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Is Indonesia prepared to defend its palm oil sector?
The government has shown its commitment to defending the palm oil sector from a negative campaign waged by the European Union (EU), which has been resilient in its stance against the commodity in recent years
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span>The government has shown its commitment to defending the palm oil sector from a negative campaign waged by the European Union (EU), which has been resilient in its stance against the commodity in recent years. However, it has neglected several internal issues that may contribute to the EU’s anti-palm oil policy.
The absence of accurate data on oil palm plantations and low engagement with political EU figures may hamper the government’s efforts, according to Indonesia’s palm oil stakeholders.
Indonesian Oil Palm Estate Fund (BPDP-KS) president director Dono Boestami revealed recently that the organization had only three sets of data on the palm oil sector’s total land use in Indonesia, all of which come from state agencies.
“How can we get a valid figure of our palm oil total production when we still don’t know the exact total area of our plantations? […] It’s unsurprising if we get criticized for our lack of valid data,” he said at a palm oil seminar in Jakarta.
The three agencies that were able to provide palm oil data are the Corruption Eradication Commission (KPK), Statistic Indonesia (BPS) and the Agriculture Ministry, who recorded 20 million hectares, 12-30 million ha and 14 million ha in oil palm plantations, respectively.
Deforestation is one of the issues that the government has been trying to tackle as environmental groups and the EU have used it to criticize Indonesia’s palm oil products.
Dono said the discrepancy of data provided by the state agencies was due to their different definitions of plantation areas. The KPK, for example, based its figure on oil palm permits while other methods exist using satellite imagery.
“When we have valid data [on oil palm plantations], nobody could challenge it. Once the data is valid, we could know what kind of policy [on controlling expansion] to issue,” he said.
He added that the BPDP-KS recently collaborated with the BPS to “fix” the data on national palm oil production, which he expected could be endorsed by the government as the only valid data on production once it is completed.
It has been several years for palm oil, one of Indonesia’s most valuable commodities, to face a series of “negative campaigns” from the EU over sustainability issues. Indonesia believes the campaign is simply an attempt by the EU to protect its trade deficit.
According to European Commission data, Indonesian exports to the EU stood at US$17.1 billion in 2018, while imports were at $14.1 billion. The trade surplus with the EU has occurred for at least the past four year.
Knowing the importance of Indonesia’s export value to EU, it is necessary for the government to retaliate against the EU’s anti-palm oil stance, according to Peter F. Gontha, a former ambassador and special staff at the Foreign Ministry.
However, Indonesia has been lacking diplomatic effort, especially in communicating with EU parliament members about the facts of Indonesia’s palm oil sector.
“For example, we don’t have an office [for palm oil issues in Europe] like Malaysia does in Brussels [the Malaysia Palm Oil Council regional office]. We have to engage them from the top down, playing golf and drinking wine with them. We don’t do that,” he said.
Peter further said the country should have pushed the Business Competition Supervisory Commission (KPPU) to investigate British-Dutch consumer goods manufacturer PT Unilever Indonesia, which was accused of still using Indonesian palm oil.
“The KPPU should investigate Unilever. Its country of origin says no to palm oil, but the company has been using [Indonesia’s palm oil]. That is a double standard,” he said, adding the government could also ask for Europe’s antimonopoly body to also investigate the case.
The statement came after the European Parliament kicked off a session to deliberate the EU Renewable Energy Directive (RED) II, submitted by the European Commission on March 13.
If RED II is approved, the EU, which is Indonesia’s second-biggest palm oil customer, will categorize palm oil as an unsustainable product and phase out its use in biofuels by 2030.
As a response, Indonesia has said it would take firm actions against the EU by, for example, challenging the EU’s anti-palm oil policy with the World Trade Organization (WTO).
Indonesia has also threatened to withdraw its commitment on climate change, Coordinating Maritime Affairs Minister Luhut Pandjaitan said recently.
One of the recent agreements on climate change that Indonesia signed was the 2015 Paris Agreement with other 195 nations, a deal to cap global warming under 2 degrees Celsius.
“If we’re talking about the environmental issues [in the palm oil sector], the United States was able to exit the climate change [deal in Paris] and Brazil could potentially do so as well. So, we could consider withdrawing from the deal also. Why not?” the retired army general said.
Indonesia, which owns 54 percent of the crude palm oil (CPO) market share, is the world’s largest CPO-producing country with an average production of 40 million tons, while Malaysia is the second.
Responding to the issue, EU Ambassador for Indonesia and Brunei Vincent Guérend said recently that the EU had no problems with Indonesia’s plan to challenge its policy at the WTO, adding it was the right way to settle a dispute.
“We believe the trade dispute could be settled in a right way in WTO. […] We also deny we are discriminating palm oil given the fact our import duty on Indonesian palm oil to the EU is only 5 percent, whilst India’s duty reached 40 percent,” he said as quoted by kontan.co.id.
