Indonesia, a leading producer of palm oil, reached an output of 16 million tonnes in 2006, having tripled the area of land under oil palm plantation between 1995 and 2005.
Though the Indonesian government had established a moratorium on forest conversion for estate crops --though unclear about how long the moratorium should be maintained and whether it referred to a moratorium on actual conversion of forest cover or a moratorium on changing the status of forest lands to allow planting (see WRM Bulletin Nº 124)-- the country’s policy on palm oil development seems to continue the increasing trend. There are plans to add some 10 to 11 million hectares to the six million hectares of land occupied with oil palm plantations, in response to the rising global demand for palm oil.
Palm oil is used in numerous food products and consumer goods and is one of the main raw materials for the new biodiesel rush. In early 2007, the European Union endorsed a minimum target for biofuel to constitute 10% of its transport fuels by 2020.
The target of increasing palm oil production to 40 million tonnes in Indonesia by 2020 goes along with the need to add some 300,000 hectares of new estates each year. A report by the Indonesian Forest Ministry and European Union cited by an article of Hilary Chiew (1) says that inevitably, most new estates would come up in wetlands, as the more desirable dry lands are already occupied.
Recently, the Indian edible oil refiner Jhunjhunwala Vanaspati Ltd has announced its plans to buy 20,000 hectares of oil palm plantations in Indonesia for an amount of up to US$ 38 million. According to Reuters (2), the company director S.N. Jhunjhunwala said that they were “looking at either virgin or developed plantations [sic] in Indonesia". For the Indian firm, the operation has two purposes. First, to reduce costs. The costs of producing edible oils are mounting so for Indian firms the opportunity to buy plantations abroad is a way of bringing down the cost incurred through import of crude palm oil (CPO).
Besides cutting costs, Indian firms in Indonesia can thus avoid the laws that at home limit them to acquire the large areas they need. That’s why they are heading to countries in South-East Asia or South America, with less protective regulations.
However, such happy business plays a heavy toll on the people and the environment. Almost one-quarter of Indonesia's palm oil plantations is established in the province of Riau, where peatlands abound. The carbon rich peatlands are drained and burned to make way for palm oil plantations thus sending huge quantities of carbon dioxide into the atmosphere. According to Wetland International, this gives Indonesia a notorious third place as carbon emitter and contributor to global warming after the United States and China.
The Indonesian Technology Assessment and Application Agency (BPPT) has claimed that the calculation did not include the carbon absorption power of Indonesia’s forest that reduced the total amount.
Whether ranked third or 14th carbon emitter, the destruction of rainforests to grow palm oil in Indonesia represents, as UNDP’s latest Human Development Report 2007/2008 puts it “the erosion of a resource that plays a vital role in the lives of the poor, in the provision of ecosystem services and in sustaining biodiversity.” The UNDP report also acknowledges that the “rapid expansion of the [palm oil] market has gone hand-in-hand with an erosion of the rights of small farmers and indigenous people.” So, good business for whom?
Article based on information from:
(1) “Eco-conscious palm oil”, Hilary Chiew, The Star Online, http://thestar.com.my/lifestyle/story.asp?file=/2008/1
(2) “India firm eyes oil palm plantations in Indonesia”, Reuters, http://in.news.yahoo.com/071121/137/6nj6g.html; “Indian firms scout for farms overseas”, M.R. Subramani, The Hindu Business Line, http://www.thehindubusinessline.com/2007/12/03/stories/2007120350860500.htm; Human Development Report 2007/2008, UNDP, http://hdr.undp.org/en/media/hdr_20072008_en_complete.pdf