Sustainable palm oil production can lift communities out of poverty

Luhut Binsar Pandjaitan is Coordinating Minister for Maritime Affairs, Republic of Indonesia

Palm oil is used today in more than 400 different products and processes across the globe. Its production has lifted millions of families out of poverty in Indonesia and in many emerging economies in Southeast Asia, Africa and South America. It has also allowed Indonesia to move closer to meeting the United Nations 2030 Sustainable Development Goals.

Yet, there is a negative a priori and a product stigmatisation for palm oil that seems to be fuelled more by ideological prejudices and national self-protectionism of alternative products in importing countries than by scientific evidence and acknowledgement of the basic trade principles underpinning EU and WTO rules.

Latest trends and achievements on the ground suggest that the most effective solution to protect the environment, support endogenous socio-economic development and guarantee fair trade with developing economies is by ensuring that the palm oil plantation and production chain is developed under internationally recognised sustainability standards.

On the contrary, the unilateral banning of palm oil irrespective of the conditions under which such activity is developed, as proposed by a European Parliament resolution, is worrisome for many reasons that go well beyond palm oil. These include the destabilising geo-political and socio-economic risks that can potentially fuel another factor of East-West and North-South cultural division; the denial of the huge progress made just in few years by the main producing countries that have embraced the brave path to sustainable development and growth; the potential resurgence of national trade barriers that jeopardise WTO rules and progress on more ambitious bi-lateral trade and partnership agreement with the European Union. The ban also indirectly drives further migratory flows to Europe from African countries that could alleviate poverty through palm oil.

Palm oil is a thriving industry and a driver for inclusive growth in rural areas. Its high yields and relatively low cost contribute to job creation, business opportunities and rising income levels among small farmers, representing already more than 40% of palm oil farmers in today’s Indonesia.

The European Parliament’s critical stance disregards important considerations which paint a more nuanced picture as to its sustainability. Evidence shows that, contrary to misperceptions, palm oil is one of the lowest causes of deforestation at the global level and is a net contributor to the reduction of greenhouse gas emissions (GHG). Compared to its counterparts – soybean, sunflower, rapeseed and sunflower ‒ palm oil uses less land due to its high crop yield. The European Commission itself revealed that the largest cause of deforestation is livestock, while the least is palm oil. Furthermore, Indonesia is very serious in designing and implementing anti-deforestation policies, and the results are very positive: in the last three years, Indonesia has managed to reach a net decrease in deforestation from 1,09 million hectares in 2014 to 0,47 million hectares in 2017.

Whilst the palm industry only uses 7% of the total land required for growing vegetable oils, it contributes to more than 57% of vegetable oil production worldwide. Sustainable management of palm oil in producing countries, coupled with improved traceability and sourcing policies in importing countries, help to offset the risk of its negative effects. The wide range of measures taken throughout the country include reforestation initiatives, forest and peat land mapping as well as efficient forest fire prevention and control, which have allowed the country to reduce deforestation by one third in less than three years.

As the third fastest growing economy among G20 countries after China and India, the Indonesian palm oil production, which amounts to 3.5% of national GDP, is one of the key drivers of inclusive economic development, as demonstrated by a shrinking GINI coefficient from 0.4 to 0.3 in the last three years – a key measure of income inequality.

Poverty is mostly concentrated in rural areas. Given the increased role of smallholders and the geographical distribution of palm oil plantations, the palm oil industry contributes significantly to help raise these communities out of poverty. According to research conducted by Stanford University, “at least 1.3 million people were lifted from poverty in Indonesia as a direct result of the expansion of the palm oil industry”. This will only become more important as the share of smallholders’ land is expected to reach 50% by 2020.

All in all, there is a need to avoid discriminating against palm oil and engaging in practices which may be considered protectionist of Europe’s own vegetable oil producers. Instead, a constructive dialogue between governments, local communities, the private sector and NGOs worldwide should be established, to find common solutions and overcome global issues facing the sector with a view to building upon its economic potential and ensuring sustainability – in Indonesia and beyond. Only in doing so will we stay closer to meeting the UN’s sustainable development targets and empowering rural communities.