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Indonesia’s Palm Oil Can Survive Without Europe

Interview with TEMPO Magazine

INDONESIA’S palm oil is facing a load of pressure. In June 2018, the European Union declared its plan to ban the use of palm oil as an additive for biodiesel by 2030. This is an extension to the previous deadline of 2021. The European Union plans to also gradually decrease its  import volume of palm oil. On Tuesday last week, the European Union’s ambassador to Indonesia, Vincent Guerend, also made his move. He requested the Indonesian government review the standards of Indonesian Sustainable Palm Oil (ISPO) certification which do not meet certification standards in Europe. He said the Roundtable on Sustainable Palm Oil certification was better recognized by the international market.

Executive Executive Director of the Council of Palm Oil Producing Countries (CPOPC) Mahendra Siregar responded by saying, the European Union’s policy violates the basic principles of the World Trade Organization (WTO), that obligates member countries to give equal treatment to all commodities. “Beginning 2020, exports will be limited. we consider that a discriminatory act,” said Mahendra, 56, in a special interview with Tempo’s Sapto Yunus and Gabriel Wahyu Titiyoga, at the Sudirman Central Business District in Jakarta, last Friday.

Bad news against palm oil has been Mahendra’s daily fare for the past three years, ever since he took on the position of executive director of the organization which members are Indonesia, Malaysia, and Colombia. One of his major duties is defending oil palm from negative campaigns-ranging from accusations that oil palm is the culprit behind the loss of biodiversity, deforestation, and the death of thousands of wildlife, such as the orangutan.

In an interview that lasted about an hour, the former chair of the Investment Coordination Body in 2013-2014 also discussed Indonesia’s efforts in lobbying the European Union to cancel the ban, and diversifying the market for oil palm products from Indonesia and other producing countries. “We see palm oil as the most sustainable plant-based oil comrnodity and is important for the earth,” said Mahendra, who in October was designated Indonesian Ambassador to the United States of America.

European Union ambassador Vincent Guerend suggests lndonesia to review the ISPO certification. The EU is more amenable to the Roundtable of Sustainable Palm Oil (RSPO) certification. Your response?

Indeed, I wish to question the logic of his statement. In January 2018, Europe declared oil palm as high risk towards indirect land-use change (ILUC). This means, oil palm in the European perception is a risky commodity. This is confusing, because RSPO certified products, also those I using other certiflcation, should then also be considered high risk for ILUC.

How do the palm oil producing countries view this issue?

To me, the focus is now on Indonesia and the other palm oil producers and the world’s consumers, and is no longer on the European Union. Indonesia is the world’s biggest consumer of palm oil. We’re even bigger than India, which in itself is one and-a-half times the size of Europe.

Why is the European Union suggesting employing RSPO standards instead of ISPO standards?

They are different types of standards. ISPO is mandatory, a fulfillment of the laws and regulations governing palm oil companies operating in Indonesia. The RSPO is a consensus among its members, which currently more and more consists of non-governmental organizations. RSPO is voluntary. Total production of palm oil from Indonesia, Malaysia, Colombia, Thailand, that complies to RSPO is far larger than that of European demand. So, Europe makes requests, we comply, and then they reject us. Furthermore, they dub our product as being of high risk.

Europe criticizes the ISPO for not recruiting independent auditors nor involving community-based organizations…

Of course, by all means, let them launch any criticism they wish to. The question is, on the other hand, does Europe accept RSPO products, when RSPO already involves independent auditors and non-governmental organizations? I still don’tget the logic. They suggest we do something, we do it, and then they refuse us. Even more headache-causing is, we continue to go on believing what they say, as if it is all true.

How many landholdings have now been covered by the ongoing ISPO certification?

Currently we’ve covered nearly 50 percent of all landholdings. Because it’s mandatory, all the palm oil companies are compelled to comply. But, with ISPO, small-holding farmers also get priority. Under the RSPO, instead, documents state that the most high-risk holdings are with the small farmers. Yes, this is understandable, because the system is costly. Who would be willing to pay up?

The ISPO was targeted to achieve 100 percent by 2015. What are the obstacles that have made its progress so slow?

