plantation lands were burned (Schweithelm and Glover 1999: 8; Ruitenbeek 1999: 99).

The impacts of the 1997/1998 fires in Indonesia can be divided into the following categories based on the mechanism that caused the impact and the spatial and temporal relationship between burning and impact.

The direct impact is the immediate damage caused by the flames such as consuming natural vegetation or agricultural crops and killing animals.

The indirect, short-term impacts are the impacts resulting from damage to vegetation such as wildlife that die from food and habitat loss, human loss of forest-derived food and income, accelerated soil erosion, sedimentation of water bodies, impairment of the hydrological functions of forests and disruption of nutrient cycles. Smoke and haze cause acute human ailments, disrupt tourism, transport, and business, reduce enjoyment of life, contribute to the production of ozone, acid rain, and greenhouse gases, and reduce photosynthesis in plants by blocking some solar radiation.

The indirect, long-term impacts, which are more difficult to document and link to the forest fires include the possible long-term human health effects of exposure to smoke and haze from vegetation fires and fire-caused changes in species composition or ecological processes that last for decades or centuries.

The cumulative impacts are the long-term ecological changes that results from a series of large fires that occur at short intervals such as those in Indonesia over the last two decades. Alone or in combination with other disturbance factors such as forest conversion, the cumulative effect of sequential fires can lead to extinction and irreversible changes to forest species composition and vegetation structure (Schweithelm and Glover 1999: 7-8).

Putting this in financial terms, scientists working for WWF Indonesia have calculated that the direct and indirect short-term impacts of 1997/1998 have exceeded US$ 4 billion. The value loss of timber resources is almost US$ 500 million, agricultural losses is estimated between US$ 470 million to US$ 754 million; the losses in direct forest ecosystem production amount to US$ 705 million; the losses in indirect forest ecosystem functions amount to US$ 1,077 million; the losses in capturable biodiversity amount to US$ 30 million; the cost in fire-fighting efforts amount to US$ 25 million and the losses in carbon release amount to US$ 272 million. This adds up to more than US$ 3 billion. Then, the short-term haze impacts resulted in over US$ 1 billion of losses. This impact occurred during the three-month haze episode in 1997, and excludes long-term health-related losses (Ruitenbeek 1999: 103-110). From the Indonesian people's perspective, these losses in dollar figures only have meaning if we relate it to thei r basic needs. Hence, the WWF Indonesia team has forwarded the following comparisons:

It takes about US$ 25 per capita to provide basic sanitation, water and sewer services to the rural poor. The US$ 3 billions losses from the fires could provide basic services to 120 million people, or all those classified as "rural poor" in Indonesia.

It takes about US$ 30,000 to provide basic levels of village sanitation, water, and health infrastructure. The US$ 4 billions losses from the fires and haze could therefore be distributed to over 100,000 rural villages or kampongs.

Public spending on health in Indonesia was about US$ 1.5 billion annually. Private spending on health in Indonesia was about US$ 1.7 billion annually. Therefore, total fire damages were equivalent to total annual health spending by both the public and private sectors.

The economic losses from the fire are equivalent to about 1.5 per cent of the annual GDP, while the economic losses of the fire and haze are equivalent to 2 per cent of the annual GDP (Ruitenbeek 1999: 110-111).

Those were the direct and indirect, short-term losses to the Indonesian people, especially the poor, who stood out among the 20 million people who suffered from the forest fires. In 1997, at least 40 000 people were reported to have suffered from respiratory ailments. They are the most likely to suffer from the long term effects of smoke damage, that include throat cancer, harm to the kidneys, liver and nervous system, brain disorders, skin and eye allergies, and exacerbation of heart and asthma problems (EIA 1998: 41).

