Oil palm in Indonesia

Carbon emissions may cost RI dearly

2009-04-22T09:09:00.000-07:00

Adianto P. Simamora , The Jakarta Post ,

JAKARTA | Fri, 03/06/2009 9:37 AM | National

Peatlands for palm oil: Peatland is drained to make way for the cultivation of oil palms in Central Kalimantan. Indonesia is home to the world’s largest peatland areas. Scientists have warned that peatland reclamation could increase the release of carbon emissions stored in its area, leading to the worsening of global warming. (Courtesy Of The Indonesian Peat Land Association)

Indonesia suffers an estimated US$1 billion in potential losses each year from the release of carbon stored in its tropical forests’ peatlands, a study has revealed.

Mitsuru Osaki, a professor at Hokkaido University’s Graduate School of Agriculture in Japan, said the potential losses were due to poor management combined with the massive opening of peatlands for agriculture, such as in Central Kalimantan.

“If we convert it to the price of carbon, Indonesia loses about $1 billion annually, equal with the release of 0.6 gigatons of carbon dioxide [CO2],” he said Thursday on the sidelines of an international conference on carbon management in peat forests in Central Kalimantan.

Asked about the peatland condition in Indonesia, Osaki, involved in a study on peatlands in Kalimantan from 1997 to 2007, said it was “terrible, with no management of peatlands.”

Osaki, together with a team of 16 Japanese scientists, will conduct another five-year study to calculate the total carbon in the country’s peatlands.

The study will be jointly conducted with Indonesian scientists from the State Ministry for Research and Technology, the National Standardization Agency (BSN), the University of Palangka Raya, the Indonesian Institute of Sciences (LIPI) and the Indonesian National Institute of Aeronautics and Space (Lapan).

Tropical peatlands — including swamps and forests found in Indonesia, Malaysia, the Amazon lowlands and central Africa — are estimated to reach 42 million hectares and contain 148 gigatons of CO2.

Rising levels of CO2 emissions add to the greenhouse effect, thus increasing the temperature in the atmosphere, widely blamed for climate change effects.

Bambang Setiadi, chairman of the Indonesian Peatland Association, told the conference Indonesia had about 27 million hectares of peatlands, mostly in Kalimantan, Sumatra and Papua.

“Indonesia’s peatlands store between 10 and 32 gigatons of CO2,” he said.

(JP/Irma)

The depth of the country’s peatlands ranges from 1 to more than 12 meters. About 42 percent of the peatlands are more than 2 meters deep, with deposits of 77 percent of total peat carbon.
Bambang, who is also BSN chairman, said deforestation and repeated forest and peat fires significantly contributed to carbon release.

“Fires have become the most dangerous threat to Indonesian forests and peatlands in the past 15 years,” he said.

Studies show peat deposits in Southeast Asia could be wiped out by 2040 due to fires.

Bambang added that up to 0.6 gigatons of carbon released into the atmosphere in 2006 were due to peat fires.

He said carbon release from reclaimed peatlands could not be avoided. However, improved land management could lower the peat carbon loss rate.

LIPI peatland scientist Herwint Simbolon said the building of canals in peatlands would only accelerate the release of carbon.

“The fact is, carbon release is far higher than storage in peatlands, because the use of canals has sped up carbon release,” he said.

The government is currently drafting a presidential decree on peatland management, in a bid to cut CO2 emissions from peatlands.

Agriculture Minister Anton Apriyantono issued a ministerial decree last month to allow oil palm companies to expand into peatlands with a depth of less than 3 meters.

A report in 2006 from Wetlands International said Indonesia’s peatlands emitted around 2 billion tons of CO2 a year, far higher than the country’s emissions from energy, agriculture and waste, which together amounted to 451 million tons.

This places Indonesia as the world’s third largest CO2 emitter after the United States and China.

Plantations struggle as CPO prices in free fall

2008-12-03T05:08:00.000-08:00

Business and Investment - November 14, 2008

Manggi Habir, The Jakarta Post, Jakarta

Plantation companies are one of the first to suffer from the deepening global downturn. And, as the year end nears, it is plantations with scale of production, the right mix of tree maturity and a conservative balance sheet (low debt and high cash levels), that are best able to weather the storm.

It was only a few months back, that the sector's outlook still looked so bright. Crude palm oil (CPO) prices were on an unprecedented upward climb. Fueled by high economic growth in India and China CPO prices soared to reach a peak of US$1,200 per ton by mid-year, about double its historical prices in the $350 to $600 per ton range.

