Commentary, “Our Palm Oil Conundrum” in Diplomatic Voice

Below is the full text of a commentary I recently wrote for Vol. 1 2017 of Diplomatic Voice, a publication of the Institute of Diplomatic and Foreign Affairs, Malaysia. You can view the entire publication here.

Our Palm Oil Conundrum

Malaysia’s latitude and tropical weather are ideal conditions for the oil palm tree to flourish. Currently Malaysia is the world’s second largest producer of this ‘golden crop’. We held the pole position until 2008, when Indonesia became the world’s biggest producer, a position they still proudly hold today. Combined, Indonesia and Malaysia produce more than 80% of the world’s palm oil.

Palm oil is one of the most important types of oils and fats available in the world today. Its usability is ubiquitous; palm oil is not only a common ingredient in foodstuffs, but it is also widely used in the cosmetics industry and in cleaning products, and nowadays increasingly for biofuel as well.

The demand for this ‘green gold’ has kept prices high on the commodity markets, and has been credited for bringing about national development and improving standards of living across the board in producing countries. As the world population continues to increase, the demand for oils and fats in the world is expected to continue to rise.

The oil palm is one of the most efficient crops for oils and fats. A relatively large amount of palm oil can be produced from quite a small area of land. For the same quantity, soybean oil production would require almost ten times the land area. This means that less land needs to be exploited to produce a target amount of palm oil, compared to any other vegetable oil.

Palm oil unfortunately has been linked to several environmentally unsustainable practises. These include deforestation, fires and haze pollution, habitat loss for endangered animals, and reduced biodiversity due to mono-cropping. Furthermore, some palm oil plantations have faced allegations of land grabs and human rights violations. The ‘healthiness’ of palm oil for consumption has also been an issue in the past, but this has largely been debunked – palm oil’s safety for consumption is no different than other widely available vegetable oils in the market.

Due to such perceived issues, there have been various campaigns in developed countries, especially in Europe and Australia, discouraging consumers from buying products containing palm oil. These have been relatively successful, and some products have met with commercial success simply by promoting the fact that they do not use palm oil.

Most recently, the European Parliament approved non-binding resolutions for the phasing out of palm oil as a component of biofuels by 2020, and the introduction of a single EU-wide certification scheme for palm oil entering EU after 2020. While the requirements of the single EU certification is not yet clear, there are indications that no deforestation will be a major requirement.

While the percentage of palm oil presently imported by the EU is not huge (collectively EU is the third largest importer of palm oil after India and China, but individual country imports are small), this high-profile resolution has the potential to further damage palm oil’s reputation in the world.

Many involved in the production side of palm oil believe that anti-palm oil publicity is a result of strategically and discreetly orchestrated campaigns by other vegetable oil producers, in an attempt to win back their market share of the world oils and fats market. While there has not yet been conclusive proof of this, it is telling that while sustainability expectations are high for palm oil, this is less so for other types of vegetable oils.

The governments of Malaysia and Indonesia, as well as the producers involved, have over the years had to respond to this negative publicity in order to protect their hard-won market share. However, their responses has been somewhat defensive, and shrouded in denial. In response to deforestation and haze pollution in particular, Indonesia and Malaysia have often denied that their companies are involved, and the companies likewise have pointed to their corporate sustainability policies in defence.

This may not be the most productive way to respond to such allegations. No industry is perfect, and the first step to improving industry practises is acknowledging problem areas and transparently working towards improving these areas. While the allegations thrown towards the Malaysian and Indonesian palm oil industry may be conflated and exaggerated, the ‘exaggeration’ of denial on the side of the producers are not helping either.

My book, “The Haze Problem in Southeast Asia: Palm Oil and Patronage” is an attempt to shed light and encourage discussion and positive action in the regional palm oil industry where industry practises can be improved. The book is based on research carried out between 2009 to 2012. It discusses how some palm oil plantations in Indonesia were established on peatlands. Peatlands are highly fire-prone when drained for agriculture, and the disturbance of these peatlands have often resulted in fires that produce transboundary haze. This has been enabled by laxly applied land use and fire use policies, bolstered by patron-client protectionism.

