Indonesia announces new measures on Child Labour

Indonesia’s Minister for Women’s Empowerment and Child Protection (PPPA), Bintang Puspayoga, has announced a number of new measures aimed at increasing protection for children at risk of labour exploitation across the country.

These include increased monitoring and enforcement of child labour practices, developing special women and child-friendly villages, development of a child labor database, strengthening coordination and collaboration between stakeholders related to child labor, mainstreaming child labor issues in child-specific protection policies and programs in districts/cities. Four priority sectors have been named, agriculture, fisheries, services, and tourism.

The Minister cited success with existing programs, noting a reduction in the number of children aged 10 to 17 engaged in employment by around 10 per cent to less than 400,000, down from around 1.6 million in 2017.

Child labour is a global challenge, not just one for Indonesia. According to ILO estimates released this year, Southeast Asia has a child labour prevalence of around 6 per cent, compared with rates approaching 25 per cent in Sub-Saharan Africa.  Data from a 2015 ILO report shows that Indonesia was already performing significantly better than its regional peers, such as Vietnam. Based on current census statistics, Indonesia’s prevalence would be closer to 2 per cent. 

In 2017 President Jokowi announced a roadmap to eradicate child labour from Indonesia by 2022. Indonesia has also ratified all eight Fundamental ILO Conventions, including on forced labor and child labor.

At the beginning of 2021, the Indonesian palm oil sector was the subject of an investigation by Associated Press journalists on child labour and exploitation in the palm oil industry, which largely focused on RSPO certification. The journalists did not mention Indonesia’s child labour road map, nor speak with representatives from the PPPA. 

Nestle’s Child Labor Case: Implications for Palm Oil?

Nestle and Cargill last week won a US lawsuit in which it was alleged that the two companies abetted child labour on cocoa farms on the Ivory Coast.

The plaintiffs were six individuals from Mali, who were allegedly taken to the cocoa farms, from which the two companies source their cocoa.

The lawsuit was based on the US Alien Tort Statute, which allows for cases involving non-US citizens and residents to be heard in the US legal system.

However, the case does not change the current situation with respect to US Customs and Border Protection (CBP) and cases against companies such as FELDA Global Ventures. Last week FGV announced that it would be choosing an auditor to assess the claims of forced labour as part of a remediation plan with US CBP. Canada has also announced that it is investigating Malaysian palm and rubber glove manufacturers because of forced labour concerns.

Global Witness and China: Wack-a-Mole

Global Witness has launched a report calling on China’s financial institutions to exercise greater leverage on commodity supply chains.  The report focuses on soybean and beef, but palm oil is also targeted.

The report – and Global Witness – is arguing for ‘deforestation free’ financing and is calling on Chinese regulators to tighten up lending to the sector. It highlights a number of institutions that are financing palm oil and palm oil-related operations; the tone of the report gives the impression that Chinese finance is a significant player and that this leads to deforestation caused by oil palm expansion. In this context, it points out that around USD4 billion of Chinese financing has gone to palm oil operations from 2013 to 2019.

However, this needs to be put into context: around USD260 billion in financing to all commodities is recorded, and around USD60 billion of financing has gone to palm oil operations alone. Further, palm financing from Singapore, Malaysia and Indonesia is more than USD6 billion, USD14 billion and USD12 billion respectively. Financing from the EU amounts to around USD4.7 billion. The significance of Chinese finance is significantly over-egged in the report.

Moreover – as Global Witness points out – the bulk of the Chinese financing (i.e. more than 50 per cent) goes to one single company, COFCO, which doesn’t own any plantations; it only owns processors and traders. Global Witness then points to COFCO’s procurement policies as key leverage that Chinese financial institutions should be influencing.

But underlying this is that around 3 per cent of palm oil financing is from Chinese institutions that goes anywhere near oil palm plantation operations. So – the impact of the Chinese finance on plantations in producing countries is also overstated.

The question is this: what is Global Witness seeking to achieve here?

One possibility is that Chinese investment has and will continue to become more significant for many developing countries. UNCTAD data notes that outward investment from China has more than doubled over the past decade, while it has remained stagnant for the European Union. ASEAN data for the region points toward Chinese FDI in ASEAN’s agriculture sector now far outstripping that of the EU. That shift could also have wider policy implications: the EU’s attempts to shape global investment – such as the new investment taxonomy that tilts strongly in a Green and protectionist direction – may be limited as the bloc’s importance as an investor wanes.

This would seem to be an attempt to address an inevitable ‘leakage’ in palm oil financing, in the same way that there is already a fragmented market for certified palm oil. But, given that so much financing for palm oil comes from intra-ASEAN sources and Europe, China’s approach to palm oil financing hardly seems a significant and insurmountable problem.

There’s another wrinkle. COFCO, as China’s largest palm oil-related borrower, also obtains significant financing – around USD1.5 billion – from institutions in the EU, US, Australia and Japan. It’s therefore apparent that these lending interests aren’t able to influence COFCO, and the only possible leverage is Chinese lending institutions.

On the one hand, Global Witness is attempting an enormous task: move China’s needle on sustainability. On the other, perhaps they are doing something else: overstating the influence China’s financial institutions on the palm oil sector, and therefore trying to attack palm oil by dishonestly pretending that the industry is financed by China.

ICYMI: CPOPC Calls Out the EU on Biofuels

Last week, the Council of Palm Oil Producing Countries (CPOPC) urged the European Commission to correct course on biofuels ahead of the upcoming revision of the Renewable Energy Directive (RED), which is due for mid July 2021.

CPOPC argues that given the progress made by producing countries such as Indonesia’s with the updated ISPO standard and deforestation at an all-time low, it is time for the EU and member states to start acknowledging the successes.

CPOPC went on to urge that the EU-ASEAN Joint Working Group expand its scope to focus on key issues like the UN SDGs. You can read more here.