Program Update

Smallholders In Situ
Community Partnership Program
CPP ( COMMUNITY PARTNERSHIP PROGRAM)
Guiding Principles
1. Community Partnership Program --> Key requirement based on regulations:
a) Within the concession, permit holder (LAJ/Wanamukti/MKC) must develop a
Forestry Partnership Program (Community Partnership Program) that is a long term
agreement with smallholders and tied to “land usage”
b) Based on Ministerial Regulation no P 12/2015 about Industrial Forestry
Development require every permit holders to allocate minimum of 20% of total
area is Livelihoods Crops area (forestry partnership area) & minimum 10%
protected area (conservation)
c) CPP in MOEF regulation is recognized as primary community development strategy,
social stabilisation effort and land conflict resolution strategy
d) Avoid non-compliance with government regulations that have the potential to get
sanctions from the government and legal loopholes for litigation in the court.
e) This program is also planned in the ESMS, monitored periodically by RLU investors /
lenders (TLFF, Andgreen).
f) The implementation of CPP can range from agreement between company and
existing settlement areas to development of Rubber plantation with smallholders in
situ scheme (CPP Smallholders In Situ) or profit sharing concept (“CPP Plasma”)
g) Fulfillment it can be in livelihoods crop area or protected area (conservation)

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 Existing Land Use
No License Holder Total Area Production Area Livelihood Crops Protected/
Company (Planted & (min 20% total area) Conservation Area
Infrastructure) Livelihood Crops (min 10% total area
area based on regulation) based on regulation

Existing Regulatiom

1 PT Lestari Asri Jaya 61.495 Ha 11.551 Ha ( 18 %) 0 Ha 12.299 Ha 16.116 Ha (26 %)

2 PT Wanamukti Wisesa 9.264 Ha 4.069 Ha (43 %) 0 Ha 1.853 Ha 1.361 Ha (15 %)

3 PT Multi Kusuma
Cemerlang 18.000 Ha 4.864 Ha (27 %) 0 Ha 3.600 Ha 9.983 Ha (55%)

Based on Ministerial Regulation no P 12/2015 about Industrial Forestry Development require every permit
holders to allocate minimum of 20% of total area is livelihoods crops area (forestry partnership area) &
minimum 10% protected area (conservation) .

In a variety of standards (ISO 26000 guidance on social responsibility) - the basic principle is to first fulfill
the applicable government regulations and do those that are beyond / better than that.
CPP ( COMMUNITY PARTNERSHIP PROGRAM)
Guiding Principles

Inside concession.
Program for development of rubber smallholders with
CPP Plasma revenue sharing scheme. The program aims to be an
alternative land acquisition strategy in addition to land
compensation and fulfillment of regulatory obligations
(Minister of Forestry and Environment Regulation)

Inside concession.
Community Cooperation with existing rubber smallholders to buy
Partnership CPP Smallholders
their cuplump/latex. The program aims to
Program (CPP) in Situ strengthening social stability (trust from community)
and fulfillment of regulatory obligations (Minister of
Forestry and Environment Regulation)

CPP for Community Inside & Outside concession.

Development for Economic This program aims to develop trust from community
Empowerment, Education and social license to operate. Flagship program:
& Health
integrated farming plots Jambi & rice farming in
Kuamang Village.

Outside concession.
Program for small holders in the surrounding area. It
CPP Outgrowers will contribute to the supply chain of the RLU factory
and part of Michelin policy for SNR development in
Indonesia.

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CPP Smallholders In Situ Jambi

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 CPP Smallholders In Situ: Plan
Preparation (August’18 – to date)
• Engagement of stakeholders
(government and NGOs) - Dishut KPHP,
Setara
• Concepts program development
• Social economic assessment*
• Participatory mapping of
smallholders*
• Dialogue with smallholders
• Demo-plot integrated farming project
(alignment with Community
Development program)
• Establishment of Forest Farmers Group RLU becoming Off taker
• Proposal of the Partnership
Cooperation Text (Nota kesepahaman
Kemitraan) will be authorized by the
Minister of Forestry
June 28, 2019
Implementation (Prototype Project)
• Establishment of internal
Strengthening & Scaling Up
impelementing team
• Training for trainers • Intensive assistance
• Training on Better Management • Strengthening operational and
Practices for Smallholders MONEV
• Facilitation and mentorship for • Expansion to other communities
Capacity building and villages
• Facilitation on financial capacity &
access
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Phase 1: Preparation
No Activity Remarks PIC 2018 2019

