The return of Sabah’s Nature Conservation Agreement

No Free, Prior Informed Consent. No Additionality. No Transparency. No Credibility.

PHOTO Credit: Sabah Way Forward

On 28 October 2021, the Sabah State Government signed a Nature Conservation Agreement with a company based in Singapore called Hoch Standard Pte Ltd. The Agreement covered an area of two million hectares for 100 years, with the possibility of extending for a further 100 years.

The deal was controversial from the start - not least because the first that Sabahans knew about the Agreement was when Mongabay reported on it in November 2021.

REDD-Monitor followed the story closely, writing five articles about this strange deal between December 2021 and February 2022.

The Nature Conservation Agreement was leaked, revealing how much control would apparently have been handed over to Hoch Standard under the deal. There was no mention of Indigenous Peoples’ rights in the Agreement. In fact, the word “Indigenous” did not appear at all in the document.

A whistleblower spoke to Al Jazeera and described the project as “an obvious con”. He added, “It makes me sick to my stomach.”

In February 2022, Sabah’s Attorney General put out a press release that states that “the NCA in its present form is legally impotent”:

The State Government will not permit any land to be leased, transferred or otherwise ‘handed over’ as part of any carbon trading or carbon monetisation program. This includes the proposed NCA.

And that really should have been that.

But in June 2023, The Star reported Jeffrey Kitingan, Sabah’s Deputy Chief Minister, as saying that,

“Recently, Sabah took a momentous step by entering into a Nature Conservation Agreement (NCA). We have committed two million hectares of our rainforest to a 100-year carbon credit conservation project.

“This initiative is expected to become a prominent carbon dioxide sink, reinforcing our proactive stance on climate restoration.”

Kitingan is the main proponent of the Nature Conservation Agreement. He chairs the Steering and Management Committee for the Implementation of the NCA.

Five questions for Kitingan

In July 2023, Kitingan said that critics of the NCA should “stop talking”.

In response, Sarawak Report put forward five main questions for Kitingan to answer:

1. Where are the detailed research documents commissioned by the state government to justify his claim that $800 million can be gained per year from his NCA and what are the specific areas this NCA will cover?

2. What process was undertaken to select and appoint the Singapore shell company Hoch Standard Pty Ltd to be the ‘management’ entity controlling the project, given the matter was never even put before the state assembly? Hoch Standard just happens to be represented by one Stan Lassa Golokin, a businessman who was caught up (together with Kitingan himself) in some extremely troubling prosecutions over the earlier disappearance of an alleged billion dollars from similar eco-projects in the 1980s, according to a letter to the UN Special Rapporteur that has not been denied.

3. Given Hoch Standard is due to be accorded a staggering 30% of all the profits of this enormous public venture why does the state government not instead simply hire the required experts to form a department to manage the project and save the taxpayer a fortune?

4. Being there is sooooo much cash that is going to be filtered out of the project to the company fronted by the dubious Mr Golokin, who is the actual shareholder of Lionsgate, the BVI entity that is registered as the beneficial owner of Hoch Standard? Indeed, how can it be possible that the Sabah state government could have signed up to a ‘binding agreement’ involving so much money with an anonymous entity?

5. On what possible justification has this binding agreement included a ‘cancellation clause’ that would allow Hoch Standard to claim its entire share of the projected profits (which have been condemned as being outlandishly optimistic) whether or not the project comes to fruition?

Kitingan’s interview with Sabah Way Forward

Kitingan recently gave an interview on Sabah Way Forward, broadcast by local radio station Kupi-Kupi FM. Predictably enough, he didn’t answer Sarawak Report’s questions.

Here is Katingan’s explanation of the reason for the Nature Conservation Agreement. It appears that Katingan has not read any of the recent criticisms of the Voluntary Carbon Market, and he seems oblivious to the fact that the price of carbon credits has crashed in recent months.

“We cannot cut the forest in order to raise revenue because we can only raise so much revenue from the forest by cutting. So this is the best area to get revenue for development without cutting anything. Without cutting a single tree.

“We just need to conserve and let Hoch Standard monetise it from the global market, come up with the revenue, and be able to develop this country. And at the same time, we are going to attract more investment from overseas because they will have confidence that we are now moving towards green circular economics.

“And generate power from you know no longer fossil oil, one day our oil will run out. Where will we get our energy. Maybe from hydro. Maybe from the sun, solar. maybe from hydrogen. But we have to conserve and generate other sources of revenue.

“And carbon, we get nothing at the moment. Zero.

“We want to create revenue. From nothing. It’s like nothing to something. From nothing, zero, we get two or three billion, maybe five billion. That’s something everybody should be happy about, and supporting about. So that we can address the poverty problem. Housing problem. Raise our income.

“Therefore we want everyone to support this, because we have a lot to gain, nothing to lose. This is creating value. If we go through this, this scientific way, climate change related, the world wants it too, increase our income and at the same time address the needs of the local population.

“There will be stages, there will be stages, where local land owners can participate directly.

“Like in Columbia. ALLCOT Group, we are engaged with ALLCOT Group. They organise all the local landowners, and here we can do that too, and then create a project for them like NCA. So that they can get the money directly paid to them. And hopefully this will come after we’ve seen the success of this NCA.

“NCA, one year from now, one year, although I say 18 months, maybe one year from now we see the results, and then the people who will be against it, who are taking much effort, they care what happens, they want to stop the project. One day they will blame themselves, because they will carry the way by certain group of people, certain stories, misunderstanding, or certain greed, so one year, once this is implemented, we will prove to everybody including the critics, that this is the right thing to do for Sabah.”

