The proposed plantation, funded by China, was expected to cover 1.8 million hectares along the mountainous border with Malaysian Sarawak, equivalent to about half the size of the Netherlands, WWF said in a statement.

Environmentalists also expressed concern that clearing land for the massive plantation would only exacerbate the problem of haze created by forest fires, which is choking neighbouring Malaysia.

Most of the region still holds huge tracts of forests, where threatened species such as orangutans and the Borneo bay cat live, WWF said.

New species have been discovered there at a rate of three a month over the past decade "making the area one of the richest on the globe in terms of biodiversity," the conservation group said.

Indonesian environmentalists said the planned plantation would likely worsen the haze from forest fires, considering the huge area of land to be cleared for the project.

"We fear it will result in another environmental hazard," said Farah Sofa, an activist with Walhi, Indonesia's leading environmental watchdog.

Indonesian newspaper reports said Chinese investors would invest 8.0 billion dollars in the plantation, which was expected to employ 500,000 workers.

WWF however said the infertile soil and steep, high-level terrain of the region, known as the "Heart of Borneo", were unsuitable for oil palm plantations.

"It doesn't make commercial or conservation sense to rip the forest out of the Heart of Borneo to plant a crop which cannot grow in mountainous conditions," said Mubariq Ahmad, chief executive director of WWF-Indonesia.

"Such a project could have long-lasting, damaging, consequences for the people who depend on the area and its massive water resources, which feed the whole island."

WWF said research carried out last year by the Centre for International Forestry Research in the Heart of Borneo area showed that out of 200 sample sites, none were suitable for oil palm cultivation.

The conservation group said the Indonesian government had given assurances the project would not harm the environment but the WWF insisted that development of oil palm plantations should not take place at the expense of forests of "high social and biological importance."

WWF argued there was plenty of unforested and degraded land on Kalimantan which was suitable for oil palm plantations.

Ahmad called on the Indonesian government to work only with investors who supported sustainable palm oil.

"Borneo needs sustainable development not short-term economic measures which will accelerate the loss of the remaining natural forests in Southeast Asia," Ahmad said.