A sawmill in Central Kalimantan, Indonesia, on 3 October 2013. Photo: Alex EllinghausenWhen Indiana Jones’ alter ego blew in to Indonesia last month, his celebrity pulling power ensured a rare audience with the President, Susilo Bambang Yudhoyono.
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Actor-turned-environmentalist Harrison Ford spent nine days in Indonesia shooting a documentary for US television. He then put to Dr Yudhoyono his horror at the devastation he had seen in Indonesia’s tropical forests. This is a country that, by some estimates, produces more carbon dioxide emissions than any country other than the US and China, the bulk of which come from destroying forest and peatland for timber and palm oil.

Even though the President promised Ford on camera to support one huge, 203,000-hectare forest preservation project, a month later the project is hanging by a thread. Forestry Minister Zulkifli Hasan has, apparently in defiance of his President, suddenly proposed to slash the area in half, threatening its viability.

The failure of the Katingan Peatland Restoration and Conservation Project would threaten Dr Yudhoyono’s international environmental legacy, which he has spent years burnishing at international and regional forums. It would also virtually prove that large-scale forest preservation projects of this kind are impossible to push through Indonesia’s bureaucracy, and the country with some of the world’s largest remaining tropical forests must find another way to stop their destruction.

The Katingan area lies in Central Kalimantan, a province in the Indonesian portion of the island of Borneo. Much of its 203,000 hectares is peatland. Inside the forest it is virtually impossible to walk – you can sink waist deep into organic matter accumulated over thousands of years. The peat is permanently wet and does not decompose, but once drained and burned, it begins to decay, releasing its rich store of carbon into the atmosphere. About 4000 orang-utans – about 7 per cent of the global population – live there, and the forest floor is on average 10 metres deep in organic material.

But the surrounding forest and peatland has been ravaged since the 1970s by successive waves of logging and industrial agriculture.

It is this kind of activity that Dr Yudhoyono has vowed to stop in the name of combating climate change. He has boasted of Indonesia’s ”pioneering role in harnessing forestry to the global effort to address climate change” and has dedicated his presidency ”to deliver enduring results”.

On the ground, though, his words have had little effect. Flying into the river-port town of Sampit, there are hundreds of thousands of hectares covered by palm-oil plantations, and smoke billowing from land being freshly burned to prepare for plantings.

Navigating from the village of Terantang into the Katingan forest by way of canals flowing with red-brown water, kilometre-long rows of logs tied together line the waterway as they float downstream.

Local villagers earn a pittance for cutting these trees down – about 25,000 rupiah ($2.50) per log. It’s illegal, but some find the income irresistible. Dotted along the banks are makeshift sawmills.

Reza Lubis, an ecologist from non-governmental organisation Wetlands, says the loggers act as the advance guard for other land users, who then claim the land under a form of native title and begin to farm it. Villagers clear the logged-over land by burning, using the ash as fertiliser, and dig canals to drain the peat swamp of water.

”This was all forest in the 1970s,” says Yusran, our boat driver, as we power through a blasted and smoking landscape. ”As the population grows, people clear more and more.”

Big industrial companies follow, bringing destruction on a much larger scale, using bulldozers and heavy equipment. Mr Reza says one palm oil conglomerate had already been sniffing around Terantang asking to buy people’s land to consolidate into a plantation. The villagers refused to negotiate. They say they fear the consequences of industrial plantations in the area, and do not want to be employees.

One man determined to offer a different model is Dharsono Hartono, the president director of a company called P.T. Rimba Makmur Utama. His plan to halt the destruction is called a reducing emissions from deforestation and degradation, or REDD, scheme.

Mr Dharsono began the application five years ago and has spent millions already to bring his ecosystem restoration licence to the desk of the Forestry Minister.

If Mr Zulkifli approves it, the remaining forest can start generating carbon credits to sell on the world carbon market. Mr Dharsono expects to prevent 3 million to 7 million tonnes of carbon dioxide per year being emitted.

In return he proposes to help diversify the village economy and protect the locals’ rights, establishing a rattan manufacturing scheme and ecotourism, provide microfinance and agroforestry.

The idea has the support of local communities and the provincial governor, Agustin Teras Narang.

REDD is a deeply problematic concept, not least because of the absence of a viable global carbon market, but it is exactly the kind of project Dr Yudhoyono says Indonesia needs to meet his ambitious emissions-reduction target of 41 per cent by 2020.