Preparation Q3 Q4 Q1 Q2 Q3 Q4
1 Engagement with stakeholders Dishut, KPHP, TRK & Public Affairs LAJ & WW MKC
(government and NGOs) Setara
2 Social economic assessment Public Affairs LAJ - WW - MKC
3 Concepts program Public Affairs WW LAJ
development MKC
4 Participatory mapping of Sungai Karang (SK), Public Affairs, WW LAJ
smallholders Napal Putih (NP)/ KPHP & Setara MKC
Pemayungan (PY),
Tepian Langsat (TL)
5 Dialogue with smallholders SK : 18 (40 Ha) Public Affairs, WW – LAJ-
NP : 18 (50 Ha) KPHP, Head of MKC
Villages, Setara
6 Establishment of Forest SK - done Public Affairs WW LAJ
Farmers Group & Setara MKC

7 Demo-plot integrated farming LAJ - done Public Affairs, WW – LAJ-

project MKC
8 Submission of the Partnership Target June 2019 Public Affairs and WW
Agreement (Nota Kesepakatan supervised by LAJ
Kerjasama) to Minister of KPHP MKC
Forestry
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 Phase 2: Implementation
No Activity Remarks PIC 2019

Implementation Q1 Q2 Q3 Q4
1 Establishment of implementing Public Affairs, TQC &
team (RLU internal) operation
2 Training for trainers Public Affairs,
Training -TQC and
SNV (TBC)
3 Training on Better Management Public Affairs,
Practices for Smallholders Training-TQC and
SNV (TBC)
4 Smallholders facilitation, Public Affairs, and
mentoring & monitoring SNV (TBC)

5 RLU becoming Off taker / Public Affairs, and

Connector implementing team

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 Phase 3: Scaling Up
No Activity Remarks PIC 2020

Scaling up Q1 Q2 Q3 Q4
1 Intensive assistance Public Affairs, TQC &
operation
2 Strengthening operational and Public Affairs,
MONEV Training -TQC and
SNV (TBC)
3 Replication to other Public Affairs,
communities/villages Training-TQC and
SNV (TBC)

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Sungai Karang - Progress
PT Wanamukti Wisesa/ Business Unit - 2

The activities that have been implemented:

• Stakeholders engagement (Dinas Kehutanan, KPHP, Camat,

Kepala Desa & Yayasan Setara)
• Social economic assessment & dialogue with smallholders
• Development of program concept (WW will 100% buy
rubbers based on quality standards, Rp 8,500 – Rp 9500 /kg)
• Participatory mapping (KPHP & Yayasan Setara )
• Establishment of Forest Farmers Group ( KTH Karang Jaya)
• Prospective participants are 17 smallholders with land area
of 35 ha

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Napal Putih- Progress
PT Lestari Asri Jaya/ Business Unit - 3
The activities that have been implemented:

• Stakeholders engagement (Dinas Kehutanan, KPHP &

Yayasan Setara)
• Social economic assessment & dialogue with smallholders
• Development of concepts program
• Participatory mapping (KPHP & Yayasan Setara )
• Establishment of Forest Farmers Group ( KTH Karang Jaya)
• Prospective participants are 20 smallholders with land area
araound of 108 ha

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Kampung Jawa - Progress
PT Lestari Asri Jaya/ Business Unit - 3

The activities that have been implemented:

• Stakeholders engagement (Dinas Kehutanan, KPHP & Yayasan Setara)

• Social economic assessment & dialogue with smallholders
• Concepts program
• Integrated farming ( vegetable & fish) demo – plot

Challenge: The village head has not supported this activity (one of the
largest illegal settlement areas, issues with ABT/WWF concession as well)

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Tepian Langsat- Progress
PT Multi Kesuma Cemerlang/ Business Unit 5
The activities that have been implemented:

• Stakeholders engagement (KPHP & Yayasan Setara)

• Social economic assessment & dialogue with smallholders
• Participatory mapping (KPHP & Yayasan Setara ) on progress
• Prospective participants are 30 smallholders with land area araound of 57 ha

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RLU Roles
Option 1 (Buyer/ offtaker) vs Option 2 (Connector to the factory)

Aspect Option 1 : Buyer/ offtaker Option 2: Connector to the factory

Roles RLU buys rubber from smallholders in
cash and stores it in the warehouse.
After that RLU will sell rubber to the
factory
Risk • Finance risk is higher ( price
fluctuations, shrinkage and several
other factors)
• Risk for business sustainability and
relations with the community is
lower
Control/ RLU will have strong control and
influence influence on smallholders
RLU connects smallholders to factories. The
factory buys smallholders rubber directly.
RLU can facilitate transportation of rubber to
factory
• Finance risk is lower (retribution of
rubber produced by smallholders is the
responsibility of the RLU as the license
holder Rp 150/ KG)
• Risk for business sustainability and
relations with the community is higher
RLU will have low control and influence on
smallholders compared to factory and no
guarantee that in future the farmers will sell
through RLU

