SUMMARY ENVIRONMENTAL IMPACT ASSESSMENT

OF THE

LOWER SARIBAS AGRICULTURAL DEVELOPMENT PROJECT

IN

MALAYSIA

June 1996 2

ABBREVIATIONS

AWB - Asian Wetland Bureau AWL - Average Water Level Cu - Copper (metallic) DID - Department of Irrigation and Drainage DOA - Department of Agriculture DOE - Department of Environment EIA - Environmental Impact Assessment EMP - Environmental Monitoring Plan FAO - Food and Agriculture Organisation (United Nations) FFB - Fresh Fruit Bunch FR - Forests Reserves MSL - Mean Sea Level NCR - Native Customary Rights O&M - Operations and Maintenance OPE - Oil Palm Estate PF - Protection Forest PFE - Permanent Forest Estate POME - Palm Oil Mill Effluent PWD - Public Works Department RM - Malaysian Ringgit SALCRA - Land Consolidation and Rehabilitation Authority SLF - State Land Forest

GLOSSARY

Kampung - Traditional Malay settlement or village, comprising individual Housing units. Longhouse - traditional Iban settlement or village, comprising adjacent, Interconnected homes under a single roof.

WEIGHTS AND MEASURES c - degree celsius ha - hectare km - kilometer m-meter m3 - cubic meter mg - milligram pH - a measure of the acidity or alkalinity of a substance

NOTES In this report, the symbol “$” refers to the US dollar. 3

CONTENTS

Page

A. Introduction 1

B. Description of the Project 1

C. Description of the Environment 1

D. Anticipated Environmental Impacts and Mitigation Measures 6

E. Alternatives 12

F. Economic Assessment 13

G. Institutional Requirements and Environmental Monitoring 13

H. Public Involvement 14

I. Conclusions 14

J. Appendixes

1. Map of the Project Area 16 2. Environmental Impact Matrix 17 4

A. Introduction

1. The Environmental Impact Assessment (EIA) study of the Lower Saribas Agricultural Development Project identified potential impacts related to proposed agriculture estate development in an area consisting mainly of lowland peat swamp within the Saribas-Layar river basin. Peat soils cover approximately 80 percent of the study area of 152,582 hectares (ha). The EIA has been prepared on the basis of field surveys, site visits, and desk studies. Special attention has been given to the irreversible impacts on the unique peat swamp forest ecosystem within and adjacent to the study area. The EIA study includes a proposal for the establishment of the National Park within the confines of the study area. The proponent of the Project is the Government of Sarawak.

B. Description of the Project

2. The area covered by the Project is largely a low-lying, coastal peat swamp, with some higher, more hilly ground inland, between the Lupar River in the south, the South China Sea in the west, the Pan-Sarawak trunk road in the east, and the Pusa trunk road in the north. The study area runs from the coast in a southeastern direction for approximately 70 kilometers (km) and is about 20-25 km wide. The geographical coordinates are approximately 1-2° N and 111-112° E. About 90 percent of the study area is located in the Saribas District, the remainder is located in the Kalaka District and District, including the coastal Maludam Subdistrict.

3. The following components are proposed for inclusion in the Project:

(i) development of OPEs in upland areas (about 5,000-6,500 ha net); (ii) development of OPEs in lowland areas (about 3,500-5,000 ha net); (iii) construction of flood control, main drainage works and access roads to serve lowland OPEs; (iv) construction, installation and initial operation of a palm oil mill (30/60 MT of FFBs/hour); (v) development of a pilot sago plantation (about 500 ha); and (vi) establishment of Maludam National Park (about 43,150 ha).

4. The Project will also include institutional support for project management, training, special studies, and technical assistance and will be complemented by Government-financed credit and socioeconomic initiatives to support income generation activities for the beneficiaries of the Project. A map of the area covered by the Project is shown in Appendix 1. The Project will be implemented over a six-year period.

C. Description of the Environment

1. Physical Resources

a. Soils

5. The area consists predominantly of low-lying wetlands (peat swamps) of flat topography along the coast and the mouth of Saribas River, with low hills marking the eastern hinterlands. The altitude varies from 3 to 30 meters (m) above mean sea level (MSL). Tidal 5 influence in the main river basin affects the entire western and eastern part of the area. There is little seasonal variation in the extent of sea water intrusion from the South China Sea. At the mouth of the Saribas River, the amplitude of semidiurnal tides is about 5 m.

6. The predominant soil type is organic or peat soils (Dystric Histosols, based on Food and Agriculture Organization (United Nations) (FAO-classification), covering 122,640 ha. These peat soils have been subdivided into deep peat soils (Anderson Series) and shallow peat soils ( Series). Anderson 3 series, with a depth of the peat layer of 250 centimeters (cm), covers 101,556 ha (66.7 percent) of the study area, whereas Anderson 1 and 2 series, with peat layers from 200-250 cm and 150-200 cm respectively, cover 11.2 percent (17,041 ha). The remainder of the peat soils are Mukah series (4,043 ha or 2.6 percent) with shallow peat (50-150 cm), underlain by nonsulfidic clays.

