Palm oil exports at risk from overseas buyers boycott

The Jakarta Post 18 May 09;

Indonesia's palm oil business, already hit by lower prices, risks an overseas buyers boycott, with NGOs saying government plans for huge plantations in Kalimantan may mean big environmental damage.

The Indonesian Palm Oil Board (DMSI) said last week that fears about the government's proposed palm oil expansion program for north Kalimantan - which ironically has been postponed - has triggered calls for a boycott of Indonesian crude palm oil (CPO), particulary in European Union countries.

DMSI is a grouping of palm oil stakeholders including the palm oil farmers, palm oil corporations, biodiesel producers and associoated food oil corporations.

Derom Bangun, DMSI deputy chairman, said that the calls -- largely initiated by non-governmental organizations (NGO) -- have undermined the image of the Indonesian palm oil business by claiming that the palm oil companies will destroy 1.8 million hectares of forest in Kalimantan.

"This black *publicity* campaign has caused a decline in palm oil exports to Europe since 2006," added another chief deputy of DMSI, Sahat Siahaan.

In 2006, the palm oil export volume to the Netherlands, the main importer in Europe, reached 1.5 millions ton. However, the figure only reached 1.3 million tons last year.

"European palm oil exports actually only made 15 percent of the country's total *CPO* export. However, Europe has high political influence and other countries may follow its example," said Sahat.

The claim about the danger of destruction to Kalimantan's forests was made referring to a statement from Agriculture Ministry Anton Apriyantono in 2005 about a proposed program to develop massive oil palm plantation developments across Northern Kalimantan.

At that time, the Minister said that the government planned to build an oil palm plantation zone along the 840-kilometer Malaysia-Indonesia border in northern Kalimantan. He said the plantations would be built to raise the level of economic development in the border area and to promote a belt of development alongside the border. This was to improve security for local residents and to help improve border supervision, along the land border between Malaysia and Indonesia. .

"However, the program proposal was never implemented but the industry is still feeling the damage *from the fall-out* even until now," said Derom.

After doing further research, the Agriculture Ministry found that the geographic and soil conditions of the borderline less suitable for the establishment of palm oil plantantions than first thought, and eventually the government decided to stop the plan, according to Derom.

Though the plan was called off, many people in foreign countries thought that the Kalimantan proposal was still to be implemented. Foreign media have still been questioning DMSI officials regarding the proposal, said Derom.

In addition to the potential negative impact on the proposed expansion of export volume, fears that the program might still go ahead may make it more difficut for Indonesian companies to obtain required Sustainable Palm Oil certificates which are needed to acquire permission to import into countries with high environmental protection standards.

The certificate is given by the Round Table on Sustainable Palm Oil (RSPO), a multi-stakeholder international organization aiming to ensure that the palm oil industry meets environmental standards.

"Last month a Malaysian company application for an SPO *certificate* was rejected because RSPO thought the company involved in the Kalimantan program," said Dorum. Malaysia and Indonesisa share Borneo island also known as Kalimantan to Indonesians.

He added DMSI was worried the same thing could happen to Indonesian companies in future, blocking their exports to the EU. (mrs)