The changes illustrate the trade-offs countries make to protect the environment or provide jobs
(Repeats earlier story with no change in text)
By Bernadette Christina and Fransiska Nangoy
JAKARTA, April 21 (Reuters) - Indonesian farmer Albertus Wawan hopes a new government regulation means the small plot of land where he grows palm oil trees in a forest reserve on Borneo may be recognised as a legal plantation and eligible to access funding.
But the hopes of thousands of smallholders like Wawan for the acceptance of their farms inside designated forest areas is alarming green groups and comes at time when palm oil is under scrutiny in some Western countries for its links to deforestation.
The changes, part of President Joko Widodo's sweeping liberalisation of regulations to boost Southeast Asia's biggest economy, illustrate the trade-offs countries make to protect the environment or provide jobs to raise living standards.
Gaining legal status for his palm holding would allow Wawan to join a subsidised loan scheme. He also argues he was only made aware his fields were illegal in 2015 when the government amended his district's zoning.
"We are considered illegal even though we believe this land has been passed down by our ancestors through generations since before Indonesia's independence," he said, referring to the country's founding in 1945.
Gaining legal status would also allow smallholders to join a government programme to replace low-yielding trees with better seedlings.
Indonesia is the world's top producer of palm oil with exports in 2020 estimated at about $23 billion, though its expansion has often been in areas of once plentiful tropical forests.
The government contends that higher production yields compared with other vegetable oils make palm cultivation less environmentally damaging while providing jobs to tens of millions of farmers and processing workers.
However, the new rules risk writing off years of illegal deforestation by small plantations and companies, meaning offenders might only have to pay a fine instead of facing criminal prosecution, argues Wahyu Perdana, campaign manager for essential ecosystems at Indonesia's biggest environmental group Walhi.
"If this practice continues, there will be a bigger deforestation threat," he said.
Indonesia's Ministry of Environment and Forestry did not respond to a request for comment.
But at a parliamentary hearing last month Ministry Secretary-General Bambang Hendroyono denied the omnibus law would write-off illegal land use and said it only permitted legal access to use the forest for a certain time period.
Under the new regulations, a maximum 5-hectare (12.4-acre) plot could be released from its protected status if a farmer has lived on it for 20 years. The owner could then become eligible for replanting subsidies.
Another mechanism allows farmers to continue cultivating plots in a forest reserve until crops reach a maximum of 15 years but they must pay the government back for the forest resources consumed and a separate reforestation fee.
Indonesia says its replanting programme allows smallholders to boost output and income from existing plots instead of adding new plantations and should discourage the burning of undergrowth to clear land that often result in devastating forest fires.
But the palm farmers association Apkasindo says around 80% of members seeking replanting subsidies have not received approval after farms were declared inside forest areas.
Kanisius Tereng, another smallholder in Borneo, said his cooperative spent three years applying to join the scheme before some farmers withdrew because their plots were in conservation areas.
"The replanting scheme still has a lot of requirements, that's why there has been no progress," said the 53-year old.
The new regulations would provide a solution to the challenges the replanting programme faces, said Musdhalifah Machmud, Deputy Coordinating Minister for Economic Affairs
Indonesia has said that 3.37 million hectares of palm oil plantations are located in forest areas.
Separately, a ministry official said out of 2.4 million hectares targeted for replanting, an estimated 500,000 hectares are thought to be located within forests.
While the government asserts the benefits of the new rules, Wahyu at environmental group Walhi points to Indonesia's poor environmental track record.
He noted that authorities often did not enforce previously imposed fines for damaging forests, including against plantations found guilty of causing devastating forest fires in 2015. (Editing by Ed Davies and Christian Schmollinger)
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