7. Alluvial soils are found further upstream along the Saribas River and its tributaries. Two types, both derived from riverine alluvium, are distinguished: (i) Gley soils, poorly drained soils of clayey texture, locally classified as Series; and (ii) Alluvial soils, imperfectly to well-drained soils of clayey texture, locally classified as Seduau Series. Both soil types are subject to seasonal flooding. Together they cover 3.7 percent (5,640 ha) of the study area.

8. Red-Yellow Podzolic Soils are found in the southeastern (upland) part of the study area, on moderately steep (12-15°) hill slopes. They include soils of the Merit Series (clayey soils) and Series (fine loamy soils). Grey-White Podzolic Soils, i.e., Durin Series (fine loamy soils) and Kerait Series (clayey soils) are also found in these uplands, covering an area of 14,857 ha (9.7 percent).

b. Climate

9. The area has a typical moist tropical climate, with constant temperatures throughout the year (25-27 degrees Celsius [C]), high air humidity (average 85 percent), cloudy skies with limited sunshine (4-6 hours/day), abundant rainfall (3,600 millimeters [mm]/year), and relatively low evaporation (1,600 mm/year). Strong winds are uncommon. There is no distinct dry season, although June/July is referred to as the "dry season," with monthly rainfall less than 200 mm. The "wet season," with monthly rainfall exceeding 300 mm, is from October to January. The wettest month is December with a rainfall of up to 500 mm. However, "dry months" with less than 100 mm rainfall may occur. Near the coast, the average annual rainfall is higher than further inland near Betong, the difference being about 500 mm.

c. Hydrology

10. The catchment area of the Saribas-Layar river system extends over 220,000 ha. The river system drains into the South China Sea. Its estuary, Kuala Saribas, is about 10 km wide. The major tributaries of the Saribas-Layar river system are the Rimbas and Paku rivers. The study area lies southwest of the Saribas basin and is drained by the Maludam River (about 35 km in length), and the estuarine part of the Lupar River.

11. The average elevation of the land adjacent to rivers is 2.5 to 3 m +MSL, indicating ground levels roughly equal to mean high water levels (typical for tidal lands). Tidal movements cause sea water to penetrate the entire study area, and create saline and brackish water environments along the river system. During spring tides, inundation of unprotected lands may 6 occur, which is a major impediment to crop production. Tidal bores occur occasionally along the Saribas River, but are more common in the Lupar River.

2. Ecological Resource

a. Forests

12. The predominant forest formation in the area is coastal peat swamp forest. This type of forest covered 1,246,000 ha or 10 percent of the total land area in Sarawak in 1995. The largest single peat swamp forest (107,000 ha), on the Maludam peninsula, lies partly inside the study area. The deep peat soils in this area are virtually undrainable. Six subtypes of peat swamp forest are distinguished, four of which are found in the study area.

13. The peat swamp forests in the study area represent the peak of evolution of this lowland forest formation in Borneo. They represent very distinct habitats for a large and unique variety of specialized plants and animals. The peat swamp forests also act as important reservoirs for fresh water and provide essential fresh water inflow for the coastal mangrove forests. They also play a crucial role as a storage reservoir for flood- and storm water and act as a buffer between the upland and the coastal zone, and maintain the hydrological balance in coastal zones. Many of the tree species in these forests have a high commercial value.

14. The coastal fringes from the mouth of the Lupar River north to Kuala Kabong are covered with mangrove forest. The mangrove forests provide coastal protection and act as a silt trap and nursing and breeding places for a large variety of marine and coastal organisms, including economically important fish and pennaeid shrimp species. In Sarawak, these tidal forests also provide habitat for a variety of wildlife species, including the endangered proboscis monkey (Nasalis larvatus) and estuarine crocodile (Crocodylus porosus). Salt water and fresh water mix over large areas along the main rivers. In these brackish water environments, still subject to tidal influences, dense groves of nipah (Nypa fruticans) form the dominant vegetation. Nipah groves play an important buffering and protective role between tidal rivers and peat swamps. They also contain a high density of crabs. The nipah areas, like the mangrove areas, are an essential habitat for nursing and breeding many economically important aquatic species.

15. Mixed dipterocarp forests originally covered the upland soils in the eastern part of the study area. Logging, shifting cultivation, and rubber plantations (now mostly abandoned) have replaced the original forest cover. Shifting cultivation is followed by secondary shrub which, in places, has evolved into secondary forests.

b. Wildlife

16. The larger mammal populations in the study area have been reduced by hunting, but important wildlife species still survive, in particular in the Maludam-Triso peat swamp forest complex, where Sarawak's largest population of the endangered proboscis monkey (Nasalis larvatus) is found. Also found in Maludam is a rare variety of the banded langur (Presbytis melalophos cruciger) that is endemic to northwest Borneo. Both primates are endangered species and are protected by law. Other larger mammal species still surviving in the area include mouse deer (Tragulus sp.), sambar deer (Cervus unicolor), bearded pig (Sus barbatus), otters (Lutra sp., Aonyx sp.), otter civet (Cynogale bennettii), treeshrews (Tupaidae), flying squirrels (Petauristitinae), squirrels (Callosciurus prevosti, C.notatus) and a variety of bats. Bird life includes shore birds, semiaquatic species, and forest species. 7

c. Fish and Aquatic Fauna

17. Dolphins enter the estuarine zone of the main rivers for up to 20 km from the mouth of the rivers. It is believed that the false gharial (Tomistoma schlegeli) is still to be found in the Saribas River and adjacent peat swamps. All the dolphins are protected by law, and the false gharial is on the list of partially protected species.

