What explains the non-implementation of Jatropha schemes?

By Jacqueline Vel

Quote: “Typically, within a year or two, the jatropha project would be declared a failure – blaming local conditions and population – and the project developer would disappear, leaving shareholders with worthless shares and increasing farmers’ and local governments’ cynicism regarding agribusiness investors. There is even a local term for this phenomenon: ‘PT Akan’, companies with (only) nice promises but no implementation.”

The non-implementation of plantation plans is a well-known aspect of the behavior of plantation companies in Sumba. Although there is never hard evidence available, local informants provide the same explanation: the land permits for plantation companies provide access to bank loans, and even just having plans for jatropha cultivation (or any other crop) can be sufficient to receive subsidies or loans from a government or from international donor agencies. When the plantation subsequently fails, the company disappears, and so does the capital it received from banks, investors or donor institutions. There is even a local term for this phenomenon: “PT Akan,” companies with nice promises that are not implemented. This analysis is based on the results of field research in Sumba between 2007 and 2012.

McCarthy, Vel and Afiff (1, pp. 536-537) have described a pattern in plantation development in Sumba which predates the jatropha projects:

“First, a high government official introduces an idea for a new cash crop. Then, there is a promising initial phase. Next, an Indonesian company responds by discussing potential plantation sites with the district officials. Subsequently, an international company or foundation gets involved as the investor (lender). Websites promote the idea and describe large-scale, long-term, and high expectations. Then, an official ceremony occurs, where companies and the district government sign a “letter of intent” or a “memorandum of understanding.” The local newspaper covers this signing ceremony and reports are posted on the internet. Second, a phase of limited implementation follows. The district government issues a location permit for a much smaller area than the initial plans stated. This allows the company to start exploratory activities and obliges the company to negotiate with local landowners about the terms for land use/acquisition, and to conduct an environmental assessment. The company sets up some minor activities: building one road, and one small warehouse, getting some equipment and making a fence and a signboard. Then the company tries to persuade local famers to collaborate with the plantation, particularly when this is a requirement for obtaining a bank loan. The plantation company employs a few local people as “permanent staff” and casual laborers to do seasonal work or to construct fences. Part of the land is cultivated with the crop for one or two seasons. Third is the phase of acknowledging failure. Typically, after several years, activities end. Local informants describe instances where the company’s management stated that the area was unsuitable after all, that the local population has been uncooperative (and sometimes even burnt the plantation), or that the company was in financial trouble. There are always rumors about bankruptcy and plantation loans being used for other purposes. Finally the company disappears from the district scene.”

Since 2001, when the national decentralization policy brought regional autonomy to Sumba’s districts, the number of potential investors visiting Sumba has increased. The district governments welcome investments hoping that these will develop the districts’ economy and raise the government’s income from tax. When West Sumba was carved into three new districts in 2007, the new district governments became even more active in attracting investments, and agriculture was the most obvious sector of the island’s relative advantage compared to other areas in Indonesia due to the availability of large areas of unused land.

View on the landscape of Memboro sub-district in Central Sumba with large areas of uncultivated land in October 2011. Foto: Jacqueline Vel

View on the landscape of Memboro sub-district in Central Sumba with large areas of uncultivated land in October 2011. Photo: Jacqueline Vel

In 2007 the Jatropha hype in Indonesia was already beyond its peak. The Ministry of Agriculture and the district agricultural services had stopped their programs of promoting Jatropha cultivation by small holders. The absence of a market and the fossil fuel subsidies that worked as a price ceiling for jatropha oil were the main reasons for ending government Jatropha programs. Surprisingly however, after 2007, private investors came to Sumba with business proposals for commercial Jatropha projects.

Between 2007 and 2012 I heard of at least 10 Jatropha business initiatives, but accessing information about this was difficult because it was not publicly available.  Through my network in Sumba I could access various materials of four projects and conduct interviews with actors engaged in those projects (5) who enthusiastically depicted the potential and benefits or their future Jatropha schemes. Although people in Sumba refer to them as ‘investor’ they are actually commercial brokers, living mostly in Jakarta. Their companies were recently founded, had no experience in the plantation industry, and no capital to invest in the proposed projects. Their business plans emphasized the plans and costs for establishing their Jatropha projects, but had little information on the involvement of local farmers or laborers, nor about real market strategies. They had submitted their business plans to the district government to obtain a location permit, which two of the four received.

