- Indonesian prosecutors have charged three palm oil giants with corruption relating to a cooking oil shortage across the country last year.
- Permata Hijau, Wilmar International and Musim Mas are alleged to have benefited from the criminal actions of their executives, who were convicted earlier this year in the same case.
- The executives were found to have bribed a top trade ministry official to issue the companies with permits to export their palm oil for a high price rather than sell it domestically at a capped rate.
- Industry watchdogs have welcomed efforts to prosecute the companies, but say these must be accompanied by an overhaul of the industry in general.
JAKARTA — Indonesian prosecutors have charged three major palm oil companies in connection with a cooking oil shortage that rocked the world’s top producer of palm oil.
The Attorney General’s Office announced June 15 that it had charged the companies — the Permata Hijau Group, Wilmar Nabati Indonesia, and Musim Mas — with corruption. All three companies are major players in the industry. Indonesia’s Permata Hijau Group is one of the top 10 palm oil processors and traders in the country; Wilmar Nabati Indonesia is the arm of Singapore-based Wilmar International, the world’s largest palm oil trader; and Musim Mas, also based in Singapore, owns one of the largest palm oil refinery networks in the world.
The scandal broke out last year, when executives from the three companies were arrested for conspiring with a top trade ministry official to secure export permits for the firms. The permits allowed the three companies to skirt their obligations to allocate a quota of cooking oil for the domestic market.
The quota obligation was imposed by the government to make sure that the country had enough cooking oil amid an acute shortage that lasted for months in early 2022. The scarcity prompted widespread complaints from the public, who questioned why Indonesia, which produces more than half of the world’s crude palm oil (CPO), the most widely used vegetable oil for cooking oil, was running short on domestic supplies.
The government also imposed a domestic price obligation, or DPO, which capped the selling price of CPO.
With the permits, the companies continued to sell their CPO abroad, where palm oil prices were higher than the DPO at home.
The palm oil executives and the ministry official were convicted and jailed early this year, and prosecutors are now turning to the companies that benefited from the shortage.
Ketut Sumedana, a spokesman for the AGO, said in a statement that the judges in the trial of the executives had ruled that their actions represented their respective companies and were not isolated incidents.
“Therefore, the companies have to take responsibility for paying back the state losses caused by the crime,” Sumedana said.
Prosecutors previously calculated the state losses from the companies’ subversion of the domestic market obligation and domestic price obligation at 6.47 trillion rupiah ($432 million).
Responding to the prosecutors’ announcement, Wilmar said no official charges had been made against any of the companies in its group.
“[A]nd what we are aware of is merely the press reports on statements issued by the Indonesian Attorney General’s Office,” a Wilmar spokesperson told Mongabay. “We are seeking more details of the alleged charges and will issue a statement at the appropriate time if we have in fact been charged as alleged.”
Musim Mas, meanwhile, told Mongabay that that it “respects the legal proceedings currently in progress, and cooperates with the authorities.”
Permata Hijau did not respond to Mongabay’s requests for comment by the time this story was published.
The three executives jailed in the case are Master Parulian Tumanggor, a board member at Wilmar Nabati Indonesia; Pierre Togar Sitanggang, general manager at Musim Mas; and Stanley M.A., senior manager of corporate affairs at Permata Hijau Group. Also jailed were Lin Che Wei, founder of economic policy think tank Independent Research & Advisory Indonesia, and Indrasari Wisnu Wardhana, director-general of foreign trade at the Ministry of Trade, who the court ruled had issued the export permits in exchange for bribes.
They were sentenced in January to between one and three years in prison for their roles in the case, prompting prosecutors to appeal for harsher punishment. A higher court in May sided with the prosecutors, extending the sentences to between five to eight years.
Wilmar has also been fined by Indonesia’s anticompetition watchdog, the KPPU, for restricting sales of cooking oil during the shortage. The KPPU launched an investigation into 27 cooking oil producers amid claims of cartel-like practices by the palm oil industry last year. It concluded that seven of the companies were guilty of restricting distribution of their branded cooking oils after the government imposed the retail price cap in early 2022.
The companies intentionally hoarded their cooking oil rather than sell at a steep discount, the KPPU said.
Among the companies found guilty are two subsidiaries of Wilmar. Other companies on the list are a subsidiary of Indonesia’s largest food company, Indofood Group and a unit of Apical, the palm oil arm of another commodities giant, Royal Golden Eagle.
Achmad Surambo, executive director of palm oil industry watchdog group Sawit Watch, welcomed prosecutors’ decision to go after not just the individuals involved in the scandal, but also the companies that benefited from their actions.
However, he said law enforcement needs to be complemented with other actions to resolve the irregularities and accountability issues plaguing the palm oil industry in Indonesia.
Achmad noted initiatives by the government to improve the management of the country’s palm oil industry, including a recent audit. That initiative aimed to scrutinize all aspects of palm oil companies, including their permits, production and concession size. It found that there are still problems that could lead to state losses, such as holders of 9 million hectares (22 million acres) of concessions — an area three times the size of Belgium — not paying their taxes.
In April, President Joko Widodo established a task force to follow up on the findings of the audit.
Achmad said the enforcement being carried out by prosecutors should be integrated into the work of the presidential task force so that the root causes of the issues plaguing the industry can be addressed.
“There’s still lots of work to be done in many aspects, such as permits, accountability and transparency,” he told Mongabay. “The government should determine what indicators to use for the improvement. For example, the issue of non-tax payments. When will this be solved? The government should not only let us know about the issues [but also the actions taken and the outcomes]. This is something that we never had.”
Banner image: Yuliana and Singapue, workers in an oil palm plantation in Kalimantan. Image by Cooke Vieira/CIFOR via Flickr (CC BY-NC-ND 2.0).
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