Investing in Papua New Guinea

Oil Palm Cultivation in Papua New Guinea

Amitabha Guha

ARABIS.

Papua New Guinea is a country rich in minerals, petroleum, fisheries, forestry and agriculture.

It is located in the wet humid tropics, and has long mountain ranges, upland valleys, lowland plains, swamps, rivers and many large islands.

The country’s natural resources can raise the income of its approximately 4.5 million population spread over an area of 462,840 sq. km (46.284 million Ha) or about 10 persons/sq. km.

About 30% of the area is considered suitable for major agricultural development. Of this area, about one quarter is currently being cultivated or used for agriculture, and another quarter is used at lower intensity. Thus less than half the arable land is being used. Above 80% of the country's land area remains under forest cover, ranging from swampland to alpine. Logging is feasible in about 40% 0f the forest area, with an estimated 50,000 ha being logged annually. Large sections of this sparsely populated country have very poor infrastructure and air and sea transport are the main means of moving people and goods within the country.

Geographically, PNG comprises the mainland and islands:-

• The Papuan Mainland provinces includes: Central, Northern, Oro, Milne Bay provinces, Gulf, Western province and others (Morobe, Madang, Sepik, Highlands etc.). The Papuan mainland comprises the area eastward from the Irian Jaya (Indonesian Papua) border to the Milne Bay area, and is divided by the Owen Stanley Ranges with a peak elevation of 4,793 m at Mt. Wilhelm.
• The New Guinean Island provinces include: New Britain, New Ireland and N. Solomon / Bougainville.

Oil Palm in PNG

Oil Palm is the country’s largest agricultural foreign exchange earner, ahead of the long-standing PNG cash crop, coffee.

There are five major established oil palm projects in PNG, situated in the Island provinces of West New Britain (2 schemes) and New Ireland; and also in Northern/Oro and Milne Bay provinces on the Papuan mainland.

These plantations are on the coastal areas of these provinces, which are good sites for oil palm cultivation.

The New Britain and New Ireland provinces have a desirable rainfall pattern and fertile volcanic soils. ARABIS was involved in the late 1960’s and 1970’s in site selection and establishing New Britain Palm Oil Limited’s – NBPOL (which started as a project of Harrisons & Crossfield of the UK) and also the Hargy Oil Palm projects at Bialla for Sipef N.V. of Belgium. In the late 1990’s, Kulim Group (Malaysia) purchased controlling interest in NBPOL.

The Commonwealth Development Corp. (CDC), UK schemes / projects - Higaturu Oil Palm in Popondetta (Northern/Oro province) and Milne Bay Estates in Alotau (Milne Bay province) - also enjoy good rainfall although at Milne Bay the soils are not as good. The New Ireland oil palm scheme also enjoys favourable rainfall and fertile volcanic soils.

Note: In 2005, CDC sold its interest in plantations in PNG and Indonesia to Cargill Inc (USA) and Temasek Corp. (Singapore). Later in 2010, NBPOL acquired these plantations to become the dominant oil palm plantation group in the country.

Very favourable rainfall for oil palm cultivation can also be found in the Gulf province (in the Kerema – Kikori area), although no large oil palm projects have yet been established in this province. Ramu Sugar has planted sugar cane in Madang where the rainfall is lower. However oil palm was planted here in the early 2000’s when the protected sugar market was opened up and it has more recently been acquired by NBPOL who have built a palm oil mill.

All the above oil palm schemes were developed as Nucleus Estate Schemes (or a variant) due to PNG’s Customary Land Tenure system.

 Oil Palm Area and Production in PNG (in 2006).

1  Companies own the mills and ‘Plantation’. Ramu (Morobe Province) was not yet producing in 2006. NBPOL has a refinery at Kimbe, WNBP.

2  CTP Holdings, formerly Pacrim, and before that, CDC. Now as of 2010, under NBPOL.

Land Tenure & Ownership in PNG 

The system of customary land tenure in PNG makes it inappropriate to follow an agricultural development model based on individual land ownership rights. Till today, 97% of the all lands are held under customary tenure. Rights to ownership to land produce and property can be classified at several levels, which means that there is hierarchy of rights relating to any piece of land under customary tenure.

Owing to such diverse interest groups and hierarchy of rights, often consensus or agreement is prevented when giving rights to others to use or own land.  Disagreements between diverse interest groups within a hierarchy of rights can cause frustrations and can lead to prolonged land disputes or an all out war between disputing parties.

Land in the PNG context is considered to be a very valuable and important asset.  It plays a vital role in the social, economic and political life of the people.  Owing to its importance and value held by everyone, land becomes difficult for individual ownership.  Land ownership in the area is based on a 'clan system', whereby the land is usually owned by a group of persons or families who make up the clan.  Every clan has its own piece of land with its own landmarks defining its boundaries.  However, people are usually allowed to garden, hunt, fish and collect materials such as firewood and other forest resources.

Everyone in the clan has rights to the use of the land.  Any individual clan member is allowed to garden, hunt, fish and collect raw material from the land.  Any activity that is of "business" in nature is subject to general consent of the whole clan.  The performance of non-sanctioned activity on the traditionally-owned clan land is not allowed in the area.  Cultivation and planting of permanent tree crops such as betel nut, sago and coconut are usually discouraged on land other than one's own.  Such plants are considered to be permanent because they have the potential to cause disputes over land in the future.

