“China’s palm oil business in Indonesia: Socio-environmental challenges”, January 20, 2023

On 8 March 2022, dozens of Indonesian contract farmers gathered in front of the local parliament building at Sintang, West Kalimantan, to protest against three palm oil companies. These contract farmers, also known as “plasma smallholders”, work under a scheme with a company that sends field workers to plant on the farmers’ land in return for part of the harvest.

Along with two Indonesian companies, the Chinese company PT Julong Group Indonesia was accused of disbursing a concession fee that the contract farmers claimed to be too low and not reflective of the rising price of palm fruit. Julong was also accused of land grabbing – taking over local land illegally for palm oil cultivation.

In response, the leader of the local parliament visited the land under dispute, along with hundreds of contract farmers, but Julong was absent. To press for a response, the protesters besieged the company’s office, which further escalated to blocking the road to the company’s complex. The conflict lasted for 12 days and ended only after the local parliamentarians held closed-door mediation.

This series of events form the largest protests against Julong in recent years. Despite the company’s presence in Indonesia for more than a decade, Julong often still struggles with community discord over its sustainability practices. This is in sharp contrast to how Julong is presented by Chinese sources as a role model among China’s “going-out” enterprises (companies which invest in foreign nations).

Challenges for ‘going-out’ enterprises and the palm oil sector

At the macro level, despite the socio-environmental concerns around Indonesia’s palm oil industry, China’s presence has been strategic and welcomed by both sides. In this context, Julong’s entry to Indonesia has received high-level government recognition and the company has been portrayed as particularly laudable among China’s “going out” enterprises, especially for providing employment and improving infrastructure.The greatest criticism of Julong has come from international NGOs, targeting the company’s poor performance in forest protection and fire control, and lack of transparency. At a local level, Julong’s profit sharing with plasma smallholders and CSR efforts have been the focus point of disputes in Sintang. While plasma smallholders and some local parliamentarians have voiced concern about what they see as a lack of CSR, there are loose legal requirements on companies such as Julong in terms of CSR, despite the high needs and expectations of locals. On the other hand, Julong’s CSR efforts have received recognition from the local government, particularly for helping out in disasters.

The contrasting viewpoints on Julong’s operations in Indonesia are rooted in vastly different priorities and interpretations across stakeholders. The socio-environmental challenges are thus deeply political.

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The critical challenge for Julong has been to learn how to directly interact with the various stakeholders in a foreign context with limited experience, since the Chinese government assumes a very assertive role. The company has clearly recognised this challenge and in response has established an “environment division“, a public relations department responsible for communicating with various stakeholders. However, from the recent conflict and Julong’s rather passive response at the Sintang site, it seems there is still a long way to go for the company to effectively negotiate with various local stakeholders, not only the government.

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