Reflecting this trend, the share price of Indonesia's three top listed plantation companies, PT Astra Agro Lestari (AALI), PT Bakrie Sumatera Plantations (UNSP) and PT London Sumatera (LSIP) also doubled in 2007, reaching respective peaks of Rp 28,000, Rp 2,275 and Rp 10,650 per share by early 2008.

However, with the consolidation of the global downturn in the second semester, these earlier gains disappeared in a couple of months. CPO prices began their steep decline after June, reaching a low of $500 per ton by November. Reflecting this drop, share prices of the above three companies also fell by more than 70 percent, to reach lows of Rp 8,550, Rp 340 and Rp 2,725 per share, respectively.

This has been a painful awakening for plantation managers after seeing margins and profitability levels rise. So what has been the impact? First, there has been the drop in revenue with falling commodity prices. Costs, on the other hand, are fairly fixed and not easy to adjust downward in this sector. This ultimately translates into narrowing margins and profitability.

For instance, Astra Agro Lestari, the largest of the three plantation companies, showed a steady decline in quarterly net income from Rp 827 billion in the first quarter of the year, to Rp 770 billion in the second and further down to Rp 532 billion in the third quarter.

How have they responded? In the short-term, the response has been on finding ways to control costs and push them downward. This is difficult in a business with a long business cycle. Palm oil tree crops take 3-4 years to plant and grow to first production level, during which time it is all cash outflow. This is then followed by another 6-7 years for a tree to reach its maturity and generate peak yields.

Interestingly, the plantation cost structure has undergone a fundamental change with the rise in oil prices. In 2006, the largest cost component was labor, accounting for 39 percent of total cost.

However, by 2008, with rising gas prices, fertilizer costs have rapidly grown to replace labor as the largest cost component. Fertilizer, which previously accounted for just 14 percent of total cost, now takes up 34 percent of the CPO cost structure.

As a result, it has become the major focus in the sector's cost cutting efforts. Efforts are underway to use fertilizers more efficiently and to look at replacing costly chemical-based fertilizers with natural organic compost waste. The drop in oil and gas prices should help bring down fertilizer prices, although companies have yet to notice and confirm this trend.

In the long term, there is a focus on improving tree crop yields by investing in higher yielding and disease resistant seeds. Currently Fresh Fruit Bunch or FFB yields are about 18.2 tons per year per hectare. This palm fruit is then further processed by mills yielding an average of about 4.2 tons of CPO per year per hectare.

Most Indonesian plantation companies limit their activity to the upstream part of the value chain, focusing on planting, harvesting and processing palm fruits into CPO. Rarely have they ventured further downstream to vertically integrate into the next phase of processing, for example, into cooking oil or cosmetics, where the value added and larger margins are to be found.

There is also little discussion thesedays about investing in biofuel processing plants, with the decline in oil prices.

Plantation owners explain that moving downstream would require extensive investment. This is not limited to large processing plants but also to building distribution networks and marketing capability, as well as investing in creating strong brand names. This, they argue, requires a different skill base.

Besides, they also say, there is much to do already at their end of the value chain. The argument is that it would be more prudent if they focused on what they are good at, which is expanding and investing in their existing processing mill capacity, improving efficiency in their planting phase and increasing yields and then further seeking additional land or acquiring other plantations to plant more hectares and expand their capacity.

Astra Agro operates some 235,000 hectares of tree crops across the islands of Sumatra, Kalimantan and Sulawesi. About 80 percent of its tree crops are mature, with the remaining 20 percent in the planting or immature phase. In a downturn cycle planters prefer to have a larger mature proportion in their tree crop mix as it minimizes the heavy cash outflow found in the initial phase.

With a large mature area, there is also more cash flow generation, even with lower prices. This is why plantation companies that are relatively new or have a larger immature proportion of tree crops are suffering more in this downturn cycle.

Another cost that needs to be managed well in a downturn is financing costs. All commodity companies that face volatile commodity prices tend to have conservative balance sheets, carrying low debt levels in proportion to their capital. Astra Agro, for example, has Rp 1.9 trillion in cash as of September 30, 2008, and practically no debt.

It is too early to tell whether the recession will be long enough to encourage consolidation in this sector. What is sure is that those with scale, an appropriate mix between mature and immature tree crops and a conservative balance sheet should be able to ride out the storm more comfortably than others.