18. The protected estuarine crocodile (Crocodylus porosus) is reported within the estuary of the Lupar River, outside the study area. No data are available on the species' survival inside the study area. The totally protected terrapin (beluku, Orlitia borneensis) probably survives in the extensive swamp forests of Maludam-Triso, and in other similar habitats.

3. Human and Economic Development

19. The human population in the study area includes about 7,500 households (52,000 individuals). The majority of the people are Malay (56.2 percent). The other ethnic groups are Iban (38.1 percent) and Chinese (5.7 percent). The Malays occupy the riverine villages; the Iban, the upland area; and the Chinese, the towns. In terms of economic activity, the Malay are generally either fishermen or laborers in the forestry sector, the Ibans are farmers, and the Chinese work in the commercial sector. Rural settlements are widely scattered and are characterized by small population size, low productivity, and low-income levels often derived from subsistence or shifting-cultivation farming.

20. Most Malays live in single houses, while the Ibans live in their traditional longhouses. Many dwellings require repairs or lack sanitary facilities, and piped water supply. The generally low level of agriculture development is due mainly to: (i) the swampy nature of the land, which lack infrastructure such as drainage and roads; and (ii) the insufficient labor supply (especially young males) for full-time farming. Migration from Betong District is about 6.6 percent of the population, while from , it is about 21.6 percent.

21. According to a poverty and malnutrition study in 1989, about 28 percent of the households in Sri Aman District are in poverty, and 26.6 percent of the children of 0-6 years old are malnourished to some degree. In the Kalaka District, these percentages were 29.1 and 32.1, respectively. The mean monthly income per capita is very low: RM49 in Sri Aman, and RM68 in Betong. Hard-core poverty is reported to be 33 percent of the population in the town at Sri Aman and 14.8 percent of the population in the town of Betong. Poverty is especially noticeable among those engaged in agricultural activities. Paddy farmers constitute the largest group of poor households; they are largely the Bumiputras (comprising local ethnic groups of Malays, Melanaus, Iban, and Bidayuh).

22. Approximately 45 percent of the study area may be classified as "encumbered state land", which includes areas that have been used for housing, cropping and other purposes, but for which the users have not been given a title. Therefore, much of this land is subject to claims under native customary rights (NCR). Forest reserves cover another 40 percent while the remainder of the area is alienated lands that have been surveyed and issued with land titles under either the mixed zone or the native area land category.

4. Land and Resource Uses 8

a. Agriculture

23. More than half of the study area is still covered with natural vegetation, comprising mainly selectively logged, peat swamp forests. Secondary vegetation occupies one-quarter of the area. Only 10,070 ha (7 percent of the land area) is used for agriculture (i.e., cropped at any given time). Much of the cropped area has been subjected to shifting cultivation, with more than half of the area used for padi and coconuts, with the remainder used for sago, rubber, and pepper production. Single crop wet padi is cultivated on a rainfed basis. The average wet padi yield (Betong District) is about 2 t/ha dry unhusked rice, but is lower in areas where saline water intrudes. Most of the coconut gardens were established under the Department of Agriculture’s (DOA) Coconut Planting Scheme. In some places, coconut has been intercropped with cocoa, but most of the cocoa has been abandoned because of the low prices and disease problems. Many of the older coconut gardens have been abandoned because of poor growth and low yields caused by the intrusion of salt water.

24. Sago palms (mainly the thorny type) are planted on a semiwild, smallholder basis with few inputs and little maintenance. The mature palms are intermittently harvested for sale to buyers or to the sago factory at Pusa. Most of the sago palms are located on encumbered land without land titles. Rubber is mainly found in the upland areas that are often abandoned and overgrown with secondary forest. Most of the rubber was planted by Iban smallholders under the Rubber Subsidy Scheme. Inputs are very low and maintenance is poor. A few high-yielding clones were planted.

b. Capture Fisheries

25. Fish is the main source of animal protein and fishing is the main activity in the kampungs along the Saribas River. Subsistence level fishing is practiced by nearly all people, mostly Malays, living in the coastal area of Sarawak. The main capture fisheries resources are the Saribas, Layar, Lupar, and Rimbas rivers, and the marine territorial waters of the exclusive economic zone. Coastal fishing is carried out between March and October. In the other months (rainy season), fish are mainly collected from the rivers and swamp backwaters.

26. In 1991, about 750 fishermen were registered in the study area, which represents 6.1 percent of the total fishing population in Sarawak. Yields from capture fisheries and the share of high-valued species have been declining since the 1970s. Evidence indicates the area is being over-fished, which could be related in part to increased encroachment by "foreign" trawlers into the inshore waters, and, in part, to decline in the spawning grounds.

c. Aquaculture

27. Fresh water pond aquaculture is practiced on a limited scale in the upland areas. The main constraints are the lack of high quality inputs and insufficient field extension. A few farmers operate small backyard ponds for mud crab (Scylla serrata), but the supply of crab seed for stocking ponds and pens is a problem. The seed is collected from the wild and supplies are irregular and seasonal. A further constraint is the availability and the price of trash fish used as feed.

d. Forestry 9

28. Forestry is the backbone of the economy in Sarawak. In 1992, 33 percent of the value of total exports came from forest products. Sarawak is also making progress in the export of value-added timber products. The harvesting of commercial forest on PFEs as well as on State Land Forests (SLFs) is organized through a concession system. The concession holders are required to adhere to an accepted forest management plan that prescribes harvest techniques, felling cycles, minimum diameter limits, allowable harvestable volume, etc. The prescribed felling system is a selective felling system.

