The government is designing a road map for sustainable trade, which is expected to be finish this year, in a bid to boost its export edge and enhance the competitiveness of local products amidst new challenges from overseas markets.
Trade Ministry’s director general on foreign trade Deddy Saleh said that this road map would become a reference for various stakeholders in the trade sector, including related ministries and businesses, to improve trade in compliance with acceptable standards demanded by export markets.
“The [international] trade has changed. We cannot produce and market products in conventional ways. In down streaming the industry, for example, we cannot only change raw materials into finished goods, but also have to pay attention to how the processes fulfill sustainable trade requirements,” he told The Jakarta Post on Friday at his office in Jakarta.
Deddy added that in the changing the trade landscape, the challenge would be related to producing not only quality goods, but also products which complied with sustainable trade requirements, such as environmentally friendly and socially compliant goods, in which business practices are expected to be socially responsible in production, supply and distribution chains.
“A quality product will not be accepted by the market if it does not fulfill the approved environment or labor standards,” he said, citing an example that under the prevailing standards, manufacturers would not be allowed to exploit workers.
Deddy went on by citing the purchase suspension of Indonesia’s palm oil, one of the country’s main export commodities, by large international buyers as another example.
In 2010, several international buyers of local palm oil, including Swiss-based food and beverage company Nestle SA and US hamburger chain Burger King suspended purchases from Sinar Mas Group, one of Indonesia’s major palm oil producers, due to concerns that the firm had damaged rain forests and peat land due to expansion of its palm oil plantations.
“Our palm oil has been considered to be not in compliance with environmental standards. We learned from that. The business people must take responsibility by doing something to comply with all requirements,” Deddy said, adding the compliance would also be a solution whenever environmental issues were employed as trade barriers to enter certain markets.
Indonesia, the world’s largest palm oil producer, is currently developing its own version of sustainable palm oil cultivation, the Indonesia Sustainable Palm Oil (ISPO) certification, which will be mandatory in all oil palm plantations across the country.
The ISPO certification includes wide-ranging measures, such as plantation licenses and plantation management, cultivation techniques, environmental management, surveillance and responsibilities to employees and the community.
The plan was unleashed last year by Agriculture Minister Suswono and was considered by many as a rival to the Kuala-Lumpur based Roundtable on Sustainable Palm Oil (RSPO), which according to Indonesia’s palm oil industry, was biased towards buyer countries and was too expensive.
To meet international buyers demands’, the government is also initiating its own timber certification scheme, which complies with regulations on export destinations, such as the European Union, after deforestation allegations hampered its timber exports several years ago.
Exports have been one of the major drivers in Southeast Asia’s largest economy. During the first and second quarters of this year, exports contributed a respective 25.4 percent and 27.3 percent to Indonesia’s gross domestic product (GDP), totaling Rp 1,738.2 trillion and Rp 1,811.1 trillion respectively, according to the Central Statistics Agency (BPS).