This year, the situation has not radically improved, as far as the practice of using fire for land-clearing is concerned. Since March, officials from the Singapore Meteorological Survey ant the Singapore Institute for International Affairs as well as the Minister of Environment have repeatedly warned their Indonesian counterparts of the growing number of hot spots which have appeared on satellite photos of Sumatra. These hotspots were constantly monitored by the Centre for Remote Imaging, Sensing and Processing at the National University of Singapore, which can pinpoint hotspots with an accuracy of 20 metres. The emergency of these hotspots as early as in March 2000 was quite alarming, which moved the Singaporean officials to sound their alarm bell. Nevertheless, this did not discourage corporate and individual farmers in central Sumatra to continue burning the undergrowth way into the middle of July, when officials in Peninsular Malaysia began to worry. That was when the smog caused by fires in the central Sumatran province of Riau shrouded half of the Malay Peninsula. Visibility was poor along the North-South Expressway, which runs the length of the Peninsula, while the skyscrapers in the capital, Kuala Lumpur, were almost lost in the grey smog. In some areas of the capital, visibility had dropped to one kilometre, the worst since the 1997-1998 forest fires in Indonesia. After engulfing half of the Malay Peninsula, the smog also revisited Thailand in the last week of July 2000 (Associated Press, March 2 & 17, 2000; Straits Times, March 3 & 10, 2000; South China Morning Post, March 8, 2000; AFP, March 10, 2000; Dow Jones Newswires, July 11, 2000; British Broadcasting Corporation, July 16, 2000; Business Times [Singapore], July 17; Reuters, July 24, 2000).

These early hotspots and the smog that engulfed half of the Malay Peninsula revived Singaporeans' traumatic memories of the 1997 haze which blanketed Singapore and Malaysia for weeks and scared off tourists. The economic loss to Malaysia is estimated to reach US$ 321 million, while to Singapore it is estimated between US$ 69.3 million and US$ 78.8 million (Shawahid H.O. and Othman 1999; Hon 1999; Straits Times , March 25, 2000; Business Times , Singapore, July 17, 2000).

SUHARTO'S PALM OIL OLIGARCHY

Regardless of the national and international criticism, three consecutive regimes in Jakarta (Suharto, Habibie, Abdurrahman Wahid) have not been able to cope with these recurrent forest fires. In fact, from the 144 companies which had their licences revoked in October 1997 by then Minister of Forestry Djamaludin Suryohadikusumo, two months later 45 permits were reinstated (Nando.net & AFP, December 2, 1997). And even after a new forestry law was enacted last year, which carries a sentence of a maximum of five years in prison or a fine of Rp 5 billion (around US$ 0.5 million), no company owner or executive has been charged and found guilty of lighting the fires (Jakarta Post, July 26, 2000). Therefore, it is imperative to outline the forces which caused the previous forest fires - and are still causing new fires. From the Forestry Ministry's initial list of 176 suspects, 133 were oil palm and pulpwood plantations (EIA 1998: 30, 43-45). Of these two, oil palm plantations had the biggest share, since 46%-80% of

all big fires took place on these concessions (Wakker, van Gelderen and Telapak 2000: 19). As the largest nation-state in Southeast Asia in terms of area and population, many Indonesians are driven by a megalomaniac form of nationalism, in the sense, they want to outbeat their fellow ASEAN brothers and sisters in all fields.

This megalomania also affect palm oil production, an economic sector in which Malaysia was previously the leader. Currently, Indonesia out-competes Malaysia in terms of labour cost by five times and in cast of land by four times, thereby making it the cheapest producer of palm oil in the world. While Malaysia's oil palm plantations covered 2.8 million hectares in 1998 and is further aiming to establish a maximum area of 3.6 million hectares by 2008, in 1999 Indonesia already had approximately 3 million hectares oil palm plantations, and was converting an average of 200,000 hectares of forestland each year into this lucrative commodity. The monetary crisis in Southeast Asia only temporarily reduced plantation companies' planning target, and can be expected to incrase dramatically in the coming years (Wakker, van Gelder and Telapak 2000: 6-7, 11). Ironically, oil palm plantations have largely benefitted from the fires because the haze caused Crude Palm Oil (CPO) prices to hike and because of the Indonesian gov ernment plans to relase the burned land for plantation development. Stocks in plantation firms such as London Sumatra and Bakrie Plantations rose after the 1997/1998 forest fires (EIA 1998: 26, 33; Wakker, van Gelder and Telapak 2000: 25). Responding to this lucrative market, the Indonesian government went ahead setting aside 9.13 million hectares of forestland - 5.6 million hectares of which in West Papua - for oil palm plantation development (Wakker, van Gelder and Telapak 2000: 7).

