Palm Oil Monitor – Weekly Update, 24th April, 2018

EU-ASEAN TRADE RELATIONS: THE PLOT THICKENS

As reported last week by POM, the Indonesian government has walked back on a $2 billion deal to buy Airbus military aircraft – in retaliation for the EU Parliament’s proposed ban on palm oil in the bloc’s renewable programs.

This has now been widely reported in the UK print media.

Adding to that, Indonesian Fisheries Minister and Special Envoy for palm oil Luhut Binsar Panjaitan made Indonesia’s stance even clearer. He told reporters in Brussels last week, “We have a very good relation with Airbus. But if you punch us to the very difficult corner, what will we do? We are human beings, you know?”

He added, “Airbus is very important but we need to see the reciprocity of this. We don’t want to import Boeing because of this palm oil issue.”

The next round of inter-institutional talks on the renewable energy file are scheduled for May 17. The EU is also discussing a free trade agreement with Indonesia.

But it could get even more complicated for Brussels. Have Malaysian interests joined the fray? According to news reports AirAsia boss Tony Fernandes has walked back on an order for Airbus A350s, stating that the aircraft is ‘too expensive’. Reports also note that Malaysia’s low-cost carrier – arguably the most successful in the world – is now in talks with Boeing to purchase the US aircraft manufacturers’ 787 variants.

This would be a big shift for AirAsia, if it happens. The company’s fleet is composed entirely of Airbus aircraft.

That said, the negative feeling that Europe’s against Malaysia is running particularly deep. Most Malaysians are friends with or related to individuals that have had their lives changed by palm oil.

[One of the co-hosts of this blog is no exception. His family’s hometown of Temerloh in Pahang was transformed by the presence of FELDA plantations just to the north of the town.]

If Fernandes’ decision is based on national pride rather than commercial concerns, Brussels will need to take notice; it will have ruined not just trade relations, but diplomatic relations in the ASEAN region.

NGO CAMPAIGNS STRUGGLE IN PRODUCER COUNTRIES

Indonesia’s Salim Group has been put through the wringer by Rainforest Action Network and fellow NGO, the Netherlands-based Aidenvironment.

RAN’s basic claims are this: Salim has ‘connections’ to two plantation companies, and these plantation companies are causing environmental problems, via peat drainage in Borneo.

The choice of Salim as a target makes sense for the US-based RAN. Salim owns Indonesia’s largest food company, Indofood. Crucially, it has ties to US companies such as PepsiCo.

RAN therefore has a point of leverage with its supporter base in the US. And, RAN has been running a long-time campaign against the US beverage company.

But for anyone who has worked in Indonesia, the claims rest on what is pretty much business as usual. Indonesian business is often opaque, run by family interests and has many layers.

Indonesian compliance with regulations is often problematic because regulations themselves are often problematic.

RAN have been trying this path with Salim and PepsiCo for a while now, to little effect. Arguably the most interesting thing about RAN’s campaign is that even though Indofood is the country’s largest food company, the usual ‘shaming’ of brands has no impact in Indonesia’s domestic market.

RSPO OFFICIALLY LAUNCHES IN NIGERIA

RSPO has officially launched its national interpretation (NI) in Nigeria. Nigeria is the world’s third-largest palm oil producer, although much of the production is small-scale and consumed domestically.

But this is a significant development. Developing the NI has taken several years, and it is one of the first NI outside of the Asia-Pacific region.

POM is yet to analyse the interpretation, but we’re hoping that some of the issues that have been raised about RSPO in Africa – such as not being able to use chemical treatments for blast disease – are addressed. Watch this space for an analysis over the next few weeks.

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