The Katingan project is perhaps the last best chance for a commercial scheme in Indonesia. It is the country’s biggest by far, and Mr Dharsono – Indonesian-born, Cornell University-educated and a 10-year veteran of US merchant banking – could not be a better proponent. He has also vowed to do it without bribery or corruption. A year ago the Forestry Ministry declared Mr Dharsono’s company had met all criteria, but since then, Mr Zulkifli has without explanation failed to sign the restoration licence.

Now, suddenly, he has proposed the project’s area be cut in half, saying he worries about the proponent’s ability to ”manage” the full area. Mr Reza said that cut would render it unviable because both sides of the area are ”the same ecosystem”.

The 100,000 hectares the minister is proposing to lop off is also on the side near where many of the local villagers live.

It’s not the first time Mr Zulkifli has intervened to gut a REDD project. Indonesia’s only approved scheme so far, Rimba Raya, suffered agonising delays on his desk and was ultimately cut to a fraction of its original size.

Mr Dharsono says the success or failure of his project will tell whether Indonesia’s President is serious about the environment or is simply making rhetorical flourishes on the world stage.

”If we fail to get this, we’ll never reach the tipping point of making the argument of REDD or sustainability work,” he says.

Terantang villager Desmon believes in REDD, saying the project will have an effect for ”three generations from today”.

But the strain of waiting is showing. ”If the project fails, the people here … will be shocked,” he said. ”I think the people’s trust in government is decreasing.”

The original release of this article first appeared on the website of Shanghai Night Net.Read More →

blue skiesAustralia may be the lucky country. But following the mining boom, NSW is poised to be the luckier state.
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NSW is set to gain a disproportionate share in the next phase of Asia’s economic boom because of its strength in five super-growth sectors forecast to be worth an extra $250 billion to the national economy over the next 20 years.

A report by Deloitte Access Economics says Asia’s impact on Australia is changing in ways that play to NSW’s economic strengths. Five key sectors – tourism, international education, wealth management, gas and agribusiness – are forecast to grow more than 10 per cent more quickly than the global economy over the next 20 years. Each of these sectors is bigger in NSW than in any other state or territory, making the next phase of the Asia boom a perfect fit for the premier state. NSW is “ready for take off”, Deloitte Access Economics says.

State and federal governments face thorny policy challenges in at least two of the sectors identified in the report – gas and agribusiness. While NSW has significant gas reserves, there is considerable community opposition to the use of new extraction techniques. Opposition to the foreign ownership of farming land could also hamper the big investments needed if Australia is to make the most of Asian demand for its agricultural products and farming know-how.

For Australia as a whole, the five super-growth sectors could be collectively as big as the mining boom which has re-shaped the Australian economy in the past decade. But for NSW the five sectors outweigh mining by a factor of 2½.

“The next boom will be much better distributed than the last one and it is going to be in sectors where NSW has an absolute advantage,” said the report’s co-author, Chris Richardson.

But he warns this economic windfall is not inevitable.

“This won’t just fall into our lap,” he said. “We’ve still got a lot of heavy lifting to do if we are to actually cash in on the potential.”

A lot will depend on how Australian companies respond to new opportunities in Asian markets.

“Although government policies can help, success or failure lies more in the aggregate actions of the business world,” says the report, Positioning for Prosperity? Catching the Next Wave.

For much of the past decade Asian demand for raw materials has boosted investment and jobs growth in the mineral-rich states of Western Australia and Queensland more than other states. The mining boom also helped push up interest rates and the value of the Australian dollar. Higher interest rates weighed on the NSW economy – with its big finance sector and heavily indebted households – more than other states. The high dollar also hampered key NSW exporters such as tourism operators, manufacturers and the higher education sector.

But the Deloitte report says the strong presence in the NSW economy of all five super-growth sectors positions the state “for future prosperity”.

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It is easy to forget that before the sharemarket began to build up a head of steam over the past few weeks fund managers were forced to actively trade around takeover offers in a bid to generate returns in tough market conditions.
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And as the largest – and longest-running – bid on the table, GrainCorp has attracted its share of arbitrage attention.

It was nearly 12 months ago that US grain trader Archer Daniels Midland lobbed its first bid for the company, taking advantage of a soft share price after a $159 million rights issue to get a 15 per cent stake in the company.

Initially offering $11.75 a share, that was sweetened to $13.20, including dividends, valuing the target at $2.3 billion. And from this month, shareholders will begin receiving a 3.5¢-a-share monthly dividend until the deal wins regulatory approval.