The business proposals were also written for foreign investors seeking objects for green investments. In three of the four cases the companies involved presented themselves to candidate investors as plantation implementation companies offering to arrange legal permits, access to land, buildings and roads and access to labor. The targeted areas mentioned in the plans ranged between 5000 and 300,000 hectares. In practice there has been little activity in the field. Two of the brokers just had some contacts with other companies who had claimed they could provide access to land in Sumba. The third and most active company had a nursery and some fields planted and has been conducting negotiations with land owners for obtaining legal access to land, but it stopped its activity after three years because of lack of investment capital.

 

The nursery of the jatropha company in Tana Modu, Central Sumba, at the peak of its activities in 2009. Foto by Jacqueline Vel.

The nursery of the jatropha company in Tana Modu, Central Sumba, at the peak of its activities in 2009. Photo by Jacqueline Vel.

The fourth case was not directed at attracting foreign investment, but concerned a company with a plan for producing Jatropha as feedstock for fuel production in Australia. The company active in this Jatropha project had been established by a gas station business group in Australia in response to the Australian biofuel blending legislation. This project has a nursery, a small warehouse, some equipment and planted an area of around 100 hectares. Activities lasted for one season only, due to, among others, lack of water, bushfires and lack of infrastructure and knowledge on how to run a plantation. By 2012 all four projects had ended.

The small office, half built warehouse and water truck of the jatropha plantation in Memboro, Central Sumba, 4 October 2011. Foto by Jacqueline Vel.

The small office, half built warehouse and water truck of the jatropha plantation in Memboro, Central Sumba, 4 October 2011. Photo by Jacqueline Vel.

One explanation for the non-implementation of jatropha schemes is thus found in a well-known pattern of plantation development failure in Sumba. According to this pattern “PT Akan” project developers never intend to reach the full production phase, but rather aim to obtain short-term benefits (financial opportunities) available in the initial phases of establishing the proposed scheme. The second explanation is that global narratives about energy or climate crises – with the accompanying funds for crisis mitigation – have stimulated the phenomena of “virtual land grabbing” and “trading in discursive commodities” instead of establishing real production (4, 5). A third explanation is the fact that jatropha schemes have been regarded as projects in the Indonesian sense of the term proyek.

References

  1. J.A.C.Vel and R. Nugrohowardhani 2012. Plants for Power; the potential for cultivating crops as feedstock for energy production in Sumba. The Hague: Hivos. http://www.hivos.nl/dut/Hivos-Knowledge-Programme/Themes/Small-Producer-Agency/Publications/Plants-for-Power
  2. J. McCarthy, J. Vel, S. Afiff, Trajectories of land acquisition and enclosure: Development schemes, virtual land grabs and green acquisitions in Indonesia’s outer islands. Journal of Peasant Studies 39(2), 521-49 (2012).
  3. R. Brittaine and N. Lutaladio (2010): Jatropha: A Smallholder Bioenergy Crop – The Potential for Pro-Poor Development, in Integrated Crop Management,  8–2010. Page 22.  http://www.fao.org/docrep/012/i1219e/i1219e.pdf
  4. James Fairhead, Melissa Leach, Ian Scoones, Green grabbing: A new appropriation of nature? Journal of Peasant Studies 39(2), 237-261 (2012).
  5. Jacqueline Vel, Trading in Discursive Commodities: Biofuel Brokers’ Roles in Perpetuating the Jatropha Hype in Indonesia, Sustainability 2014, 6(5), 2802-2821; doi:10.3390/su6052802

 

Jatropha processing equipment at the office of the government's Plantation Service in Waingapu. East Sumba, in November 2007. Foto: Jacqueline Vel

Jatropha processing equipment at the office of the government’s Plantation Service in Waingapu. East Sumba, in November 2007. Photo: Jacqueline Vel

The same jatropha processing equipment had been stored in the Plantation Service Office in Waingapu, East Sumba by October 2011. Foto: Jacqueline Vel

The same jatropha processing equipment had been stored in the Plantation Service Office in Waingapu, East Sumba by October 2011. Photo: Jacqueline Vel

 

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