At one point in the interview, while Kitingan was talking, Sabah Way Forward showed two letters on the screen. One is from ALLCOT, a carbon consulting firm, and the other is from a company called Sustainable Investment Management:

Unfortunately, both letters are illegible. Kitingan mentions several times that “We are engaged with ALLCOT Group, Colombia” but doesn’t tell us anything specific about this “engagement”. I have written to both companies to ask about their involvement in Sabah’s Nature Conservation Agreement. I look forward to publishing their responses in due course.

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UPDATE - 12 September 2023: ALLCOT’s response makes clear that the company is not at all involved in the Nature Conservation Agreement.

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Judicial Review Process

In August 2023, a coalition of Sabahan and Malaysian Civil Society Organisations announced that they would be launching a Judicial Review Process. In a press statement the Coalition states its concern that “a contract of this scale would be awarded in secret to a new entity in a foreign country without commercial record or evidence of expertise in carbon trading or managing natural capital”.

Alexander Yee of Sabah Environmental Protection Association explains that,

“One focus of this Judicial Review will therefore be on discovering whether the Sabah Government ever undertook and applied the required due diligence, prior to or since signing the contract.”

Hoch Standard is listed by the Accounting and Corporate Regulatory Authority of the Singapore Government as owned by a company called Lionsgate Ltd, which is incorporated in the tax haven of the British Virgin Islands.

In the interview with Sabah Way Forward, Muguntan Vanar, a journalist with The Star, asked Kitingan for his views about the Judicial Review, and whether Hoch Standard and Lionsgate are suitable companies to run the NCA.

Kitingan replied,

“Anybody is free to take anybody to court. But I hope that they are really able to understand with a clear objective, not a naughty objective to derail this programme. Because I must clarify here that Hoch Standard is owned 100% by Lionsgate Ltd. And Lionsgate is 100% owned by Dr. Ho.”

Dr. Ho is Dr. Ho Choon Hou. According to a form filed with Singapore’s regulatory agency dated 1 October 2020, Lionsgate is “indirectly wholly-owned by Dr. Ho Choon Hou”.

During the interview with Kitingan, this slide is shown of the Hoch Standard “Global NC Team”:

Kitingan claims that over the past 18 months - since the Attorney General announced that the project is “legally impotent”, we have lost “about eight million a day”. That’s 8 million ringgit, or about US$1.75 million. Mongabay asked Kitingan how these calculations were made, but he did not respond.

Where exactly is the Nature Conservation Agreement?

In the interview with Sabah Way Forward, Olivia Miwil from the New Straits Times asked Kitingan what are the areas involved in the NCA deal. Here’s Kitingan’s reply:

“OK, well, obviously it involves different classes of forest reserve. But it doesn’t involve private land, at the moment. It only involves forest reserves. We start with Trusmadi, for example. The NCA involves two million hectares, according to the agreement we have to start with 600,000 hectares first. After that, we will do the rest once the government is satisfied.”

The reality is that no one outside the project knows where the project will be implemented. WWF-Malaysia has urged the State Government to disclose the 600,000-hectare project area.

In a statement, Dr Robecca Jumin, Head of Conservation Sabah at WWF-Malaysia said, “In Trusmadi, there are two forest reserves. One is the Nuluhon Trusmadi Class I Forest Reserve and the other is the Trusmadi Class II Forest Reserve. Will the Nuluhon Trusmadi Class I Forest Reserve also be included into the NCA?”

WWF-Malaysia questioned the additionality of the Nature Conservation Agreement. Class I forest reserve is protected and therefore “not eligible for carbon offset because of the concept of additionality”.

In its statement, WWF-Malaysia writes,

In principle, carbon offset projects like the NCA must satisfy the criterion that they offer opportunities for its designated areas to contribute to emission reduction that would not already happen in the absence of the project. To put it simply, only forests that are meant for exploitation - via logging, agriculture development, settlements, and so on - can claim additionality by means of preventing such activities that would have been otherwise inevitable.

Additionality?

Kitingan claims that the project complies with Verra standards and the Integrity Council for the Voluntary Carbon Market. “So don’t worry about that,” Kitingan says.

But in the interview with Sabah Way Forward, Kitingan reveals that his grasp of the concept of additionality is flimsy, to say the least.

Sonny Tzan of Sabah Way Forward asks him, “Given that it has been stated that the NCA will operate in existing protected areas, how will the project achieve additionality and hence generate saleable carbon?”

It’s a good question. Earlier in the interview, Kitingan claims that the project has been under development since 2019. So he’s had four years to think about this.

Here is Kitingan’s answer in full:

“Additionality. Actually, I don’t know how much they know about additionality. Additionality is not confined to like you plant new trees. That’s additionality, yes. But it has got seven or eight types. Including compliance to the Indigenous People, like FPIC is also additionality. It increases the value of our carbon credit. Yeah. And so on. Including compliance to SDG [Sustainable Development Goals]. These are all additionality. OK? It’s not confined to just add new forest.

“So we have to capitalise on all these additionality provisions that will add value to our carbon deal. It will increase the value of our carbon credit. It will not be confined to basic, you know? Additionality, not just one but many components of additionality.

“Yes we are taking that into account to make sure that our carbon credits have smart value, enhanced value, additionality value.”

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