Manggi Habir is Contributing Editor at The Jakarta Post

COCA TO JATROPHA: THE CHANGING FACE OF INDONESIA'S PLANTATIONS

2008-12-01T07:21:00.000-08:00

The Jakarta Post - December 12, 2006Julian Hill, Jakarta

Taking a snapshot of Indonesia's major crops in 1920, the world's largest producer of coca leaf and its derivative, cocaine, was right here on Java. And while the Latin Americans simply said cocaine production here was totally banned by decree. But also in 1920 more than 90 percent of the United State's high end cigar tobacco wrapper leaves were grown on Sumatra.

World opinion and politics ended cocaine production and the great depression ended expensive tastes in tobacco. Tea and coffee replaced coca in Java and rubber replaced tobacco in Sumatra. Two major crops displaced for two entirely different reasons, and thus we see the trend that fashion, politics and technology are all capable of changing the crops and the economics of Indonesia's plantations.

Dunlop's invention of the pneumatic tire spawned demand for rubber and as motorized transport grew between the wars so did the need for tires. By 1942, the need was so great that it was a major motivation for the invasion of Indonesia. Post World War II technology, particularly in the non-tropical USSR, began to replace natural rubber with synthetics made from petroleum. No need for natural latex, said the tire manufacturers and rubber prices fell.

Out came the rubber trees and planters started with a new super crop, oil palm. The tire manufacturers over did it though, and whilst they succeeded in keeping the price of latex down, they became worried about shortage of supply. A few years ago they admitted that although synthetic rubber worked well in tire treads, natural rubber was still needed for the walls. Rubber prices soared. Rubber or oil palm? Planters were in a dilemma, but not for long.

The motor car that spurred the demand for rubber is a big contributor to the global warming scare, the next big driver in the plantation game. Palm oil is not only an edible oil with a myriad of uses, it is now also seen as a feedstock for the production of alternative biofuels, the next new big business. After that brief dilemma, most reckon oil palm oil has the ascendancy over rubber again. At the moment.

Many of Indonesia's islands are moist, fertile and warm, perfect conditions for tropical agriculture, notably seen in the 1890s Le Figaro cartoon, Au fertilite du Sumatre, of the planter's walking stick sprouting leaves while he leans on it for a rest. Foreigners have been flocking here for centuries to seek the fruits of this fertility, but what they have sought has changed from cloves and cinnamon for the tables of European nobles to feedstock for biofuels to halt the progress of global warming. So what's next?

Undoubtedly the major influence on Indonesia's plantation sector over the next decade or so will be the demand for biofuels; irrespective of the price of crude oil, governments and interest groups around the world will continue to push the concept of sustainability.

So what are biofuels and why are they sustainable?

Biofuels fall into two categories: those categorized as biodiesel and those produced by fermentation such as bioethanol. Biodiesel is a modification of a vegetable oil which enables it to be used alone or mixed with petroleum diesel, for engines where ignition occurs by compression. Interestingly I know planters in Sumatra who have been mixing crude palm oil with regular diesel for years and they say it works just fine.

To produce bioethanol, carbohydrates need to go through a fermentation process, much the same as producing alcoholic drinks. Ethanol, by the way, is the same as the ethyl alcohol we find in our scotch, wine or beer. Bioethanol may be the rage now but it is volatile and cannot be mixed more than 10 percent with regular petrol.

These biofuels are deemed to be sustainable because, unlike fossil fuels, they are grown by plants which fix the carbon from the atmosphere. When they are burnt they return the same carbon to the atmosphere that was used in growing them. That's the theory, but such a balance does not take account of the equipment and transport used to produce them.

So it takes a vegetable oil to make biodiesel but virtually any old carbohydrate can be used to make bioethanol.

Let's look at a biodiesel plant producing, say, 250,000 tons of biodiesel a year. In petroleum terms that is about 1.75 million barrels. To produce the palm oil feedstock for a plant with that capacity would require oil palm plantations of about 60,000 hectares, about the same size as Singapore.

The 1.75 million barrels of crude, on the other hand, could be produced by a field of about "fifty donkeys" pumps covering an area of 70-odd hectares. So can the benefits of the sustainability be traded against the loss of a huge area of what used to be rain forest and now turned to monoculture? This is an issue the green lobby has yet to address. Sure it may be sustainable, but is it a sword in the side of biodiversity?