So, not surprisingly, a big portion of GrainCorp’s shares is now held by arbitrageurs. As a result, Treasurer Joe Hockey’s surprise decision late on Friday to extend the deadline for a decision on whether to block the takeover on national-interest grounds generated a significant level of anxiety among at least one class of investor.

After Prime Minister Tony Abbott at his first news conference slapped down the rank populism of some in the National Party by saying a Coalition government would not block foreign investments, approval of the ADM bid for GrainCorp was thought to be a foregone conclusion.

Now an extension to mid-December might well push back the deal, and winning all government approvals, into the new year, since the bid also needs to win clearance from China’s Ministry of Commerce.

Already foreign governments such as the European Commission, Japan and Korea have waved the deal through and, given GrainCorp’s limited direct presence in China, this is expected to be a formality.

Most in the market expect Beijing to wait until the Australian government delivers its verdict before it responds. Hence the prospect for a further prolonged delay.

For arbitrageurs, the extension by Canberra was all the reason some needed to exit the shares on Monday, pushing the stock down another notch to $12.15. It is already trading well below the April highs of about $12.80 when the revised offer from ADM won acceptance from the GrainCorp board.

And vested interests opposing the deal are expected to take full advantage of the extra time the deal is on the table to push their barrow, which might test further the resolve of some of the arbitrageurs.

Farmer lobby groups are especially touchy about the extent of GrainCorp’s resources – in particular its port assets, a fact that is well recognised already since they are regulated by the competition watchdog, the Australian Competition and Consumer Commission, to ensure there is open and fair access.

The natural response of some in financial markets is that ”time is money”, especially given the pipeline of new floats in the offing, with investors keen to recycle capital to take advantage of continuing investment opportunities. This might keep downside pressure on GrainCorp stock for a while yet.

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Australia’s $1.6 trillion superannuation system has been ranked as the third best in the world, although it emerged with strong marks around integrity, according to a report looking into the retirement income systems of 20 countries.
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Australia was beaten by the retirement savings system in the Netherlands and Denmark, and its super system was described as having a ”sound structure, with many good features, but has some areas for improvement”.

According to the Melbourne Mercer Global Pension Index, Australia’s improved score – of 77.8 points, up from 75.7 in 2012 – was ”primarily caused by the introduction of the Stronger Super reforms leading to improved governance and stronger regulation”.

The Stronger Super reforms included requiring super funds to offer a low-cost, default fund for disengaged members.

The report – completed by financial services firm Mercer and the Australian Centre for Financial Studies – said Australia could boost its score by requiring that part of the retirement benefit must be taken as an income stream.

It also recommended increasing the labour force participation rate among older workers, boosting the pension age as life expectancy increases, aligning superannuation access age with the pension age, and removing legislative barriers to encourage more effective retirement income products.

Mercer senior partner David Knox said the ageing population meant Australians needed to change their attitudes towards retirement and that businesses needed to develop more flexible workplaces to take advantage of older workers’ skills.

The report, funded by the Victorian government, concluded the global shift from defined benefit pension schemes necessitated a focus on provision of retirement income, rather than wealth accumulation.

The UK’s super system was ranked ninth while the US came in at 11.

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In Arthur Miller’s classic play The Crucible, about the Salem witch trials in early North America, protagonist John Proctor willingly walks to the gallows rather than sign his name to a crime he knew he did not commit, implicating others and ruining his good name.
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Miller was, of course, using the hysteria about imagined witchcraft in Massachusetts in the late 17th century as an allegory to comment on the McCarthy trials of the 1950s. Either way, the lessons were the same.

CSL has chosen a different path to that of John Proctor, and although it is not facing a similar fate at the end of the hangman’s noose, it has decided to give $US64 million ($68 million) to a handful of hospitals that, instead of witches, saw a grand conspiracy by the company to defraud its customers through price fixing.

After four years of fighting CSL has given in, and given up any chance to clear its name and prove its innocence in the full public gaze of the US court system.

John Proctor never had shareholders, customers and a multibillion-dollar global plasma business to run; that CSL does seems to have finally won over the company’s management and board to pay off the plaintiffs – no matter how distasteful it might be.

CSL lawyers believed a trial would have cost $20 million, although this is pretty small beer compared with annual revenue of more than $5 billion. It seems CSL did not fancy its chances in a jury trial. But if juries can sit on cases as complex as Enron, why not on a case about cartels? We will never know now.

The plaintiffs lined up against CSL never found a ”smoking gun” that would have proved their case. However, sometimes a little bit of hysteria can go a long way. Just look at the graves in Salem.

The original release of this article first appeared on the website of Shanghai Night Net.Read More →