Companies owned by the members of the Suharto clan and their cronies were the most outstanding among the 176 companies blacklisted by the Forestry Minister in 1997, and are still the main driving force in the palm oil business. Cross-referencing the 1997 blacklist with general and specific business directories in Indonesia (PDBI 1995, 1998; CIC 1997 a, b), shows twelve business conglomerates linked to the Suharto family, namely the Salim , Sinar Mas, Barito Pacific, Astra, Raja Garuda Mas, Surya Damai, Kalimanis, Danitama, Mercu Buana, Citra Lamtorogung Persada, Teknik Umum, and Maharani Groups, prominent among the corporate arsonists. Of those twelve groups, the latter five are directly owned by members of Suharto's extended family, namely Retired General Bustanil Arifin, whose wife is related to Suharto's late wife (Shin 1989: 268), Probosutedjo (Suharto's stepbrother), Siti Hardiyanti Rukmana (Suharto's eldest daughter), her husband, Indra Rukmana, and her younger sister, Siti Hediyati Haryadi (aka Titiek

Prabowo). The first six companies (Salim, Sinar Mas, Barito Pacific, Astra, Raja Garuda Mas, and Surya Damai) are predominantly owned by Sino-Indonesian business families who have rewarded Suharto's patronage with lucrative shares in member companies to the Suharto family or charities headed by Suharto. Sinar Mas' agrobusiness arm, PT SMART (Sinar Mas Agro Resources and Technology Corporation), for instance, is headed by Retired General Yoga Sugoma, whose wife is also related to Suharto's late wife (Shin 1989: 268). His son, Bambang Riyadi Sugama, is a close business associate of Bambang Trihatmodjo, Suharto's middle son (Swa, December 12, 1996-January 1, 1997: 12-38). Bambang Sugama's argo-business company, however, PT Kresna Duta Agroindustri, is considered to be a member company of Sinar Mas (Wakker, van Gelder and Telapak 2000: 55).

The Kalimanis Group, meanwhile, is headed by Mohamad "Bob" Hasan, formerly known as Indonesia's "timber king" and IOC (International Olympic Committee) board member for Indonesia (Jennings 1996: 232, 280). Contrary to Liem Sioe Liong's Salim Group, the Kalimanis Group is actually more of a money-making machine for the Suharto family rather than for Bob Hasan himself. This is because the major shareholder in most of the Kalimanis companies is PT Nusamba, which in turn is owned by three charities headed by Suharto himself. However, what is more important than the predominance of Suharto -linked companies on the 1997 Forestry Department's list of suspects is the systemic control of the Suharto clan over the entire palm oil industry, from plantations to marketing to the use of revenues generated from the palm oil trade. Three generations of the clan are represented in the plantations, from Suharto's brother and cousin to Suharto's grandson (Aditjondro 1997b).

A similar hegemonic position occurred in marketing of the products. During the Suharto era, state palm oil plantations produced crude palm oil (CPO) which was sold to the state logistics agency (Bulog) in either its raw or refined form at rock bottom prices. Bulog made a significant mark-up and profit on its subsequent sales of cooking oil, which is still dominated by two Suharto-linked conglomerates, Salim and Sinar Mas. The difference was pocketed by key state officials, foremost among whom is Bustanil Arifin who headed Bulog for two decades. This is also the man who Suharto has trusted - together with Bob Hasan - to manage his four wealthiest charities, claimed by Arifin to far surpass the wealth of the Rockefeller and Ford Foundations (Brown 1999: 56; Surabaya Post, July 29, 1994). Revenues from this state-controlled commodity has also benefitted the Suharto family, in an indirect way. Palm oil was one of the main components of a US$ 500 million barter deal between Indonesia and Russia, which involved In donesia obtaining twelve Sukhoi jet fighters and eight helicopters from Russia, after the US Congress blocked arms trade with Indonesia (EIA 1998: 30). Ironically, this purchase of Russian aircraft was planned to go through two companies owned by Suharto's youngest daughter, Siti Hutami Endang Adiningsih, namely PT Dwipangga Sakti and PT Dwipangga Sakti Prima. Fortunately, due to Indonesia's financial crisis which began in mid 1996, the purchase of these Sukkhoi jets was cancelled (Info Bisnis, September 30, 1997: 74; Prospek, September 31, 1998: 26).

