Main photo: the roots of mangrove trees are seen along a river in Pitas, Sabah, Malaysia, July 6, 2018

An ostensibly green land deal between Sabah state in Malaysia and a private Singaporean firm that covers five million acres of forest on Borneo Island is murky and was struck without consulting indigenous communities, critics say.

Under the so-called Nature Conservation Agreement (NCA), Hoch Standard Private Limited, a company registered in Singapore, aims to “reverse forest loss and degradation” for the next 100 years in a wooded area as big as the European nation of Slovenia, according to a copy of the deal seen by BenarNews.

Hoch will then monetize the unspecified “natural capital benefits” and carbon credits generated via greenhouse gas reductions from the land, with Sabah state getting 70 percent of those proceeds, and media reports saying the Singapore company will get the rest. The five million acres of space covered under the agreement represents 27 percent of Sabah's surface area.

An indigenous Sabahan has sued the state over the deal and the State’s Attorney General is investigating the agreement, which rights and environmental activists claim lacks transparency; saw zero consultation with the area’s communities and includes a lopsided profit-sharing agreement, among other things.

The Sabah-Hoch deal “is controversial in large part because of the secrecy with which it was negotiated, the lack of consultation with local communities that may be affected by the agreement, and the lack of transparency about its terms,” Phil Robertson, deputy Asia director for Human Rights Watch, told BenarNews.

The agreement “covers such a huge amount of land for such a long period of time, without any clarity on the benefit to be gained by allowing an outside company to control the state’s natural resources in this way,” he said last week.

But none of this is going to happen under her watch as far as Sabah State’s Attorney General Nor Asiah Binti Mohd Yusof is concerned.

“The NCA in its present form is legally impotent,” she said in a letter on Feb. 9 to various media outlets.

For Nor Asiah, a big sticking point is that the deal did not specify the area of its operations and did not include any consultation with local indigenous people, according to her.  

“The NCA is therefore not finalized nor is it binding because, among others, the designated area – which is the subject matter of the NCA – has not been ascertained nor identified.”

Additionally, she wrote in her letter, that no carbon trading program would be agreed to “nor implemented without the free prior informed consent of native communities whose customary rights may be impacted by such programs.”

And this consent is “amongst issues that remained unresolved,” she wrote.

Some 20,000 to 25,000 indigenous people live in Sabah’s forest reserves, according to a 2005 report by the U.N.’s Food and Agriculture Organization. That number does not include people who live on the fringes of the reserves.

Sabah lost more than a quarter of its tree cover between 2001 and 2021, or about 1.75 million hectares, according to Global Forest Watch data. The degradation was largely due to fires, industrial logging, and the spread of commercial plantations.

In her Feb. 9 letter, Nor Asiah also said that her office was scrutinizing the deal and its promoters as part of due diligence, and that the agreement would not proceed until that process was complete. The attorney general did not immediately respond to follow-up efforts by BenarNews to contact her for updated information.

Three days before the Sabah attorney general’s letter, Hoch’s global corporate advisor, Stan Lassa Golokin, claimed in a press conference that the state’s Totally Protected Areas have already gone through the process of free, prior and informed consent as required under state laws, reported local news outlet The Vibes.

BenarNews contacted the office of Sabah Chief Minister Hajiji Noor, and Jeffrey Kitingan, Sabah’s deputy chief minister and the main promoter of the deal, but did not immediately hear back from any of them.

“Sorry, I have nothing new to say as the matter now is before the court,” Frederick Kugan, the state government’s forestry chief, told BenarNews.

BenarNews also contacted Ho Choon Hou, Hoch Standard’s director, who said “the PR team will get in touch with you.”

 ‘Forest-dependent community’

In November 2021, Adrian Lasimbang, a representative of the indigenous communities of Sabah, took the state government to court over its agreement with Hoch.

The “whole concern is regarding the process… signing off on this deal without going through any due diligence process … it was done in a really closed-door manner,” Lasimbang told BenarNews.

“Not many people, even in the government agency, know about this… later on, I was informed that it didn’t even go to the cabinet for any discussion. So basically, before I filed the case to demand for disclosure of documents, not many things were known.”

The deal is a massive cause of concern for the local indigenous population because they are a forest-dependent community, Lasimbang also said.

Human Rights Watch’s Robertson echoed these concerns.

“If, for example, [the deal] includes medicinal or food plants used by indigenous communities, will they still have access to those plants for their own use, and will they be financially compensated for the monetization of their traditional knowledge?” Robertson said.

“Without more information on details such as this, it is impossible to measure the impact on local communities.”

According to Lasimbang, the deal covers areas that are already well-managed protected areas with “very, very mature forests that have minimal degraded area” and counted as contributors in Malaysia’s “nationally determined contributions.”

Under the 2015 Paris Climate Agreement, NDCs are long-term efforts by each country to reduce national emissions.

If Malaysia has already included the forests in the NDCs, “you cannot claim the same area… for carbon trading,” Lasimbang said.

Robertson concurred, saying that if the land covered in the deal is already conserved forest, but the carbon credits are sold as if they are not, “then the deal is not actually saving any trees from being cut down and thus not preventing any carbon release.”

“Without clarity about what land is covered, its current conservation status, and the basis of the carbon credits that Hoch Standard will market, everything is up in the air,” he said.

“This is why this complete opaque, non-transparent deal is so unacceptable.”

Profit-sharing

While the agreement doesn’t explicitly state that Hock will get 30 percent of the proceeds of sales of carbon credits and so-called natural capital benefits, Golokin seemed to confirm the arrangement at a press conference with Kitingan on Feb. 6 when he defended it.

He said the technology for carbon trading was not cheap.

“70:30 is very equitable and fair. It is a very, very good deal for Sabah,” Golokin said, according to local news outlet The Vibes.

“The cost of the satellite alone for [surveying] could run up to 10 million ringgit. Then there are also scientists involved. Paying their salaries is not cheap,” he added.

But Wong Chen, a member of parliament from the national opposition bloc, questioned the wisdom behind promising potentially huge sums of money for up to 100 years to what he said was a little-known company.

“Astonishingly lopsided and overly generous,” is how he described it, according to local news outlet Free Malaysia Today.

“This is a major governance red flag that will scare off potential international and domestic buyers of carbon credits,” he said last December.

“This deal, if allowed to complete, will also set a very bad precedent for all future carbon deals in Malaysia.”