While the book acknowledges that the palm oil industry is a lucrative comparative-advantage industry for both Malaysia and Indonesia, the book also delves into issues on how land is used, or sometimes misused, for this crop, especially in Indonesia. By highlighting this, it is hoped that plantations and governments involved will be encouraged to improve upon their land use practises in this industry.

Such improvements can potentially take away some of the ammunition used by the anti-palm oil lobby in its claims that palm oil is not environmentally sustainable. However, the first step is to acknowledge that these are indeed real issues that are on priority lists to be addressed promptly. In this way, instead of being turned off by denial and defensiveness, importer countries and consumers may instead be won over by the transparency and honest efforts of producers to improve their practises.

Indeed, with the increased academic research being published on land use issues within the palm oil industry since the early 2010s, there has been promising improvements in land use policy and implementation among the major actors in this sector. For example, Indonesian President Joko Widodo is personally overseeing the expedited completion of Indonesia’s ‘One Map’ to properly map out the vast country. This, among other benefits, would help the authorities better determine areas suitable for sustainable agricultural development in the future, including for oil palm. Furthermore, many major palm oil producers in both Malaysia and Indonesia have in recent years been very actively and publicly pursuing important improvements in their fire management and conservation procedures.

This is an encouraging outcome for academicians who take pride that their work has successfully brought about policy changes and action on the ground. However, the fact that resolutions such as the recent EU one being passed shows that the Western world needs more assurance that producing countries and companies are serious about sustainability.

The main problem with the EU resolution is that the EU is painting the entire palm oil industry with a single brushstroke. The resolution all but ignores the fact that palm oil can in fact the grown sustainably. In reality, as with any other industry, there are exemplary players, and there are some which are less so. By phasing out palm oil from biofuels completely, the EU has failed to acknowledge the efforts of those actors who have been seriously trying to improve their practises.

A backlash from these increased barriers to import palm oil into the EU could, in the extreme, be that producers simply stop trying to be sustainable, if they feel that they cannot meet EU requirements. Such producers may instead concentrate on exporting to other parts of the world which are less concerned about sustainability. This could potentially result in a major step back for sustainability in the palm oil industry.

Despite the Western consumer backlash against palm oil, it is reassuring to note that many major consumer brands have chosen not to phase out palm oil from their products. This is because, most of these brands do not see a viable alternative oil that is as versatile and cost-efficient as palm oil. For example, Unilever, a major international consumer goods company, has chosen to respond to this backlash by pledging that they will source all their palm oil sustainably by 2020. They are also working closely on the ground with corporate producers and smallholders to achieve their goal.

An ideal resolution to this palm oil ‘conundrum’ would be one where the producing and importing parts of the world find a middle ground where they can both make adjustments to encourage sustainable practises in the palm oil sector. The EU should re-think its counter-productive barriers to palm oil imports, while producing countries should be more forthcoming about problem areas while continuing to highlight local efforts to close these sustainability gaps.

Malaysia is especially well positioned to meet EU ‘in the middle’ in this respect. Our country has pledged to keep 50% of its forests intact. We are just a few percentage points away from this limit, which means that the EU does not need to worry about much further deforestation (a major EU concern) in Malaysia due to palm oil or other developments.

However, other areas of concerns still exist, particularly on the use of peatlands for oil palm in Sarawak and labour conditions in plantations. So long as Malaysia displays transparency and earnestness towards improvement in such areas, we may well win back the trust of Western consumers for our ‘green gold’. In the long term, Malaysia should be able to sustainably reap the lucrative benefits from this ‘golden crop’ for generations to come.

Helena Varkkey is a senior lecturer at the Department of International and Strategic Studies, University of Malaysia. Her book, “The Haze Problem in Southeast Asia: Palm Oil and Patronage” is in the running for the International Convention of Asia Scholars Colleague’s Choice Award. You can vote for her book at: https://www.surveymonkey.com/r/CCA17SM   

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