VZCZCXRO0327
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #2740/01 2710008
ZNR UUUUU ZZH
R 280008Z SEP 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 6477
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHKO/AMEMBASSY TOKYO 0873
RUEHBY/AMEMBASSY CANBERRA 1271
RUEHWL/AMEMBASSY WELLINGTON 1821
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHRC/USDA FAS WASHDC

UNCLAS SECTION 01 OF 02 JAKARTA 002740 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR A/S HILL AND EAP/MTS 
TREASURY FOR IA-BAUKOL 
SINGAPORE FOR BAKER 
DEPT PASS USTR FOR DBHATIA AND DKATZ 
COMMERCE FOR 4430/GOLIKE 
ENERGY FOR A/S HARBERT, CUTLER AND GILLESPIE 
 
E.O. 12598: N/A 
TAGS: ECON PGOV EINV SENV ID
SUBJECT: U/S Jeffery Visits Sumatra 
 
¶1. (SBU) Summary.  During a September 12 visit to Sumatra, U/S 
Jeffery visited the Palm Oil Research Center and toured its model 
biofuel production facility.  He also met with the Governor of North 
Sumatra Rudolf Pardede and his economic team.  He took an aerial 
survey of plantations and the Leuser ecosystem area, and discussed 
Sumatra's important biodiversity and sustainable development 
practices with non-governmental organizations.  End Summary. 
 
Palm Oil Abundant in Sumatra 
---------------------------- 
 
¶2. (U) During his September 12 visit to Sumatra, U/S Jeffery 
reviewed the challenges in the important biodiversity area of the 
Leuser Ecosystem with Consul General Sean Stein.  Stein noted that 
two years ago there was 1.2 million hectares of oil palm estates in 
North Sumatra alone. Because of record palm oil (CPO) prices, 
however, the amount of oil palm under cultivation has increased 
rapidly to approximately 1.6 million hectares over the last two 
years. Riau, Jambi, and South Sumatra provinces have seen similar 
increases as well. 
 
¶3. (U) The sky-high CPO prices which have driven producers to plant 
more oil palm have, in the near term, made bio-diesel production 
economically unfeasible. Stein said that industry insiders tell him 
that two conditions are needed for biofuels to be financially 
viable: high oil prices combined with rock bottom feedstock prices. 
At the present time, however, international oil prices are nowhere 
near high enough to for biodiesel production to take off. In the 
current environment, many producers, Stein added, have shelved plans 
to build biodiesel plants of their own. 
 
¶4. (U) In the medium term, biodiesel's prospects are less clear. 
New oil palm plantations take 3.5 years to begin producing oil.  As 
million of hectares of new oil palm comes on line, the downward 
pressure on prices may be enough to shift the economics back toward 
biodiesel production. 
 
¶5. (U) At the Indonesian Oil Palm Research Institute, U/S Jeffery 
was told that CPO contributed about 1.5% to GDP in 2004 and 
comprises 60% of Indonesia's estate crop, creating jobs for 4.8 
million families.  Sumatra is the best location for oil palm trees 
and most CPO is exported.  Palm oil is not a native to Indonesia. 
The seeds were imported from Africa in 1848.  Mike Griffiths, 
Coordinator for Conservation and Rehabilitation at the Regional 
Agency for the Leuser Ecosystem noted that palm plantations do not 
bring high quality jobs, but rather minimum wage manual labor. 
 
Palm Oil and Conservation: 
Finding the Balance 
-------------------------- 
 
¶6. (SBU) The Roundtable for Sustainable Palm Oil (RSPO) is an 
initiative bringing together palm oil producers, buyers, and the NGO 
community to discuss ways of minimizing the industry's negative 
impact on the environment. Only three of Indonesia's major palm oil 
producers are actively taking steps to implement's RSPO's vision for 
sustainable palm oil. Each of those companies has significant 
American or European ownership.  Among the steps these firms are 
taking is limiting plantations areas to no more than a fixed percent 
of any ecosystem, not planting on hillsides or river banks, and 
processing waste and effluents responsibly.  These companies also 
put in wildlife corridors for Sumatra's important species, including 
the Sumatran tiger, rhino, rare birds, the Sumatran orangutan and 
many others. 
 
¶7. (U) The Roundtable for Sustainable Palm Oil has made the ethics 
standards for CPO so high, that only the large companies can comply. 
 The Roundtable requires that no high value conservation forest be 
cleared and that indigenous peoples have informed consent before any 
palm plantations are developed. Lowland and peat forests and swamps 
are among the areas most at risk. 
 
¶8. (U) Dr. Ian Singleton, Director of Conservation at the Sumatran 
Orangutan Conservation Programme, notes that Southeast Asia has two 
thirds of the world's peatlands and Indonesia has 56% of Southeast 
Asia's. ASEAN is developing a strategy for peatland management. 
However, Sumatra's lowland and peat forests are already almost gone, 
 
JAKARTA 00002740  002 OF 002 
 
 
and the existing peat swamps - home to the largest remaining groups 
of Sumatran orangutan - are threatened.  About 7300 orangutans in 
Sumatra remain in eleven populations which require urgent 
protection. 
 
¶9. (U) Dr. Singleton's facility, like others in Sumatra and 
Kalimantan, rescues orangutan who have been injured or captured and 
prepares them to return to the wild. Their "patients" are almost all 
refugees from lost habitat.  Of the other animals they treat and 
return to the wild, the majority were captured and kept as pets, 
usually by members of the military or police, which are supposed to 
be preventing wildlife trafficking. 
 
Meeting with North Sumatra Governor Pardede 
------------------------------------------- 
 
¶10. (SBU) Governor Rudolf Pardede and his economic team welcomed U/S 
Jeffery, noting that North Sumatra is a diverse province of 12.5 
million population comprises of eight ethnic groups following 
multiple religions: 60% Muslim, 35% Christian and 5% other 
religions.  Palm plantations bring $2.5 billion in revenue per year 
and the province's GDP growth rates, at 9%, was higher than the 
national rate.  The Governor noted that 85% of credit in the 
province goes to corporations.  North Sumatra attracts a lot of 
investors, getting the fifth highest rating for investment climate 
in the country this year.  However, the lack of electricity is a 
serious problem and another 1,000 megawatts capacity is needed to 
promote growth.  Noting the growth in the plantation sector, the 
Governor seeks to increase productivity per hectare rather than 
expanding overall land use. 
 
¶11. (U) U/S Jeffery cleared this cable. 
 
HUME