As if to rub salt into the wounds, in the heat of the forest fires Suharto's middle son, Bambang Trihatmodjo, tried to make a fortune out of the ecocide, by planning to import fire fighting aircraft from Canada for three times the real price. Then Environment Minister Sarwono Kusumaatmadja promptly wrote a memo to the President, opposing that plan. It is unclear, however, whether Bambang got the deal or not (SiaR, October 1, 1997). What is clear is that Mr. Kusumaatmadja lost his ministerial portofolio in Suharto's last cabinet, before Suharto himself was forced to step down by the student movement which occupied the parliament in mid 1998. Then, as in many other economic sectors, military business interests - mainly through the so-called 'welfare improvement charities - are also closely intertwined with all those civilian led conglomerates operating in the palm oil industry. In South Sulawesi, for instance, Suharto's grand son, Ari Haryo Wibowo, controls a 17,000 hectares oil palm plantation using local vil lagers and Javanese transmigrants as their work force. His partner is the Armed Forces Headquarters' Foundation, or Yayasan Mabes ABRI (Hamid 1998). On the Forestry Department 1997 black list of companies involved in burning the forest are several companies linked with the largest army charity, Yayasan Kartika Eka Paksi, through joint ventures with the Salim Group, Bob Hasan, and Bambang Trihatmodjo.

Given the fact that three generations of the Suharto family controlled the palm oil industry one can label it Suharto's "palm oil nepotism" (see Aditjondro 1997b). But since it does not only involve one but several extended families of Sino-Indonesian business people and a handful of retired generals and bureaucrats, loyal to Suharto, one can further label this political economic system, Suharto's "palm oil oligarchy." Despite the fact that Suharto has officially stepped down, this oligarchy is still deeply entrenched in the political and economic system in Indonesia. Janji Akbar Zahiruddin Tanjung, the speaker of the parliament, for instance, is a member of the Tanjung family whose family company, PT Marison Nusantara, has overlapping shares with several member companies of the Salim and Raja Garuda Mas Groups, with businesses range from condensed diary milk to trade in chemical products (CIC 1997b, Vol. I, pp. 480-481, 542-544; Vol. II, pp. 1456-1457, 217A-218A).

THE ASEANISATION OF SUHARTO'S PALM OIL OLIGARCHY

The influence and tentacles of Suharto's palm oil oligarchy, however, has not been limited within Indonesia's borders. Preceeding the smog that drifted across the Malaca and Natuna Straits to Indonesia's northern neighbours, the tentacles of this business octopus and thereby its influence has already become deeply entrenched in the nearest ASEAN countries. This explains the lukewarm response which the haze has received in the upper echelons in Kuala Lumpur, and to a lesser degree, in Singapore. While in late July 2000 the smog from Indonesia's forest fires had drifted along the Malay Peninsula into southern Thailand, ASEAN government leaders did not offer any concrete steps to take to ameliorate the catastrophic Indonesian forest fires. On the contrary, Malaysian Prime Minister Mahathir Mohamad even strongly refused to take any strong steps. The ten nation ASEAN foreign ministers' summit in Bangkok also failed to address the transnational haze strongly in its final communique (Reuters, July 24, 2000). Mahath ir Mohamad in particular, even criticised the international press for "exaggerating" the haze problem, driven by what he labelled as a "political agenda" to discourage tourists from coming to Malaysia (AFP, July 24, 2000).

The attack on the foreign media had been preceeded by a ban on the domestic media to publish air pollution readings, after Kuala Lumpur and other areas on the peninsula were blanketed with dense haze from forest fires across the Malacca Strait. The Malaysian public, however, refused to play that ostrich policy, forcing the New Straits Times , which usually supports government initiatives unreservedly, to call for the government to publish the API (Air Pollution Index) readings (South China Morning Post, July 17, 2000). On the macro level, Malaysia's silence is partly influenced by the fact that it needs Indonesia to expand its own palm oil industry. By March 1997, Malaysia already had commitments to invest in 1.6 million hectares of oil palm plantations in Indonesia through joint ventures with various Indonesian companies. This was more than a third of all the oil palm plantations planned until the turn of the century (Kontan, March 24, 1997). In 1999, more than 1.3 million hectares had already been material ised, with some of them linking up with companies controlled by four Suharto siblings, namely Bambang Trihatmodjo, Tommy Suharto, Titiek Prabowo, and Siti Hutami Adiningsih. Their plantations cover hundreds of thousands of hectares in Sumatra and Kalimantan (Aditjondro, 1997a; Wakker, van Gelder and Telapak 2000, Appendix 3; Warta Ekonomi, October 6, 1997; Swa, April 10-23, 1997: 34).

The fact that Malaysian companies were already deeply involved in growing oil palms in Indonesia worked in the interest of Indonesian authorities to cover up their own failures in quelling the forest fires. In July 2000, two Malaysian-owned company, PT Adei Plantation, had been observed by satellite photo to burn part of the forests in the province of Riau, already since three months earlier (New Straits Times, April 5, 2000; Detikworld.com, July 19, 2000). This was a repeatition of the fact that the Tradewinds Group and Kumpulan Guthrie Berhad, which together control 110,000 hectares of oil palm plantations in Sumatra, had been implicated in the 1997 forest fire (Sydney Morning Herald, September 26, 1997; Asiaweek, October 10, 1997: 39-40).