29. The government’s forestry policies cover both the conservation of forests and maximization of economic returns from the use of forests. One element of this policy is to scale down log exports and to encourage processing and marketing of semifinished wood products. The government also encourages research on potential medicinal and genetic forest resources as part of its biotechnological research and development programs. Another element in Governments' forest policy is the development of forest-based ecotourism, which implies the development of tourist and jungle adventure facilities in or near existing and planned protected areas. The long-term target is to extend Sarawak’s national park and protected area system to 1.0 million ha.

D. Anticipated Environmental Impacts and Mitigation Measures

30. Following the identification of the main project activities for each stage of the Project and of the existing environmental impacts due to Project activities in the area covered by the Project, an EIA matrix was prepared (see Appendix 2). The specific mitigating or abatement measures that will be adopted by the proponent of the Project to minimize the potential significant impacts are discussed in the following paragraphs.

1. Impacts and Mitigation Measures Related to the Location

31. Clearing Vegetation (general). None of the proposed sites for oil palm plantations infringes upon PFEs; all the sites are situated on SLFs. These sites are no longer covered with primary forests. Most of the areas are characterized as secondary forests in an advanced successional stage. The remaining volume of harvestable timber in such areas is insignificant.

32. Drainage (general). The main impacts will occur in peat swamp areas. The drainage water from the reclaimed peat swamps is usually acid (pH range from 4.2-4.7). The reclamation of a peat swamp is a drastic and irreversible intervention. It lowers the water table and the water storage and buffering capacity of the reclaimed land and influences evaporation and transpiration. Therefore, it is essential that large adjacent areas be retained under permanent forest cover, a condition that is fully taken into account in the present Project.

33. Peat Oxidation and Subsidence. The peat soils are in a state of permanent water saturation and are waterlogged for most of the year, especially at the fringes of the peat domes. The drainage of these largely organic soils (dead plant material) will cause the loosely packed peat to subside when it is dried and exposed to the air. The result is peat oxidation. The expected rate of subsidence is 120 cm over 15 years, with subsidence of 60 cm during the first two years, and 6 cm/year thereafter. These rates are based on the assumption that ground water levels are retained at 50-70 cm below surface. More intensive and deeper drainage would increase the rate of subsidence. 10

34. Acid Formation. It is difficult to predict whether acidity problems will occur in the area covered by the Project. During a detailed soil survey of the Kabong- Scheme (situated along the coast), it was found that only about 10 percent of the shallow peat was underlain by sulphidic clays. Based on this survey, it is predicted that no serious soil acidity problems are expected once the overlaying peat has subsided and oxidized.

35. Impact on River Water Receiving Drainage Water. The drainage and seepage water from reclaimed peat swamps is acid and of poor quality for most purposes. Dark brown colored "fans" develop at the interface of the natural waterways and the drainage water. The brown coloring is due to dissolved pectin substances, and the foaming to saponification reactions of the organic substances. In the study area, these phenomena already occur, because all the peat swamps drain naturally into the rivers.

36. Impacts on Crops Grown Dowstream. During the development of peat soils for cultivation, the drainage water may contain silt and organic material for a long time. The suspended organic material normally settles, which is the reason the peat water usually looks clear, albeit dark in color. Thus, the sediment load entering the river through the drains could increase. However, it is unlikely that serious siltation problems will occur. The drainage water from the flat peat swamps in the area contains little silt, and the mineral soil content of the surface peat layer is very low. No impacts on crops grown in the areas downstream are expected because virtually all the crops cultivated by local people are rainfed.

37. Impacts on Aquatic Production Systems. The pH of river waters in the area is in the range of 6.5. These saline waters support a variety of aquatic life including species of economic and nutritional importance that provide a large part of the protein diet of riverine people. The experience has been that where acid drainage water of pH 4-4.5 enters the main rivers, the water mixes and the pH of the river water at the drain outlet drops to 5.6. At such sites, a narrower range of species and lower fish densities could be expected. Because of continuous outflow of drainage water, these fans may become permanent, although tidal movements and river discharge would guarantee continuous dilution.

38. Aluminum Toxicity. Considering the nature of the mineral subsoil in the selected sites, no serious aluminum toxicity problems are expected to occur during the development and operations of the plantation.

39. Irreversible Drying. The drainage and the exposure of peat to the air may lead to irreversible drying of the peat surface. If this occurs, dry and hard granules are formed that are difficult to rewet, and create a very poor growth medium, both physically and chemically. These layers will have to be removed to restore the moisture retention capacity of the soil.