So what are the alternatives? Biodiesel can be produced from many vegetable oils. Not just the traditional ones like palm, soya and canola but also from others, less well known oils, such as jatropha and castor. Jatropha can be grown in poor soils with low rainfall, such as is found in the Moluccas and East Nusa Tenggara. These biodiesel crops could help revitalize the economies of some of Indonesia's poorest regions, and do so by utilizing land that does not have the same biovalues as rain forest.

Bioethanol can be produced from a variety of crops; ubi kayu (cassava), potatoes, sugar cane and even, they say, from rice straw. There is a lot of land in Indonesia that could produce simple carbohydrate, and we could see, for instance, large scale production of cassava for biofuels on otherwise unproductive land.

Regional autonomy, has the potential to create a sea change in the countryside. As President Susilo Bambang Yudhoyono has said many times, "Don't talk to me, talk to the Bupati (regent)". A result is that the land rights of the masyarakat, the people, are now inalienable and protected and we will surely see a massive increase in production from small land holders rather than from the large scale corporate planters.

Fear not, this has been the case elsewhere in the world for centuries. For instance, a big-sized farm in most parts of England is 100 hectares and national agricultural production has not suffered as a result of it. What it will mean though is that the primary producer will no longer also be the primary processor, because small producers cannot justify owning processing plants like palm oil mills.

Once implemented in its purest form the Kyoto Protocol mandates the global trading of carbon credits. This will be critically important for Indonesia with its forests and agriculture, and could be worth untold billions to the nation.

The writer is a Technical Advisor with Deloitte in Jakarta. He is involved in providing financial advice to companies in the Indonesian plantation sector. He can be contacted at jchill@deloitte.com.

Source: The Jakarta Post - www.thejakartapost.com

Estates Production by Crops, Indonesia, 1995 - 2006

2008-11-07T07:44:00.000-08:00

Estates Production by Crops, Indonesia, 1995 - 2006* (Ton)

Year	Dry Rubber	Palm Oil	Palm Kernel	Cocoa	Coffee	Tea	Cinchona bark	Cane Sugar ¹⁾	Tobacco
Year	Dry Rubber	Palm Oil	Palm Kernel	Cocoa	Coffee	Tea	Cinchona bark	Cane Sugar ¹⁾	Tobacco
1995	341,000	2,476,400	605,300	46,400	20,800	111,082	300	2,104,700	9,900
1996	334,600	2,569,500	626,600	46,800	26,500	132,000	400	2,160,100	7,100
1997	330,500	4,165,685	838,708	65,889	30,612	121,000	500	2,187,243	7,800
1998	332,570	4,585,846	917,169	60,925	28,530	132,682	400	1,928,744	7,700
1999	293,663	4,907,779	981,556	58,914	27,493	126,442	917	1,801,403	5,797
2000	375,819	5,094,855	1,018,971	57,725	28,265	123,120	792	1,780,130	6,312
2001	397,720	5,598,440	1,117,759	57,860	27,045	126,708	728	1,824,575	5,465
2002	403,712	6,195,605	1,209,723	48,245	26,740	120,421	635	1,901,326	5,340
2003	396,104	6,923,510	1,529,249	56,632	29,437	127,523	784	1,991,606	5,228
2004	403,800	8,479,262	1,861,965	54,921	29,159	125,514	740	2,051,642	2,679
2005	432,221	1,019,061	2,155,925	55,127	24,809	128,169	825	2,241,742	4,003
2006*	450,526	10,869,365	2,315,740	55,482	25,179	114,332	796	2,266,812	3,986

Note :
1). Including production which uses raw materials from smallholder.
*). Preliminary figures.

Estates Area by Crops, Indonesia 1995 - 2006

2008-11-07T07:40:00.000-08:00

Estates Area by Crops, Indonesia 1995 - 2006* (000 Ha)

