Delivered by Mahendra Siregar, the Executive Director of CPOPC at the CPOPC Business Forum: Boosting Domestic Demand and Stepping into the Next Frontier, 12 February 2019, Putrajaya, Malaysia
Honorable Minister Teresa Kok
Yang terhormat Ibu Musdalifah
HE Ambassador Mauricio Gonzalez Lopez
Dato Dr Tan Yew Chong
Distinguished Speakers and Moderator
I wish to welcome all those present at this meeting today to promote cooperation and exchange of views within the business community especially in the area of biofuel.
This initiative forms part of the CPOPC strategy to increase the demand and consumption of palm oil in palm producing countries especially in the biofuel sector. In order to achieve this however, we have to recognise the challenges that are faced in promoting biofuel to the market. These are not just about political will, but it s also the need to plan an effective supply chain. Unlike crude oil production, we are not in position to open and close the tap of palm oil production at will.
While the benefit of developing biofuel is obvious for the palm producing countries, it is surprising that the potential for using palm oil in biofuel has not been fully realised; and there is also a significant difference in the level of development within palm producing countries. Although Indonesia currently takes a lead over Malaysia, the strategy should be one of unity of purpose, a common vision on how to harness the potential of our domestic biofuel markets for the benefit of palm oil.
In many respect, I believe the domestic market has been ignored as traditional supply chains to international markets have prevailed; in spite of the much higher, any in many cases, the uncontrollable risks that this international trade entails. I should also stress that the most robust trading nations have purposely developed their own domestic markets to mitigate the unexpected development of the global economy. Apart from this strategic view, we seem to be neglecting the real opportunity in front of our eyes as we seen to be blinded by distant lands.
Having said this, the development of the biofuel market is very challenging. In the case of Indonesia, the benefits of developing biofuel was and is obvious; that is the need to reduce dependency on imports of approximately 850 000 barrels of fossil fuel per day. So, not only does the biofuel market in Indonesia support the core national interest of energy security, but it was also key for the palm oil industry in Indonesia as an additional outlet to reduce stock levels. In spite of these key advantages, it took several years for Indonesia to come to the B20 program which was finally began in late 2018; And to dramatise the circumstances, it took a Rupiah depreciation to its lowest level in the last 10 years to make it happen!
In spite of the progress being made, it is important to maintain and accelerate the momentum of B20 in Indonesia and B10 programs in Malaysia and beyond. The challenges ahead are far greater than in the past. There is a growing perception and belief that biofuel is already a thing of the past, and the future lies in smart battery technology and other renewable energy industries.
I could understand if this argument comes from a Japanese engineer or auto industry, or even an average American and European. What I can’t believe is this argument also come from a number of senior Indonesian and Malaysian government officials who are responsible for the palm oil industry! And their logic is, why bother promoting biofuel industry since it will not stay for long. It seems that we are still too easily manipulated by the international interests railing against palm oil. And with this mind set, it is hardly surprising that the potential of palm oil remains unfulfilled.
While we’re still struggling against this self-defeating mentality, other countries have developed Hydrogenated Vegetable Oil (HVO) technology which basically have increased vegetable oil substitutability with fossil fuel to 100 percent. There are several HVO facilities now in the World. Some in Europe and others are in Singapore and most depend on palm oil as a key feedstocks as it is the most competitive vegetable oil on the market. We should be developing HVO facilities in Indonesia and Malaysia as a clear signal that the biofuel market is here to stay with a very bright, long term future.
In the context, the policy disconnect between government and private sector may provide palm producing countries with a second chance. This time it’s the European countries that are creating a policy environment that would be so impossible for the HVO Industries to survive in that region. While this caste a dark shadow on the prospects of palm oil exports to Europe, this could be an excellent news to the biofuel industry in our countries. If we could relocate these industries to Indonesia and Malaysia, maybe we don’t need to export palm oil at all. It’s up to us to decide our own future: do we want to keep relying on high-risk unreliable markets, or we’re committed to improve our investment climate, so that HVO, bio-avtur for jetfuel, FAME biofuel and other downstream industries in the palm oil sector establish their base here.
My last point is on the EU RED II. I’m happy to report to you that ASEAN member countries strongly supported Indonesia and Malaysia on the palm oil situation against the EU. This is quite rare if not the first time for ASEAN where the interests of 2 or 3 countries could unite the organisation to postpone the strategic partnership with the EU.
We need to capitalise on this unity by ensuring this time that it will be us, the developing countries that set the narrative on energy and the environment. It’s time for us to promote the real global platform for sustainability. It’s the Sustainable Development Goals of UN 2030 for all vegetable oil, where palm oil should be the most sustainable of all.
In this respect, the CPOPC is working hard and is committed to promoting SDGs in the vegetable oil sector. We will be creating as many global platforms as possible so that the contribution of palm oil to safeguarding the environment is understood in the context of vegetable oils in general to respond and supply the increasing global population demand, which will be doubled to be over 310 million ton by year 2045.
I wish you all a productive discussion and look forward to receiving and implementing the outcome.