40. Impacts on the Hydrology of Peat Swamp Forests. None of the sites in the upland area, but all of the sites in the lowland areas are near or adjacent to peat swamp forests. The drainage of these sites and the subsequent peat subsidence would eventually drain the bordering swamp area, unless specific measures are taken. Also, where smaller drains are cut through swampy terrain, small areas on both sides of the drainage channel will also be drained. Measures have been incorporated in the desing of the Project to prevent drainage of adjacent peat swamp forests.

41. Salinity Intrusion. The presence of saline and brackish water in the rivers with fluctuating high and low water levels twice a day requires gated (flap gates) drainage outlets if 11 salinity intrusion in the reclaimed areas is to be avoided. The requirement for these gates has been incorporated in the design of the Project.

2. Mitigation Measures Related to the Location of the Project

42. Site Selection Criteria and Environmental Protection. To minimize or to prevent negative impacts on the environment, the following criteria for site selection have been applied:

(i) no encroachment on undisturbed forests, PFEs, important wildlife habitats and spawning and breeding sites of aquatic organisms;

(ii) retaining buffer zones between rivers and coastline and the sites;

(iii) the declaration of a large and contiguous peat swamp forest area (Maludam) as a totally protected area;

(iv) areas where peat level is below gravity drainage level are not to be considered for agricultural development; alternative uses suggested are forest reserves and wildlife sanctuaries;

(v) areas where the mineral soil level beneath the peat dome is below mean river level are not to be considered for agriculture development; after peat subsidence and oxidation, gravity drainage of such lands would be impossible;

(vi) the thickness of the peat layer at areas for agricultural development should be shallow (less than 1.5 m thickness, smaller areas up to 2.5 m thickness), with good drainage;

(vii) special drainage provisions and adequate buffer zones are to be included for selected sites at the periphery of peat domes, to avoid drainage and irreversible changes in adjacent natural peat swamps.

3. Impacts and Mitigation Measures Related to Ecosystems, Wildlife, and Biodiversity

43. All of the lowland areas to be converted into plantations are peat swamps in SLFs. Their value as a habitat for plants and animals has been reduced by logging, clearing, hunting, poaching, and trapping. Because these areas are outside PFEs, they have not been subjected to prescribed management and development policies. Consequently, all the forests are degraded. However, some of the degraded peat swamp forests have retained their buffer and water retention/regulation function, and still provide a habitat for birds, reptiles, and other animals. These functions, including their remaining floristic values, will be lost after conversion to agriculture use. Of the more than 120,000 ha of peat swamp forest in the study area, the total area of degraded peat swamp forest to be affected by the Project is only about 3,000 ha.

44. The loss of habitat would not have a major impact on the survival of wild flora and fauna species and biodiversity, provided sizable areas of the same ecosystems in the vicinity of the development sites are preserved. No barrages or weirs are envisaged across natural waterways. No construction of canals or disruption of the existing natural drainage system of 12 rivers, streams and creeks is planned. Hence, no interference with migration movements of aquatic wildlife (dolphins) and anadromous or euryhaline fish species will occur.

45. There is an urgent need to set aside a sizable, contiguous area of peat swamp forest for permanent conservation of a tropical peat swamp ecosystem. The conservation of such an area would also support sustainable development, because the area would be the single most important fresh water reservoir for domestic water supply. Moreover, the area would form an important nutrient reservoir for a diverse spectrum of organisms, some of great economic importance, and it would act as a purified water storage reservoir as well as buffer to trap silt, maintain water quality, and prevent floods and soil erosion.

46. At present, there is no national park or wildlife sanctuary in the study area. Since 1986, the Maludam peat swamp forest between the Saribas and Layar rivers and the Lupar River has been proposed as a wildlife sanctuary. The area includes the Maludam Forest Reserve (16,593 ha) and the Triso Protected Forest (26,554 ha). To the east, the area borders the Saribas-Lupar Protected Forest (31,470 ha), these three permanent forests together form a large contiguous stretch of peat swamp forest. It is proposed that the Maludam-Triso area be established as a national park under the Project (see section E. Alternatives).

4. Impacts and Mitigation Measures Related to Construction

47. The following potential impacts have been identified:

(i) erosion risks during drain construction (ii) impacts on drainage water quality during drain construction (iii) erosion risks in upland areas (iv) potential health risks (v) impacts on settlements during construction (vi) impacts related to road construction.

48. Erosion Control. The potential erosion hazards have been taken into account in selection of the sites, particularly in upland areas. The plan is to develop plantations in stages to minimize the disturbances to the natural vegetation and the size of the area exposed to erosion at any one time. Terracing is prescribed for upland sites. No slopes steeper than 25 percent will be considered for plantations. Terraces will be constructed with slight reverse gradient sloping towards the hillside to trap runoff and silt from the upper slopes. Cover crops are prescribed and buffer zones are planned between the plantations and the river banks, the PFEs and the coastal mangrove zones. The timing of construction works is scheduled so that negative impacts such as soil erosion will be minimized. The construction will generally occur during the drier months of June-August. Other proposed measures include avoiding deep drainage and retaining high ground water levels, compacting and revegetation of excavation spoils to reduce the acidity risk, and proper maintenance of drainage canals.