Year	Rubber	Oil Palm	Cocoa ¹⁾	Coffee ¹⁾	Tea ¹⁾	Cinchona ¹⁾	Sugarcane²⁾	Tobacco ²⁾
Year	Rubber	Oil Palm	Cocoa ¹⁾	Coffee ¹⁾	Tea ¹⁾	Cinchona ¹⁾	Sugarcane²⁾	Tobacco ²⁾
1995	471.9	992.4	125.4	49.3	81.0	4.6	496.9	9.1
1996	538.3	1,146.3	129.6	46.7	88.8	2.2	400.0	4.3
1997	557.9	2,109.1	146.3	61.8	89.3	2.3	378.1	4.5
1998	549.0	2,669.7	151.3	62.5	91.2	0.6	405.4	5.7
1999	545.0	2,860.8	154.6	63.2	91.6	1.3	391.1	5.2
2000	549.0	2,991.3	157.8	63.2	90.0	1.3	388.5	5.2
2001	506.6	3,152.4	158.6	62.5	83.3	1.2	393.9	5.3
2002	492.9	3,258.6	145.8	58.2	84.4	1.2	375.2	5.4
2003	517.6	3,429.2	145.7	57.4	83.3	3.3	340.3	5.2
2004	514.4	3,496.7	87.7	52.6	83.3	3.2	344.8	3.3
2005	512.4	3,592.0	85.9	52.9	81.7	3.1	381.8	4.8
2006*	513.2	3,682.9	86.1	53.2	79.9	3.1	384.0	4.7

Note :
1). Area for annual crops is the area planted at end of the year.
2). Area for seasonal crops is the monthly commulative harvested area.
*). Preliminary figures.

Government to audit forestry companies' wood stocks

2008-11-03T06:37:00.000-08:00

The Jakarta Post , Jakarta | Fri, 09/12/2008 10:51 AM | Headlines

Forestry companies will be required to have their wood stocks inspected from the very beginning of the purchasing chain, to help ensure the companies do not receive stocks from illegally felled timber.

Hadi Pasaribu, the Forestry Ministry's director general for the management of forestry production, said the ministry would appoint several independent assessor companies to verify the flow of the wood from upstream to downstream.

"The new verification system will involve all stakeholders, including NGOs," Hadi said.

The new system, dubbed the Wood Legality Verification System (SVLK), is expected to replace the current system run by the Forestry Industry Revitalization Agency (BRIK), which only inspects legal documents for the wood.

Under the proposed system, assessors will be deployed to conduct field checks on forests where the wood is logged.

Companies that use timber as a raw material are also required to report the origin of their wood supplies to the government for legal certification. Those failing to comply will risk being prosecuted or losing their operating licenses.

Taufik Alamin, Indonesian Ecolabeling Institute (LEI) executive director, said the new system was necessary because several importing countries, including Britain and Japan, required documents certifying the legality of the wood and the sustainability of the forests as the source of the wood.

LEI spokesperson Indra Setiadewi said the independent assessors would also function as watchdogs, legality verifiers, and license authorities.

Indonesia is on the losing side in a battle against illegal logging, despite an intense crackdown by authorities.

Widespread illegal logging stems from the huge gap between supply and demand, luring the poor and unemployed in remote areas in Kalimantan and Sumatra to plunder forests to meet orders from local and foreign tycoons.

Indonesia's timber demand this year is predicted to reach 30 million cubic meters, while the logging quota has already been set at 9.1 million cubic meters by the ministry.

According to the ministry, there are 324 logging permit holders, with the capacity to retrieve 22 million cubic meters of timber per year.

The Indonesian Forum of Environment (WALHI) claims more than 2.8 million hectares of woods are illegally logged each year.

Indonesia has the second-largest area of rainforest in the world after Brazil.

LEI and local NGOs have worked on the verification system for the past five years, since the Indonesian and British governments signed a memorandum of understanding in 2003 to tackle illegal logging.

Robianto Koestomo, Indonesian Wood Panel Association (Apkindo) chairman, argued the business sector did not need another verification system.

"It will only give us more bureaucracy and unnecessary additional costs," he said.

Taufik, however, said businesses did not have to worry about the new system because it would allow them to lodge their protests with a special institution. (KLP)

2008-11-03T06:23:00.000-08:00

Oil palm plantations in and around Tanjung Puting National Park in Kalimantan, Indonesian Borneo Satellite image courtesy of Google Earth. (click image to enlarge)

Why is oil palm replacing tropical rainforests?

2008-11-03T06:18:00.000-08:00

Recently much has been made about the conversion of Asia's biodiverse rainforests for oil-palm cultivation. Environmental organizations have warned that by eating foods that use palm oil as an ingredient, Western consumers are directly fueling the destruction of orangutan habitat and sensitive ecosystems.

So, why is it that oil-palm plantations now cover millions of hectares across Malaysia, Indonesia, and Thailand? Why has oil palm become the world's number one fruit crop, trouncing its nearest competitor, the humble banana?

