Poorly drafted law

Poorly drafted law

Judging by its primary objectives of bringing about fairness
to farmers/smallholders, enhancing sustainable
plantation-management practices and building up an
internationally competitive plantation industry, the plantation
bill that was approved by the House of Representatives on Monday
is by no means a good law.

A good law is supposed to primarily serve and protect the
interests of the general public, or in this case, the
farmers/smallholders. But, the plantation legislation virtually
hands a blank check to the government, which is notorious for
favoring big business interests.

The legislation leaves to the discretion of the government
many crucial provisions, such as those regarding the maximum
acreage of big plantations, business partnerships between big
plantation firms and smallholders, requirements for the extension
of land tile, and procedures for land acquisition.

We, therefore, wonder why the House pushed to pass the law --
even amid such strong opposition from most non-governmental
organizations and farmers associations -- when there are many
other more urgent bills that badly need enactment. For example,
the proposed amendments to the bankruptcy law, which has trapped
many companies into legal black holes, have long been overdue at
the House.

The House should, in part, be commended for taking the
initiative to draft the bill almost two years ago -- perhaps only
one of a few laws drafted at the legislature's initiative over
the past three decades.

First of all, plantations are the most promising sector of the
economy, given the country's huge area, favorable climate and
abundance of cheap labor. With more than 10 million hectares of
oil palm, rubber, coconut, cocoa, coffee, clove and tobacco
plantations, and foreign exchange earnings of almost US$6.5
billion a year, the plantation sector commands strong comparative
advantages. In fact, it was primarily plantation crops that
attracted foreign colonialists to Indonesia centuries ago.

Moreover, sound plantation management contributes greatly to
the development of rural areas, where more than 60 percent of the
country's population live, and ideally it is also environmentally
friendly.

What then, is the point of hurriedly enacting such a poorly
drafted law, which would likely be ineffective in empowering
smallholders and protecting the interests of tribal landowners
from greedy investors and corrupt officials?

The law stipulates only several clear-cut provisions that
minimize uncertainty and different interpretations in its
implementation.

It requires foreign investors in plantations to set up joint
ventures with national interests, and threatens those found
guilty of illegally occupying land and using the slash-and-burn
method in land clearing. Heavy punishments range from 10 years to
15 years imprisonment and fines of between Rp 10 billion and Rp
15 billion (US$1.66 million).

The legislation grants a 35-year land title to plantation
firms which is extendible by 25 years, contingent upon a set of
requirements that will be made by the minister of agriculture.
The plantation owner is allowed to apply for another 35-year land
title after the extension period ends, again subject to
requirements set by the minister of agriculture.

Investors should welcome this provision, because investment in
plantations offers a long payback period. Yet, given the bitter
experiences of businesspeople in dealing with the government
licensing machinery, apprehensions have arisen as to whether the
processing of the land title and its extension would be
transparent and expedient.

The bill initially set the maximum size of land for a
plantation company at 20,000 hectares in one province and 100,000
hectares nationwide, but the specific acreages were deleted from
the final bill approved on Monday.

This is indeed a very sensitive area, yet it is very
important to have clearly defined acreage ceilings, to create
fairness and enhance equity in land ownership.

The House seems to have taken the easy way out and avoided
controversy, since many companies already have land titles to
much larger acreages than the ceilings specified in the early
draft bill. This is a time bomb that could sabotage the
applicability of the law, as in the case of a labor regulation
enacted in 2000.

Plantation companies, besides requiring land titles, should
acquire business licenses from the governor or regent, depending
on the location of the estates to be developed. Procedures for
this license have yet to be formulated by the minister of
agriculture. Again, another red-tape trap.

Yet, one of the most deplorable shortcomings is the absence of
clearly set provisions on business ties between smallholders and
plantation companies, which has, thus far, put farmers at a major
disadvantage in bargaining with businesspeople. The law only
stipulates that such relationships shall be mutually beneficial,
and regulations regarding these partnerships will be issued by
the minister of agriculture.

It would be much better to simply shelve this law, since it
would not make investment in plantations more attractive and the
industry more competitive. Nor would it be effective in
empowering smallholders.