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Budget : Offtaker/Buyer
Case Study : Sungai Karang Village, PT Wanamukti Wisesa
Monthly operational cost
No Description Volume Unit Unit price(Rp) Total (Rp)
1 Purchasing of smallholders rubber 6400 kg/month 9.000 57.600.000
2 Transportation cost 6400 kg/month 250 1.600.000
3 Project admin staff 1 person/month 3.000.000 3.000.000
4 Smallholders training 1 pax/month 2.625.000 5.250.000
5 Facilitation and monitoring 1 pax/month 1.000.000 1.000.000
TOTAL 64.825.000
Monthly income
No Description Volume Unit Unit price(Rp) Total (Rp)
1 Rubber sales to Factory 5760 kg/month 12.000 69.120.000
TOTAL 69.120.000
PROFIT 4.295.000

Assumptions:
- SICOM price (dry): SICOM price is around Rp. 21,000 / kg with the selling price of RLU to the factory
with a discount of Rp. 2,200 / kg
- Farmers price sell to intermediary (current) around Rp 7.000 – Rp.8000/ kg (wet)
- The term of payment from the factory to the supplier is 2 days after delivery invoice. Usually
smallholders are more interested in selling rubber with the cash on delivery model.
- There is an income tax (income tax) of 5%. This tax can be deducted from the sale of all holders or
paid by the RLU. VAT is not valid in this transaction

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Budget : Offtaker/Buyer
Sungai Karang – PT Wanamukti Wisesa (Case Study) – other cost
No Description Volume Unit Unit price(Rp) Total (Rp)
1 Provison of seeds and agricultural materials 18 person 1.000.000 18.000.000
(integrated farming)
2 Provision of charity loan (education, etc) 18 person 4.000.000 72.000.000

TOTAL 90.000.000

The increase of smallholders

income + Rp. 500 - 1000 / Kg
or around
Rp. 500,000 - 700,000 / month

Additional cost (one-time):

- Technical assistance for integrated farming (ensure farmers livelihoods are better and not reliant on
just rubber)
- Provision of charity/loan is buffer estimate to incentivize farmers to sell to/through RLU vs. through
agents which gives loan but large discount

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CPP Plasma Model
A - RLU plant and manage rubber plantations on behalf of
farmers in consolidated blocks, with profit share scheme
that returns an income to these farmers
Simplest system for RLU plantation management. May be
attractive for encroachers who have other land outside the
concession and/or other sources of income
Will require company to regain control of land for plantations
from which profit would be shared. This is likely to entail
financial cost, risk of conflict and dilemma over compliance
with international standards Compensation and Land
Acquisition. Possibly ineffective mechanism to engage the
more challenging groups
C - RLU establish rubber plantations on behalf of farmers in
consolidated blocks, then hand over of plantation
management responsibilities to smallholders and recover
establishment and subsequent technical support costs from
value of latex once in production
Eventually provides for smallholder autonomy, transmission
of capital and cultivation of a sense of ownership and
responsibility for scheme participants
Offers more control for company over plantation quality, but
still with some risks to quality of production and compliance
with company commitments on environmental and social
practice
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B - Plasma smallholders allocated plots in consolidated blocks,
provided with technical support and inputs on credit to
establish rubber plantations. Smallholders take full
management responsibilities from beginning of rotation. RLU
recover value of loan and input costs from value of latex once
in production
Provides for smallholder autonomy, transmission of capital and
cultivation of a sense of ownership and responsibility for
scheme participants
Will require company to regain control of land to be used for
plasma scheme, which is likely to entail financial cost, risk of
conflict and dilemma over compliance with international
standards on Resettlement, Compensation and Land Acquisition
D - Smallholder rubber farmers established within the
concession with up to 10 ha of rubber plantation, incorporated
into community partnership plasma scheme, managing and
improving these existing rubber plantations ‘in situ’
Avoids risk and expense of land acquisition, resettlement and
compensation, and thereby facilitates full compliance with
international best practice. Provides means to regularise and
take advantage of existing smallholder enterprise and
investment, with maximum smallholder autonomy and sense of
ownership
Rubber production per unit area can be improved, but very likely
to be less than in RLU’s own plantations
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