Land tenure and ownership are based upon patrimony. Any person who is born into the clan has a right to inherit or succeed to any piece of land that is left by their fathers when they die.  Land is normally inherited by the male and sometimes a female member assumes responsibility as custodians who can pass title of the land to her offspring.

Amongst the various tribal and cultural groups there are often males of individual families who own definite territories where sago patches are found, garden produce are planted, and coconut groves exist.  Ownership of land in many cases is said to be clear. A man who owns land where sago palms and gardens exist, invariably owns the land through inheritance from his father or a male member.  Any tree produce is shared by members of the family and valuables and property are jointly owned or passed down from father to son, or through the male line. Rights to land and property are usually but not always clearly defined among the various neighbouring tribal and cultural groups.

Dispute settlements pertaining to annexation of land can take two forms. In the past, land disputes between different landowning groups were settled through warfare or payback killings. Thus groups which proclaimed victory usually owned the land under dispute. Nowadays however, most land disputes are settled through mediation and cash compensation.  This is achieved either through the court of law or by mediation by land courts.

As such, in PNG almost all lands are customary (tribal) lands and as a result, negotiations with landowners for use of their lands for plantation development are often complicated. (This is also relevant in Indonesian Papua). The issue is complex because customary land may have several overlapping claims, and identifying the correct landowners is important, and often difficult. Understanding the cultural implications of customary land is essential.

This section attempts to summarize the attitude to land that prevails in Papua New Guinea. In doing so, it may be possible to achieve an understanding of PNG’s customary based land tenure system that will minimize potential conflict when such lands are used for agricultural development.

Customary land tenure in PNG reflects the culture of the country.

The Principles of Customary Land Tenure in PNG include:-

• The land law systems are derived from social systems which reflect constant rearrangement of power, authority and land tenure.
• Multiple kinds of tenure reflect the various benefits land provides the tribal / indigenous inhabitants - and the uses made of it. Land tenure is thus not absolute in this system.
• The relationships between groups influence the assertion of land rights and its subsequent tenure.
• Land tenure is not absolute but is repeatedly tested by competing groups.
• Land is referenced at the centre and  “land boundaries” are not fixed in perpetuity but reflect changes in power and authority.
• Land rights are held in common with other members of the group.
• Because there is no traditional hierarchical system of leadership, there is no land title system (unless the tribe signs over the lands to the state for issue of titles).
• Land is not an economic commodity and so cannot be alienated in perpetuity.

The Implications of PNG’s land tenure system to Customary Landowners are:-

• Ownership and boundaries of land can never be fixed for all time.
• Land rights are best perceived from the centre, rather than land having fixed boundaries. This means that greater clarity of tenure occurs at the centre of customary land, with less distinction at the boundary of the lands.
• Disputes over land are never lost, rather the loser will regroup for a further claim.
• Land is not a saleable commodity.

The Implications of PNG’s land tenure system to State or Businesses:-

• Signed agreements for land tenure have an inherent fallibility.
• Land tenure is subject to change and challenge.
• To apply the rules of titled land to the PNG context is to invite tension and misunderstanding.
• Land use agreements require flexibility and ongoing goodwill.

Forest or Commercial Plantation / Agri Developers should include elements of the following in their project planning and design considerations:-

• Need to be aware of the potential for tension over land use and occupancy.
• Resources devoted to minimizing tension will be well spent.
• The mechanism used to acquire land should reflect the need to secure use of land while minimizing risk of tension.
• Patience, tenacity and cash resources are required to ride out periods of tension.
• PNG people will attempt to impose claims on land even when agreements have been made.
• Good records of agreements and claims must be kept to avert further claims.

Land issues are identified as an important source of tension within Forest Management Agreements and any plantation development projects in Papua New Guinea. Land issues have caused start-up problems to every major oil palm development scheme in PNG and projects have to be designed to also cater for the interests of the local indigenous landowners (via village development schemes, smallholder outgrower schemes, land settlement schemes etc). As such, all oil palm projects developed to date in PNG have had some variant of a scheme that involves local customary landowners included in their project design – usually in the context of a “nucleus plasma” structure.

It was the objective of the government and their overseas investors that by establishing individualized holdings under land settlement schemes together with a company operated nucleus, Papua New Guineans would experience the benefits of an individualized land tenure system which, it hoped, would eventually replace customary land tenure.

This article has attempted to put on paper the author’s knowledge of the oil palm growing areas in PNG – knowledge based on some hard information (i.e. the agri-tech variables) and also the more subjective aspects of sociology and land tenure that have a strong determining influence on the risks and success of any upstream oil palm investment – particularly in the PNG context.

A country such as Malaysia whose rural population (except in Sarawak) has long been integrated into a market based economy has developed a socio-cultural and inherited a British legal system that by and large respects private land and property ownership. At the other end of the spectrum PNG, which is still largely a rural based economy founded on customary and tribal laws, respects more communal ownership of land and property, although in some parts this is slowly changing.

It is important to know that the use of information on both agro-tech variables and the socio-economics of a particular region is essential when deciding on the structure of an oil palm upstream investment in a particular location and socio-environment.