With decentralization, a system from the central government will not automatically be easily implemented in the regions. We do not have uniform capacity. The central government does not have regional offices. We are currently under the process of bolstering the ISPO system to make it more effective. ISPO is the representation of compliance to all the laws and regulations in Indonesia conducted mandatorily. If this is considered insufficient, then the conclusion would be that the laws and by laws of Indonesia are also insufficient. Let me query this, what rights have other countries to judge whether Indonesia’s legal mechanisms and tools are good or not good? Things are different if what we’re discussing is an international treaty.

There are no international treaties for palm oil?

There are none. Only tropical countries have oil palms.

When did Europe beginning pushing lndonesian palm oil into such a tight corner?

In the past two or three years, when poIitical parties in Europe began not achieving majority voice and had to begin creating coalitions left and right. Political behests began to get slipped in. Funny, because the idea for biofuel came from Europe, through RED (Renewable Energy Directive) I in 2009. They were the ones who taught us about using renewable energy, including palm oil.

Europe needs palm oil produced in greater quantities and more rapid production. Why are they obstructing Indonesian palm oil?

According to me, this is more a matter of trade war. If it’s only an issue of sustainability, our certification is already compliant.

Has the lndonesian government made any effort to approach the European Union to have the ban lifted and cancelled?

We did not only make a mere approach. President (]oko Widodo) even went as far as conveying a direct protest at the ASEAN-European Summit (held in Manila, the Philippines, November 14, 2017). The government also sent a direct letter. What more can we do? They shouldn’t be so discriminatory. We must realize, things have already entered into the realm of mainstream politics. So, we can’t be so naive as to think, if we approach them in the morning, daytime, afternoon, and evening, by tomorrow things will have changed.

After the ban by the European Union, which countries are now the export destinations for lndonesia’s palm oil?

The biggest are India, China, Pakistan, Bangladesh. Not only are these countries with huge populations, they also need palm oil that is affordable. This is why to my view, our approach is through the Sustainable Development Goals (SDGs). We will improve our coordinating skills, say in our approach to China, which wishes to bolster the use of B5 (Biofuel 5 percent) at their national level.

What isthe CPOPC’s role in this?

What’s possible is for us to push policies and initiatives that prioritize big markets. We view palm oil as the most sustainable plant-based oil commodity and very important for the earth. Worldwide demand for plant-based oil continues to increase, and of course the demand is for affordable plant-based oil, and reliable and smooth production capacity. If it’s not from oil palm, the alternative is from soy, rapeseed, corn, to sunflowers, which at the very minimum need six to ten times larger hand-holdings compared to that needed by oil palm for the same production volume.

These countries do not demand as high the standards ofthe European Union?

No, even though they are currently being egged on by NGOs to quickly put in place systems similar to that of Europe. These countries also have their own interests, such as the SDGs. They need access to affordable vegetable oil, not like the standard expected by Europe. That standard will make no-one able to afford any oil.

ls the export volume to these countries on par with that to Europe?

It’s far larger. India, which is only one country, can buy up to 10 million tons. Europe, which is 28 countries, only buys seven million tons.

So, then there’s no problem having exports to Europe stopped?

True. In my view, Indonesian palm oil can survive without Europe. I’m not so sure Europe can survive without palm oil. A study has already been made on how and what will happen if indeed Indonesia unilaterally halts exports of palm oil to Europe and is followed by the other producing countries.

Hasthis been discussed with the CPOPC?

Yes. Let’s just wait and see, because there are 330 industries in Europe. For us, all we have to do is seek out a new market.

So, lndonesia and the other oil palm producing countries can reject the Eropean Union’s regulations?

We not only rejected it. We have taken the matter to the level ofthe WTO. From 2020, our exports will be limited. We consider that discriminatory action.

How far has the report to the WTO gone?

There are two steps at the WTO. If a limit has already been put in place, we can take it to the Dispute Settlement Body. A few months ago, we took the issue to the Technical Barriers to Trade committee of the WTO. They have their own agreement basis, among others, countries that determine trade barriers, such as RED II, have to make transparent dissemination of information about the ruling to all the members of the WTO. Europe has made no answer to date. To them, they have violated no WTO ruling. For us, inquiry will be made by the WTO, not by Europe.

ln the current situation, can palm oil producers themselves determine who their buyers are?

Not only may we determine our own buyers, we can also align them with the SDGs, which total 17 goals in all. There should be a balance between the environment, economic development, and social targets or issues. So, it’s not only the one or two things determined unilaterally by Europe, and further only using the ILUC concept and methodology which is not internationally recognized.