49. Road Construction. The stabilization of embankments by mechanical compacting and revegetation soon after construction will avoid erosion along the side of the roads. The installation of culverts, bridges, and other civil works will avoid disruption of surface hydrology and natural drainage. The establishment of buffer zones and "set back" zones will minimize the disturbances to nearby swamp land and riverine vegetation. Furthermore, the plans for roads do not include crossing any ecologically sensitive areas. Other mitigation measures to be implemented during the construction of the roads include: (i) avoiding pollution of soils, water, and 13 air by effluents or emissions from construction equipment; (ii) providing adequate sanitary and waste disposal facilities in labor camps; (iii) filling in and landscaping the borrow pits, which may become breeding sites for animal vectors for human diseases; (iv) providing prophylactic and curative drugs for laborers exposed to such vectors; and (v) providing compensation for the loss of land and land uses, including crops. The allocations for these measures are included in the budget for road construction. The standard national road design and construction safety guidelines of the Department of Public Works will apply.

5. Impacts and Mitigation Measures Related to Operations

50. The following potential impacts related to the operation of the Project have been identified:

(i) long-term changes in soil properties (ii) long-term impacts on water quality (iii) long-term impacts on fisheries and aquatic ecosystems (iv) long-term impacts on adjacent peat swamp forests (v) long-term impacts on wildlife (vi) wildlife damage to crops (vii) expected increase in use of agro-chemicals and its impacts (viii) impacts from agro-industrial operations

51. Judicious, safe, and timely application of fertilizers and herbicides can reduce the negative impacts on the environment. The major concern is about the use of paraquat and other herbicides, in particular when used for weed control in drains. This chemical has a high acute toxicity for man, animals, and aquatic organisms. A training program on the management and the use of herbicides will be conducted for the workers to prevent poisoning and pollution, in particular in places where drainage outlets are close to human settlements or to aquaculture/fisheries projects. In case manual clearing of the drain is not feasible because of costs and labor shortages the obvious alternative is to design the plantation in such a way that mechanical weed clearing of the drains is feasible.

52. Fertilizers and chemicals should not be applied during the wet seasons. Materials applied during the wet months are likely to be washed or leached off, which diminishes the effects and, at the same time , increases the probability of polluting the surface water. The following measures would avoid potential problems related to agro-chemical use:

(i) the plantation management should closely supervise safety procedures, and should prescribe safe handling and application methods, dosage, timing, frequency of application, disposal of surpluses, packing materials, and cleaning of equipment;

(ii) the fertilizers should be applied in split dosage to minimize losses, e.g., annual dosage to be split into 3-4 applications; the use of slow-release fertilizers would be preferable from an environmental point of view;

(iii) the judicious application of fertilizers (as practiced around the stem of the palm) greatly reduces the runoff and seepage of residues into drains;

14

(iv) the circular weeding around the stem base greatly reduces the residual runoff of herbicide residues into drains; the blanket spraying of herbicides should be avoided;

(v) the maintenance of soil cover reduces runoff and leaching of chemical residue into drains; the spillage of herbicides in drains should be avoided;

(vi) the timing, climate (wind direction, rains) and season should be taken into account in foliar spraying of agro-chemicals;

(vii) the regular clearing (preferably manual or mechanical) of drains would avoid the accumulation of excessive weeds and the creation of breeding sites for mosquitoes;

(viii) in the selection of pesticides, consideration should be given to the acute and residual toxicity, the rate of degradation in soil and water, and the toxicity of degraded components;

(ix) the national laws pertaining to prohibited chemicals, and ADB-guidelines on pesticides should be followed;

(x) if rodent control is required, anti-coagulant compounds such as Klerat and Matikus should be used in safe baiting stations (baited pieces of bamboo), to avoid secondary poisoning;

(xi) the monitoring of water quality by testing from physico-chemical changes in the water and pesticide residues is included in the EMP; existing water quality standards as set for the uses by the agencies in Sarawak should apply; and

(xii) the chemicals for pest and disease control should only be used when the outbreak has reached the threshold level. If applications are necessary, judicial usage of the right chemical at the correct concentration and in the correct manner should be practiced.

a. Mitigation Measures: Agro-industrial operations

53. Palm oil milling is an industry associated with large oil palm plantations. After the site for the mill proposed under the Project has been selected, a separate environmental impact assessment will be required. Mitigation measures for the palm oil mill effluent (POME) will be adopted to ensure that no seepage of untreated effluent into watercourses will occur. All the mitigation methods adopted must be approved by the Department of Environment (DOE), including those covering water discharge and monitoring, control of particulates emitted by exhaust gases from boilers, disposal of empty fresh fruit bunches, noise pollution, and safety and health aspects.

E. Alternatives

54. The site selection criteria used to delineate the areas suitable for the development of oil palm take into consideration the environmental aspects with a direct impact on agricultural productivity such as peat depth, and drainability, and the indirect impacts such as whether the 15 areas selected are adjacent to PF, or are near areas having environmental functions that should be preserved. For these reasons, there is little flexibility in terms of alternative sites. Shifting all proposed sites for the OPE development to the upland area would be economically unrealistic because it would neglect the need to improve agriculture production and to develop communities in the downstream area of the Saribas-Layar river basin.

