T

he palm oil sector is again in the spotlight. The Indonesian government aims to strengthen the regulation of palm oil in the country by reconstructing the Indonesian Sustainable Palm Oil (ISPO). This move started in 2016 and is expected to be completed by the end of 2017.

Although the ISPO is a national mandatory certification that was introduced in 2011, it has made little progress in improving sustainable practices in the palm oil sector in Indonesia.

As of 2016, only about 10 percent of over 2,000 palm oil companies in the country were certified. Moreover, within a three-month period in 2015 (July to October), Indonesia lost over 2 million hectares of forest and peatland due to land burning in cases suspected to have involved companies.

Increasing awareness on the industry’s contribution to the national economy and growing criticism of its sustainability have pushed the government to rework the ISPO. In 2015, palm oil contributed US$12.3 billion to national export revenues, the second largest contributor after coal briquettes. It brought higher revenues than oil and gas exports. However, global criticisms, particularly from European Union countries, are seen as threatening its economic potential.

In April 2017, Members of the European Parliament (MEPs) voted to ban palm oil-based biofuel imports to the EU. A study funded by the European Commission on Oct. 4, 2016, reveals that the EU 2020 biofuel mandate put 2.1 million hectares of land in Southeast Asia under pressure from oil palm plantation expansion, half of which is established at the expense of forests and peatland.

Therefore, the resolution specifically mentioned that the ISPO and the Roundtable on Sustainable Palm Oil (RSPO) failed to address the unsustainability of the sector. Currently, the EU market for Indonesia’s palm oil accounts for 15 percent of Indonesia’s total palm oil exports and is expected to grow with the EU biofuel mandate.

In reworking the ISPO, policy makers can start by exploring one of several major challenges: the global sustainable palm oil market does not recognize the ISPO. This is partly due to the fact that ISPO implementation does not reform land allocation institutions in Indonesia. Rather, the ISPO’s assessment on land legality is still based on permit documents such as the plantation business permit (IUP) and the land cultivation right (HGU), which are problematic.

The permit documents are issued by a number of stakeholders (ministries) with contesting interests, resulting in overlapping land allocation and, thus, making the ISPO less credible. The complexity continued with decentralization in which the desire to generate natural resource extraction-based income and corruption have proliferated in regional governments.

Although Law No. 14/2008 guarantees transparency, the government does not widely disclose to the public information about land allocation. NGOs could help the government with independent monitoring, which could pressure companies to comply with the ISPO. In 2015, the Environment and Forestry Ministry rejected Greenpeace’s request for the forest cover map in a shapefile format. Several courts in the Central Information Commission (KIP) and the state administrative court followed to process the rejection, yet the conflict still continues to date. This experience reveals a transparency problem in the country.

A conflict of interest between the government and NGOs discourages transparency. From the government side, palm oil is a lucrative sector that significantly contributes to the national economy, even if plantations largely carry out unsustainable practices, including expansion into forests and peatland, and the use of fire.

In line with the economic interests, the government perceives the sustainability issue as a “black campaign” that aims to disrupt palm oil dominance within global vegetable oil markets, given that palm oil is the most productive and price competitive of the vegetable oil commodities, such as sunflower, rapeseed and soybean.

On the other hand, NGOs see oil palm plantations as a source of environmental and social destruction. Consequently, cooperation between the government and NGOs with respect to the ISPO is absent, leading to ineffective independent monitoring and a less enforceable policy.

The government’s commitment to enforcing the policy poses as another challenge to the ISPO. The government invests only a few resources into the ISPO. In 2017, for 11 months of its operation, the budget allocation to the ISPO Secretariat was less than Rp 230 million ($16,951).

Moreover, the secretariat only has five employees to verify all documents from companies. The limited budget and number of employees affect the capacity of the ISPO to ensure the sustainability of Indonesia’s oil palm plantations, which extend to more than 11 million hectares.

In 2017, Forest Watch Indonesia found a buildup of 800 company application documents in the ISPO Secretariat, with only 115 company documents being processed. Some suggest that while the palm oil sector is important to Indonesia’s economy, it is less politically important than staple commodities or food sectors (e.g. rice, chili, onion, etc.) which commonly drive mass demonstrations when food prices increase. Therefore, more than 80 percent of the budget in the Agricultural Ministry is allocated to food agricultural sectors, while others are passed over.

All in all, these issues have contributed to shape the ISPO to be a regulatory system with a lack of credibility and weak enforcement. With regard to the government agenda to relaunch the ISPO at the end of this year, to improve its credibility, the ISPO should include and be followed by reforms in land allocation institutions, such as through the one map policy.

Regarding the transparency issue, the government and NGOs could develop a way to work together and improve the independent monitoring mechanism so that the policy becomes more credible and enforceable. Finally, the government’s commitment to invest sufficient resources in the ISPO is critical.
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The writer is a research student, Master of Energy Change at The Australian National University.