Moving down from a sectoral to a more structural link, the largest Indonesian business groups had already formed numerous joint ventures with the most well-connected companies in Singapore and Malaysia. The Camerlin consortium, for instance, has forged a close link between Indonesia's Salim Group with Malaysia based Quek Leng Chan and his Singapore-based cousin Kwek Leng Beng, who head the two factions of the giant Hong Leong business empire. Two other powerful groups which joined this investment syndicate are the Singapore-based Haw Par Brothers and the Singapore state-owned conglomerate, Sembawang Corporation. Then, Johannes Kotjo, a former Salim CEO, who moved on to become Bambang Trihatmodjo's businss partner, has joined a more global business network which involves leading Malaysian businessman, Tan Azmi Wan Hamzah, and the Canadian mining magnate, Robert Friedland (Bakker, 1996a, b).

Now, moving deeper into the current and former ruling elites of Indonesia, Singapore, and Malaysia, several joint ventures have emerged, where relatives of former president Suharto, former Prime Minister Lee Kuan Yew, and incumbent Prime Minister Mahathir Mohamad hold powerful positions as shareholders or directors. Or, they are shareholders in companies, which in turn acquired shares of other companies in which members of these three families are involved. Mahathir's middle son, Mokhzani, for instance, through his Tongkah Holdings acquired a majority stake in Hospital Pantai, which in turn became a substantial shareholder in Singapore-listed AsiaMatrix Ltd. This company has Suharto's daughter-in-law, Ratnawati Harjojudanto, listed as its chairman (Backman 1999: 309-310; Tan et al 1999: 602-603). Then, Mahathir's eldest son, Mirzan, is married to a relative of Liem Sioe Liong, Suharto's oldest and richest business partner. Mirzan has formed a joint venture with Singapore-based Kim Eng Securities, which is pa rtly owned by Gloria Lee, a sister-in-law of Lee Kuan Yew (Backman 1999: 307-308).

Meanwhile, Gloria Lee's husband, Lee Kim Yew, has a more direct business links with Liem Sioe Liong. He is a director of Albright & Wilson Asia Pacific Holdings Pte. Ltd. This chemical engineering company is a joint venture of Salim Oleochemicals Pte. Ltd. and Albright & Wilson Ltd. of Australia. Lee Kim Yew's involvement in the Singapore-based Salim business empire dates back from the 1990s, when the Salim Group acquired a controlling stock in Singapore's United Industrial Corporation in December 1990 (Schwarz and Friedland 1991; Warta Ekonomi, July 14, 1997: 22; Singapore Registry of Companies and Businesses, Reg. No. 197501748G). Those are only few examples of the growing list of companies which involve the three powerful clans of Indonesia, Malaysia and Singapore, which have also expanded further in the Asia-Pacific region and were the driving force behind the economic opening of China. That is the reason why the country-by-country approach of the International Monetary Fund (IMF), without unraveling the capital flow from the Southeast Asian countries to China and elsewhere, is doomed to fail (see Aditjondro 1997c).

CONCLUSION

Why is there such a low level governmental concern in the region about these recurrent forest fires, which have destroyed millions of hectares of lowland forests, have badly affected the health of tens of millions of people, and have drastically reduced tourist dollars? That is the main guiding question which I have explored in this paper (chapter). The answer to that question lies in the fact that the most dominant driving force of the recurrent forest fires is the palm oil industry in Indonesia, which involve the main business conglomerates in Indonesia partly or wholly owned by members of the Suharto family, with a growing number of Malaysian joint venture partners. Since land and labour restrictions do not enable the expansion of this industry on the Malay Peninsula, Malaysian companies have also expanded into Indonesia, and are involved in a third of all oil palm plantations in Indonesia. These vested interests in the two neighbouring countries are further reinforced by various region-wide joint venture s and investment houses.

Therefore, any serious attempt to reduce the frequency and extent of the forest fires and the related haze problem has to deal with this 'intra-ASEAN oligarchy,' with the long term aim of enforcing regional and global transparency and accountability of the members of this oligarchy to its stakeholders, especially the ordinary citizens in the ASEAN region who have been - and may still be - regularly choked by the smoke from the forest fires.

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