All this while, Europe emphasized that oil palm causes the loss of biodiversity. How do you respond to that?

Here’s my question, how do you measure that? Mr. Ambassador (Vincent Guerend) said the measurement was the RSPO. We complied, and still they rejected us and accused us of being high risk.

What are lndonesia’s steps for reforestation and carry out conservation of natural and environmental resources?

That is everybody’s responsibility and needs common policies, especially from the government. We already have a moratorium policy on oil palm plantations. It’s now the turn of law enforcers and all of us complying to them. If there are other matters, the real issue is always law enforcement, maybe also corruption and governance, but not prohibiting oil palm.

In your view, have palm oil producing countries done their best to carry out what’s good for conservation?

Yes, though obviously not as perfectly as possible. But the efforts made have been huge. Take a look at other commodities in Indonesia, Malaysia, or the other palm oil producing countries. Do they carry out certification efforts, best practices, efforts to comply to international standards, as have been carried out by oil palm? No. We have made many efforts, extending the moratorium, improving all aspects connected to the status of ownership of holdings by the Ministry of Agriculture. To increase small farmer productivity, the biggest issue is always land ownership.

Are the notions of sustainable plantations and environmental-friendliness being driven into smallfarmers?

Yes. But of course we have to be careful in taking care of this issue. If we emphasize the SDGs, small holding farmers are the key to success. It is their progress that will determine at least five or six of the 17 goals. on the other hand, farming practices that only focus on environmental issues, such as that carried out bythe RSPO, discriminates against small farmers.

Why so?

Because, where would they get the knowledge, resources, and experience from to put in place the things demanded by certification and sustainability? The only ones capable of compliance are big companies with infinite resources.

You have said by 2050 world demand for palm oil will reach 400 million tons. With average production of six to seven tons of CPO per hectare per year, in the next 30 years, we will need a total of 30 million hectares of land. How large would lndonesia’s contribution be?

I think we will still continue to be large in our contribution to increase productivity. Other places that will contribute land will be Colombia, several African countries, whose tracts of unused lands are huge.

How many new landholdings would we be increasing?

That would be according to our needs and the capacity of our land. If we have limited land, then we should only focus on productivity. Big companies have surpassed the 6-7 tons figure, even reaching 8 tons and more per hectare per year. With innovation and creativity, research, we can reach over l0 or 11 tons. If we focus on that, our story would certainly be different.

So, there’s the possibility of increasing how many percent of landholdings in Indonesia?

Oil palm tracts are 13 million hectares of the total area of Indonesia, which amounts to almost 200 million hectares. That figure is not too high. OiI palm not only contributes to domestic income, but also at the international level. We have very few competitive agricultural products outside the country. What else has so many derivatives, outside of oil palm? The moratorium policy is the most appropriate. We also have to understand that the culprit behind the current drop in price is, among others, oversuppiy.

Several environmentalists have released data saying 2,5 million hectares of forest was degraded in the past 20 years by oil palm plantations…

Globally, the use of land for biofuel has only been four percent of all the land used for agriculture, not only oil palm. So, when looked at that way, what’s the big fuss about?

Oil palm plantations are also accused of damaging wildlife habitats, in fact causing the deaths of thousands of orangutan.

That is a unilateral accusation. There shouldbe institutions and bodies that can look into the matter more objectively.

How serious has the lndonesian government been in repairing damage and degradation?

As reported by Tempo (in an investigation of oil palm permits in Boven Digoel, Papua), it was an issue of legal enforcement, governance, and corruption. It wasn’t an issue in the realm of the environment. I am confused. When enforcement is lacking, and there’s the issue ofcorruption, the blame is put on oil palm. Where’s the logic?

Do issues like that have a big impact?

Yes of course, because they are considered justification for all those unfounded accusations. These are governance issues. Much like the matter of being caught red-handed say in a real estate deal. Would this mean that tomorrow, nobody will be allowed to build any more housing?

Should the CPOPC be bolstered by increasing their membership?

We’d like to increase out cooperation and coordination. Right now there are only three members: Indonesia, Malaysia, and Colombia. We will be adding Thailand, as an observer.

How big is the percentage of palm oil production from those three member countries?

Ninety percent of world palm oil production.

DECEMBER 17,2018 – TEMPO

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