GAMA Plantation Faces Legal Risks from Peat Fires


September 11, 2018

Foresthints.news reports that, on August 25-26, the Indonesian Environment and Forestry Ministry sealed four of the five palm oil concessions owned by GAMA Plantation in West Kalimantan’s Kubu Raya regency — PT SUM, PT PLD, PT AAN, and PT RJP. Foresthints says that law enforcement acted due to continuing peat fires on these concessions.

This sealing is occurring against the backdrop of multiple events happening with GAMA, one of the largest palm oil groups in Indonesia with 27 plantations and a landbank with likely more than 400,000 hectares. During 2014-2018, GAMA cleared forests and peatland in both Papua and West-Kalimantan. In June 2018, a Greenpeace report looked at selected estates of GAMA, noting that 21,500 ha of forest and peatland clearing has occurred since December 2013. The report referred to the Sitorus family’s involvement in Indonesian operations of both GAMA and Wilmar. NDPE-leader Wilmar spun off its problematic plantations to non-NDPE GAMA to avoid outside pressure.

Following the Greenpeace report, Chain Reaction Research released its study “Shadow Companies Present Palm Oil Investor Risks and Undermine NDPE Efforts.” One of the six cases of companies weakening NDPE undertakings in the report focused on the GAMA Group. The case showed that GAMA, short for GAnda and MArtua, is a conglomerate of companies owned by members of the Sitorus family. Its structure of ownership is opaque, the study highlighted, with shares in plantation companies held through multiple entities. These entities are owned by family members and sometimes registered offshore. Changes in ownership and directorship appear to occur with some frequency.

Wilmar reacted quickly to the Greenpeace report by immediately halting sourcing from GAMA. A few days after that decision, Wilmar announced the resignation of Martua Sitorus as non-executive director. Sitorus was co-founder of Wilmar and is involved in the GAMA Group. His brother-in-law Henri Saksti resigned as Wilmar’s country head in Indonesia.

Purchasers with no NDPE policy may still source GAMA’s palm oil. At the same time, the company may also be continuing its commercial relationships with large downstream Fast-Moving Consumer Goods (FMCG) groups such as Unilever, Colgate, Nestlé, Reckitt-Benckiser, P&G, Mars, General Mills and PepsiCo — although several indirect relationships might have ended after Wilmar halted sourcing from GAMA. GAMA also has currently, or had, commercial relations with large NDPE refiners and traders, including ADM, IOI, Cargill, Olam, AAK, Sime Darby. Some of them, such as Musim Mas and Wilmar, have already taken action. The FMCG groups could face reputation risk as a result of sourcing from GAMA, prompting their financers to engage with the companies. GAMA itself is contending with increasing business risks from loss of revenue and stranded assets, and there is a lack of transparency in GAMA’s structure and financing. However, it is very likely the company has loans from Indonesian banks. This creates financial risks for these banks as they could experience substantial losses on this large plantation group.

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