As of 1999, the three main agro-industrial plantation crops cultivated within the original administrative boundary of Kutai were oil palm (40 164 ha), rubber (33 935 ha) and coconut (20 109 ha) (Kalimantan Timur 1998a). Rubber and coconut are traditional crops and most of the estates were owned and managed by smallholders in 1998. In contrast, oil palm estates were a relatively new development, and all of the estates had been established by private companies since 1990 (ibid.). Within the original administrative boundary of Kutai, most oil palm development had occurred in Kutai Timur, followed by Kutai Barat and Kutai Kartanegara. All three regions had ambitious plans to develop the sector and many companies had already received location permits, especially in the districts of Kutai Timur and Kutai Barat. A considerable area of forest land designated for conversion (more than 600 000 ha) had also been released for oil palm development in the district of Kutai Timur. However, little forest land had been released in Kutai Barat or Kutai Kartanegara (Figure 4.3).

In Kutai Barat, there were only three estates in which oil palm had already been planted by 2000: PT London Sumatra International, PT London Sumatra Indonesia and PT Gelora Mahapala. All three of these estates fell under a company known as PT London Sumatra International Tbk (PT LonSum).^[7] PT LonSum had a significant presence in the district and was surrounded by conflict and controversy. The company had established plantations on land belonging to a number of Dayak Benuaq villages located in the Lake Jempang area (Figure 4.3), and it had been heavily criticised by grassroots organisations and NGOs for its alleged association with the 1997–98 forest fires and illegal land clearing; and for its oppressive action against local people (Muliastra et al. 1998; Gönner 1999; Ruwindrijarto et al. 2000; Wakker et al. 2000). Carrying substantial debts since the Asian financial crisis struck in mid-1997, the company’s finances have also attracted a lot of interest both nationally and internationally (EIA 1998; Wakker 1999; Wakker et al. 2000).

Source: Kalimantan Timur 1998a; unpublished statistics from the Kutai Kartanegara plantation office

At the beginning of 1998, LonSum management reacted to continuing adverse business conditions by deferring both the construction of a new oil palm mill in South Sumatra and planting activities in South Sumatra and East Kalimantan. In 1998, the company had only planted 99 ha on its new estates because the crisis had reduced the company’s internal liquidity. When fieldwork was conducted in the area, the company had stopped all planting operations due to a lack of funding. Community conflict in the area had eased as a consequence, but other elements of the community were suffering. Not only had some local people lost their land to oil palm, but they had also lost any employment opportunities previously being offered by the company. Many had also joined the company’s PLASMA scheme in which they had been promised two hectares of oil palm estate. By mid-2000, community members were just starting to realise that there was little chance of this scheme going ahead. Moreover, many of the oil palm trees had already started to bear fruit, but the company had no funds to establish a factory. The fruit was rotting on the ground or being fed to chickens as the nearest factory was in Pasir district, too far away to process oil palm fruit harvested from the LonSum sites.^[8]

Source: Map data from GTZ Sustainable Forest Management Project^[9]