How Does RED II Discriminate Indonesian and Malaysian Palm Oil Industry?

By Intan Tawaddada Ilaiha (Photo: World Resource Institute Indonesia)

The banning of Palm oil usage in the European Union ruins the economy of smallholder farmers in Indonesia and Malaysia. It remains the issue of poverty for developing countries to suffer.

In December 2018, the European Union revised Renewable Energy Directive (RED) called RED II, which bans the use of palm oil (WTO, 2018) and closes the opportunity for Indonesia and Malaysia to export their palm oil production. They maintain to use another biofuel such as sunflower oil that they start to produce themselves. The reason to ban the use of palm oil is that the European Union claims that the production of palm oil causes a lot of deforestation in Indonesia and Malaysia. Leaving the palm oil market in Indonesia and Malaysia makes the smallholder farmers suffer from being collapsed as Indonesia and Malaysia are the biggest exporters for European Countries. Almost 85 percent of palm oil in European Countries is from Indonesia and Malaysia. Moreover, palm oil is versatile if we compare it to other oil for cosmetics, pharmaceutical, food, fuel, etc.

The main reason to ban is because of bad practices of palm oil plantation. The fact is that palm oil-producing countries have done so much to solve this issue such as the commitment of reforestation, conservation, research, and also the stricter certification for sustainable palm oil industry such as ISPO (Indonesia Sustainable Palm Oil) Certification, MSPO (Malaysia Sustainable Palm Oil) Certification, and RSPO (Round Table for Sustainable Palm Oil). It is called discrimination because in RED II they do not give a clear explanation about how a sustainable plantation should be. There is no such amount of how large the plantation is. So, no matter how hard Indonesia and Malaysia have tried to prove that they have improved their palm oil production sustainability, it will be no use since the European Union will claim the whole production of palm oil as a non-sustainable production that will damage our environment.

The problems remain with the ban and the significant difference of palm oil tariffs in Europe. The Netherlands maintains its partnership with Indonesia and Malaysia to buy palm oil. The Netherlands is one of the countries in the European Union territory that does not want to bind its regulation with the RED II result. The Netherlands itself is also a producing country of palm oil, but they can sell their palm oil at way higher prices in the European Union Countries. The difference is around USD 150 per-metric ton (CPOPC, 2020), it remains unfair since we can say that the Netherlands palm oil is mainly from Indonesia and Malaysia. The tariffs sanctions exist because the European Union claims Indonesia and Malaysia have bad practices of palm oil plantation. Under the same logic, it means the Netherlands also distributes the palm oil that has the chain of bad practices palm oil plantation, but why does the Netherlands not have the same tariffs sanctions? So, the European Union proclaimed aim to stop the deforestation of Indonesian and Malaysian rainforests by giving them tariffs sanctions is questionable.

From 9 December 2019 to 2 November 2020, Indonesia has requested consultation in WTO to talk about the palm oil dispute (WTO, 2020). Other countries such as Argentina, Brazil, Canada, China, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, India, Japan, Korea, Malaysia, Norway, Russia, Singapore, Thailand, Turkey, and the United States reserved their third-party rights in that consultation (ibid). Nevertheless, the palm oil settlement dispute remains unclear for Indonesia, Malaysia, and the European Union. This means that the future of smallholder farmers in Indonesia and Malaysia remains unclear as well.

This whole regulation from the European Union will give no benefit at all to Indonesia and Malaysia. Nevertheless, I can assure you that banning palm oil from Indonesia and Malaysia will give no benefit the decreasing global warming and climate change. The whole world will rely on Indonesia and Malaysia for its reforestation to the lungs of the world. At the same time, they also give no benefit at all to Indonesia and Malaysia with a ban from the European Union. How can the world expect Indonesia and Malaysia somehow to change its palm oil plantation into a complete forest by giving them sanctions? The people in Indonesia and Malaysia especially smallholder farmers of palm oil are suffering from this regulation while the world forces them to change their lifestyle and jobs drastically. Furthermore, there is no such guarantee if the European Union leaves the Indonesian and Malaysian palm oil market and they will change its plantation into the forest due to the economy of hundreds of smallholder farmers. The worst case scenario will find another market apart from the European Union Countries market to survive and we cannot guarantee this new market will demand sustainability. We are sure if Indonesia and Malaysia still try their best for a sustainable palm oil industry even though the new market will not demand sustainability. But it is really unfair because Indonesia and Malaysia do not get the reward they deserve for trying their best to sustain the sustainable palm oil industry amid economic setback due to the coronavirus outbreak.

At the end of the day, saving the environment has to be everyone’s commitment on this whole planet due to our existence, and we all take advantage of it. It is a selfish act to leave this issue to Indonesia and Malaysia just because the forests are located there while we all take advantage of it no matter what country we live. Then, we close our eyes when their smallholder farmers are suffering from the impact of discrimination regulation. We cannot leave the palm oil market, but we can demand to reform the palm oil market to be a better one.

Intan Tawaddada Ilaiha is a Final Year Student of Communication Science from the Social and Political Faculty in Universitas Sebelas Maret. She concerns about low politics, international relations, and humanitarian issues.