55. While not strictly an "alternative" as normally used in environmental assessments, the balanced regional and resource development approach used for the proposed Project offsets the loss of environmental functions caused by the conversion of some areas to agricultural use because a large environmentally sensitive area will be brought under a system of total protection. Specifically, the proposed Project includes the establishment of a sizable national park in a viable peat swamp forest in conjunction with the development of infrastructure and the establishment of plantations. The area selected for conservation and proposed for development into a national park comprises 43,150 ha in the Maludam-Triso area.

56. A wide variety of fauna species still finds suitable habitat in these peat swamp forests. A large sizable population of the fully protected proboscis monkey (Nasalis larvatus) survives in the mangrove forest along the Maludam River. Reports indicate that the area could shelter the largest single population of this species. Also endemic in the Maludam area is the highly endangered subspecies of the banded langur (Presbytis melalophos cruciger). The Maludam swamp forest shelters what is thought to be the last viable population of this subspecies. Many species of birds such as waders, herons egrets, and kingfishers with habitats in the area are totally protected by law. Storm's stork (Ciconia stormii) is an internationally protected (endangered) species. The protected reptile species found in these swamps include the false gharial (Tomistoma schlegelii) and the estuarine crocodile (Crocodilus porosus), the latter mostly found in nipah palm communities near the mouths of the rivers. Both species are listed as endangered and are internationally protected. The park’s conservation values are significant and the area has potential for the development of ecotourism. According to the Asian Wetland Bureau (AWB) there is no known model of successful rehabilitation of heavily logged peat swamp forests. AWB is interested in Maludam being developed as a conservation area, since it would provide an exemplary model for the conservation of a sustainable peat swamp forest.

F. Economic Assessment

57. In the economic analysis the total cost of the project is estimated to be $105 million with an EIRR of 10-14 percent. The project costs include development of OPEs, construction of flood control structures, construction of a palm oil mill, pilot sago scheme and establishment of the Maludam National Park. The national park component costs about $1.7 million. All environmental mitigation costs have been incorporated into cost estimates of the Project and environmental benefits from the national park have also been included in the economic analysis of the Project.

58. The cost benefit analysis of the Project includes a number of project scenarios (sensitivity tests) based on variations in technical parameters. For example, the economic returns on upland soils, where no drainage is needed are higher than the economic returns on lowland soils, despite the potentially higher yields of fresh fruit bunches (FFB) on the latter, once they are drained. The economic returns are lower in the lowland areas because the costs for drainage and development of these soils, which includes the mitigating measures above regarding soil and water management to preserve existing hydrology of the peat domes, are much more expensive. The returns for OPEs under the Project are based on calculations of actual field operations for the upland soils, and semidetailed field drawings on a site-by-site basis for the drainage schemes. 16

59. The additional environmental costs of operations of the Project associated with drainage and the use of cover crops for erosion control have been included in the economic analysis, including the external costs required for mitigation measures as buffer zones. However, other external environmental impacts to the Project have not been valued and included in the economic analysis. These include costs associated with potential health risks from the use of agrochemicals and cost savings arising from the use of palm oil mill effluent as a fertilizer input.

60. The pilot sago plantation will investigate the economic feasibility of growing sago on a plantation basis. Because of the need to be able to test different water and drainage regimes, the drainage cost per ha for these pilot schemes is relatively high. The benefits from these activities will be incorporated in the research results that will allow the promotion of sago on a larger scale when information is available the type and costs of the different drainage regimes.

61. The benefits of the proposed national park include the values associated with biodiversity conservation, the preservation of endangered species, the value of the hydrogeological functions performed by the peat dome, the ecological functions performed in preservation of the viability of the adjacent mangrove forests, the global values associated with carbon sequestration, and directly productive values generated from nontimber forest products and sustained use of minor forest products (e.g., nipah palm and rattan). These environmental benefits have been valued and incorporated in the economic analysis. The proposed Maludam National Park alone shows 27 percent EIRR and NPV of $23 million over the project period.

G. Institutional Requirements and Environmental Monitoring

62. A detailed Environmental Monitoring Plan (EMP) with cost estimates, institutional reporting requirements, and parameters for monitoring of water quality, agrochemical usage, impact on aquatic life, changes in forest and wildlife and other impacts as based on public consultations is included in the EIA study. The EIA recommends that the EMP should be handled by a local private environmental consulting firm, especially in the initial implementation stage. After the operations of the Project are handed on to the implementing agency (e.g., the Sarawak Land Consolidation and Rehabilitation Authority) several aspects of the EMP could be assumed by them, with periodic checks by an independent authority.

63. A management plan has been proposed for the Maludam National Park, including a zoning plan with a description of allowable and non-allowable activities by local communities in each zone. While the Forest Department will be the main agency responsible for managing the Maludam National Park, it is expected that communities surrounding the park would participate actively in monitoring the protection measures. The DOE in will be responsible for monitoring agro-industrial activities such as the proposed palm oil mill.