Read more: Why is oil palm replacing tropical rainforests?
Why are biofuels fueling deforestation?
Rhett A. Butler, mongabay.com
April 25, 2006

The answer lies in the crop's unparalleled productivity. Simply put, oil palm is the most productive oil seed in the world. A single hectare of oil palm may yield 5,000 kilograms of crude oil, or nearly 6,000 liters of crude according to data from JourneytoForever. For comparison, soybeans and corn—crops often heralded as top biofuel sources—generate only 446 and 172 liters per hectare, respectively.

Indonesia: Palm Oil Production Prospects Continue to Grow

2008-11-03T05:43:00.000-08:00

A significant change in the oil palm industry has taken place during the past season, as Indonesia surpassed Malaysia in production of palm oil and is now the world leader. This designation will continue and Indonesia’s production rate will outpace Malaysia for the foreseeable future. Personnel from the USDA Foreign Agricultural Service (FAS) conducted crop-assessment travel in the main palm oil production regions of Sumatra and West Kalimantan during August and September. The team met with palm oil estate managers, agricultural officials, researchers, and independent commodity analysts. The plantation visits were targeted in the country’s most important producing provinces. Regular surveys of fruit bunches three months prior to harvest were indicative of an output surge in fresh fruit bunches. Assuming normal rainfall and based on bunch counts there will be a surge in production during the last quarter of 2007 and into early 2008. In contrast, drier than normal conditions at the beginning of the year marginally reduced output for about three months. Oil production for all major producing areas is favorable despite some dryness in early 2007. Indonesia is forecast to produce 18.3 million metric tons of palm oil in 2007/08.

Read more

Experts urge govt to counter allegations of carbon flux

2007-04-22T09:16:00.000-07:00

The Jakarta Post , Jakarta | Thu, 06/28/2007 10:21 AM

Experts recommended Wednesday that the country respond to the international community's allegations that Indonesia is the world's third largest carbon dioxide emitter due to the burning of peatland areas.

A recent calculation of emissions by the Netherlands-based Wetlands International and Delft Hydraulics has placed Indonesia behind only the United States and China. Indonesia has jumped to third place from 21st position in 2005.

""I don't know how they came to this conclusion. We have to be suspicious because we are suspected now. We have never calculated our own carbon emissions before,"" Bambang Setiadi, deputy head of research, science and technology development at the Research and Technology Ministry, told a seminar.

At the seminar, attended by peatland experts from universities, government organizations and NGOs, it is expected that strategies to advise policymakers in Indonesia and Malaysia on the restoration, rehabilitation and sustainable utilization of peatlands will be devised.

Bambang said Indonesia needs to prepare solid grounds on which to counter the new statistics, especially at the United Nations Framework Convention on Climate Change to be held in Bali in December this year.

Contradicting Bambang's presentation, Herwin Simbolon, a forest ecologist from the Indonesian Institute of Sciences (LIPI), said LIPI had been conducting research on peatland in Central Kalimantan for a decade, and calculated that the international count on the country's carbon flux was likely accurate.

""We may be debating methodology, but the most important thing is to look for the ways of solving the problem and not just prepare for defending ourselves in the international forum,"" he added.

Tropical peatland covers approximately 45 million hectares, 12 percent of global peatland. Indonesia, Malaysia and Vietnam contain nearly 70 percent of this resource. Indonesia, with 22 million ha, has around one half of all tropical peat.

Peatland in Southeast Asia is recognized as an important reservoir of biodiversity. It exhibits a range of important ecological and natural resource functions, including carbon storage.

Data from LIPI show that the carbon flux in Central Kalimantan has sharply increased since the conversion of one million ha of peatland into rice fields from 1995 to 1997, and especially with the construction of large canals throughout the area.

The project was part of former president Soeharto's plan to convert 1.4 million ha of peatland in the province into agricultural land. The project was later abandoned.

President Susilo Bambang Yudhoyono issued a decree on March 16 this year to expedite the rehabilitation of the converted peatland in Central Kalimantan. The project has been allocated around Rp 9 trillion (US$989 million) from the state budget.

Central Kalimantan Governor Agustin Teras Narang, who also spoke at the seminar, said the rehabilitation might not fully restore the self-regulatory mechanisms of water absorption on the peatland.

""This means that we have to close some canals that have caused the peatland to lose its natural function of absorbing water. This has caused floods in the rainy season and droughts in the dry season,"" Narang said. (02)