64. During the construction phase, several of the environmental monitoring functions will be performed by the agencies involved in implementation of the Project. These include, for example, Department of Irrigation and Drainage (DID) which will be responsible for the construction of all access roads, flood control drainage schemes in the lowland areas, including the operation and maintenance while the schemes are still under construction. Upon completion of the Project, the Public Works Department (PWD) will be responsible for the maintenance of access roads and associated structures and the Sarawak Land Consolidation and Rehabilitation Authority (SALCRA) for the maintenance of the drainage and flood control system. 17

H. Public Involvement

65. During the design of the Project, efforts have been made to involve participation of the beneficiaries in the planning, implementation, and evaluation of the project. A social base line survey outlining key issues for public involvement has been conducted, and a plan for indigenous peoples has been prepared. Additional efforts to involve the public in a more active way are required. The personnel given the task to implement the Project must be trained in development communications to be able to know how to communicate with the community effectively. During the planning and implementation phases, considerable time needs to be allowed to explain verbally the concept and objectives of the Project to the people, especially when the majority of them are illiterate. Dialogue, meetings and group discussions should be held with the local community leaders, the longhouse committee, influential people, younger members of the community and the more reticent members of the community. During these functions, the concept, objectives and benefits of the Project, target dates, work mechanisms and work schedules should be discussed and agreed upon. During implementation of the Project authorized staff (scheme manager) should discuss work programs and targets for the month or year with the people, particularly women. One of the most effective communication channels, especially in the context of the Iban people, is the elected committee in the longhouse. The process of declaring a National Park also involves a proces of public consultation.

I. Conclusions

66. This EIA for the Project describes conditions of the existing environment and the potential significant impacts of activities under the Project. The Project will not generate significant air emission pollutants nor will it significantly pollute the waterways, although the use of agrochemicals may have some impact which will be mitigated by both buffers and drainage controls. The potential problems of soil erosion on the upland areas and those associated with the drainage of peat soils have been also analyzed and mitigating measures prescribed.

67. The Project would also alleviate poverty by generating significant economic benefits, including employment for the participants on OPEs and the adjoining population. The Project will also enhance the social amenities in the area.

68. The expected impacts on the environment posed by the proposed Project should pose no significant adverse environmental problems. Most impacts can be prevented or minimized by careful planning, construction and operation of the proposed Project developments. Minimizing detrimental environmental impacts was taken into account during site selection. These included drainability, presence of saline soils and potential acid sulphate soils, noninterference with existing peat swamp forest classified as PFEs, and other issues. The designs for drainage networks for the proposed sites, with fully closed and gated drainage and ground water table management systems, are based on minimizing irreversible changes in soil and water quality. The impacts on adjacent peat swamp areas resulting from site drainage will be prevented by additional construction works such as cut-off drains and embankments.

69. Identified adverse environmental impacts that must be mitigated and the cost associated with such measures were included in the estimates of Project costs. Appropriate engineering design and precautionary measures are suggested and are compatible with Malaysian and Bank environmental guidelines for agricultural and natural resources projects. An EMP has been proposed that outlines both the institutional framework for reporting and the 18 responsibilities for monitoring of specific environmental risks and mitigating measures that are to be adopted.

70. The importance of conservation of unique peat swamp habitats is included in the design of the Project. The establishment of a 43,147 ha national park is included as an integral part of the Project. The establishment of this component would demonstrate that the Project followed an exemplary approach to the conservation of a sustainable lowland peat swamp forest. Based on the measures that have been incorporated within the Project’s design to mitigate serious negative environmental impacts, the EIA study recommended that the Project be granted environmental approval by Sarawak‘s Natural Resources and Environment Board, and that it be implemented. 19

Appendix 2

Impact Assessment Matrix

PROJECT ACTIVITIES Land Land Crop Crop Clearing Preparation Establishment Management

Possible Impacts: 1 Minor adverse impacts 2 Moderate adverse impacts 3 Major adverse impacts A Minor positive impacts B Major positive impacts U Uncertain Clening of vegetation Clening of debris Disposal of roads & bridges Construction Installation of drainage & cluverts Terracing Preparation of planting holes Planting of crop Planting of legume covercrops Manuring/fertilizing/liming Weed control control Pest SOIL Surface erosion (upland) 3 3 2 B 11 B Acid formation (lowland) 1 A Subsidence (lowland) 3 A Soil compaction 1 1 A 1 Topsoil loss (upland) 1 2 1 1 B A HYDROLOGY Water yield 3 1 3 B Stream flow 3 1 A B Surrounding swamp 1 2 3 WATER QUALITY Sediment load 3 3 3 3 B 1 1 B Turbidity 3 2 3 2 B 1 1 B Physical Quality 3 2 3 3 B 1 1 B Chemical Quality 1 2 1 3 A 1 A333 Biological Quality 1 DRAINAGE Sedimentation 333 B1 1 A Drainage pattern 2 B GROUND WATER Water table recharge 2 Ground water quality 111 ATMOSPHERE Local climate U U Regional climate U Air pollution (dust, etc) 311 LAND Adjacent land uses B 1 AA ENVIRONMENTAL COMPONENTS USE Downstream land uses A 1 SPECIES AND Vegetation 3 1 1 A POPULATION Wildlife 3 1 1 1 3 3 Aquatic life 2 1 2 3 3 3 HUMAN AND SOCIO- Domestic water supply 3 3 3 3 B 1 1 A 3 3 3 ECONOMICS Physical safety 2 3 2 2 Short-term employment A A A A A A A A A A A Long-term employment B B B

(Reference in text: page 6, para 30)