Tuesday, 26 September 2023

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Indonesia and Malaysia’s resistance against EU Deforestation Regulation: Clash of sustainability and economic interests

by Simone Galimberti

The titles of two articles could not better capture the current approach used by Indonesia and Malaysia while dealing with new groundbreaking regulations by the EU in the realm of sustainability and environment.

Indonesia, Malaysia to fight against EU palm oil ‘discrimination” was the headline given by the Jakarta Post on a story reporting the recent official visit of President Jokowi of Indonesia to Malaysia.

The headline of Malay Mail to describe the same development was similar: “PM Anwar: Malaysia, Indonesia agree to defend oil palm interest.”

Both nations are worried of the lasting impacts on their economies of the EU Deforestation Regulation (EUDR), a legislation that is going to set the bar high in terms of standards in relation to safeguarding land forests.

Its provisions are wide-ranging, and they could truly pose a challenge to the palm oil industries in South East Asia.

It is obvious that the powerful lobbies will push back and do whatever they can to reject the provisions.

Yet, despite the high rhetoric, conveniently embraced by politicians in the region, theirs is wishful thinking.

While there are spaces to adjust the implementation of the EUDR, especially in relation to genuine concerns of small palm oil farmers, there is nothing that can result in a drastic change in the way the regulations are going to impact the region.

And, certainly, as a consequence of the legislation, drastic changes will happen, changes that, in the long term, will transform for the better how the palm oil industry operates.

Yet there is an ongoing effort at doing whatever it takes to deny this truth, the fact that the palm oil industry has been responsible for massive deforestation in South East Asia.

As this was not grave enough, the sector has been marred by a consistent labour and human rights abuse pattern.

It is because for years, the governments of both Indonesia and Malaysia did, at best downplay and, at worst, deny the gravity of the situation that legislations like the EUDR and its closely related legislations like the Renewable Energy Directive, the upcoming Due Diligence Law, now in its final stages of negotiations in the EU, are trying to address.

The common narrative has been mostly one defined by both denial and convenience.

In another piece published in the Jakarta Post, the chief lobbyist for the palm oil industry in Indonesia tried to portray the EUDR as the key culprit in ending sustainability practices in the country.

Edy Martono, the chairman of the Indonesian Palm Oil Association (GAPKI) chairman expressed deep concern that the EUDR will make the “Indonesia Sustainable Palm Oil (ISPO) and the Roundtable on Sustainable Palm Oil (RSPO) obsolete”.

Moreover, Martone added that “if it’s also imposed on another producer country such as Malaysia, then it will disrupt the global supply of vegetable oil, which ultimately would put the world’s vegetable oil consumers at a disadvantage”.

But the same article also included the views of one of the top trade unionists representing small palm oil farmers, stating a different position, contracting the narrative that the European legislation will harm the interests of small farmers.

Mansuetus Darto, the secretary general of the Palm Oil Farmers Union (SPKS) secretary-general Mansuetus Dart, explained that he “disagreed that the governments’ endeavour was aimed “for the good of smallholder farmers”, suggesting the governments might fight to accommodate the major palm oil companies’ objection”.

In addition, according to Mr Darto, the EUDR would simply enforce provisions, Indonesia’s Agriculture Ministerial Regulation No. 1/2018 in terms of the fair price, already on the ground but never implemented.

The issues at stake are even more complex because the EU aims to stop using palm oil as a source of biofuels.

We should not forget that the predecessor of the recently approved RED legislation, the so-called RED II, in force since2018, had already defined the palm oil industry of being a high-risk factor of deforestation, what it is in jargon is called a high Indirect Land-Use Change (ILUC), a conclusion that both Indonesia and Malaysia are fighting at WTO.

Yet the latest developments seemed, at least temporarily, to provide some reprieve to Indonesia and Malaysia in this issue.

Despite intensive lobbying by environmentalist groups in this regard, at the end of March, according to the latest reincarnation of the Renewable Energy Directive, the so-called RED III will exponentially increase the target for renewables in the transport industry from 14% to 29%, biofuels powered by palm oil won’t be outright banned.

Both the European Commission and the European Council, the former executive branch of the EU and the body representing the member states, respectively, pushed back against a quick phase-out of palm oil as a source of biofuel as the European Parliament had initially envisioned.

Amid this complex scenario, the recent high-level joint mission of the governments of Indonesia and Malaysia to the European Commission could open a new phase in discussing the implementation of the EUDR.

Yet the real onus will lay with the Governments of Indonesia and Malaysia.

Rather than reactively deal with a set of legislations decided in Europe, they should have been much more proactive in coming up with much more stringent rules domestically, including enforcing all the regulations already passed.

Unfortunately, this has never been their top priority, even if some changes, mostly forced by the pressure coming from environmental groups, did happen.

Even the existing sustainability certification programs, while over the years, have become more effective and have played an important role towards ensuring better practices, cannot be seen as a substitute for strong and mandatory legislation.

Though, in recent years, the levels of deforestation in Indonesia and Malaysia have slowed down, it is not time for complacency.

According to the Indonesian Coordinating Minister for Economic Affairs Airlangga Hartarto, for example, “even the level of deforestation in Indonesia fell by 75 per cent in the 2019 to 2020 period. Indonesia has also successfully reduced the area affected by forest fires to 91.84 per cent” as reported by CNA.

But still, there is a lot that remains to be done, as explained by Benji Jones, a senior environmental reporter at Vox and a piece written by Toby Gardner and Ylva Rylander with the Stockholm Environment Institute.

As reported by Mongabay, Transparency International Indonesia (TII) recently published a damning report that evaluates the top 50 palm oil companies in Indonesia, emphasizing the endemic corruption practised in the sector.

That’s why it is paramount for Malaysia and Indonesia to step up their efforts at legislative and enforcement levels nationally and within the existing regional mechanisms.

While we cannot have great expectations from the ASEAN, at least there is a trickle of hope that the negotiations, started in December 2022, of a first environmental rights framework would provide further impetus to better provisions and stronger compliance regionally.

As explained for the Rappler by John Leo Algo, an environmentalist campaigner and journalist from the Philippines, “establishing this framework is not an option, but a necessity for the ASEAN to address the environmental crises that face it and are still to come”.

Even as Algo explained, there will be a huge challenge in enforcement; this tool can play a compelling role in nudging the member states towards action.

The same conclusion was reached by Linda Yanti Sulistiawati, a Senior Research Fellow at the Asia-Pacific Centre for Environmental Law in the Law faculty at the National University of Singapore, who wrote a piece on the issue for Fulcrum.

“Environmental rights as a human right might be a difficult and politically challenging concept to understand and apply, but if the will and power of all stakeholders in ASEAN could be harnessed to support it, its implementation in the region would not be impossible”.

Moreover, the ASEAN Intergovernmental Commission on Human Rights (AICHR) has been particularly active in business and human rights. The commission is also leading in formulating the first-ever Environmental Rights Framework.

It is of utmost importance that the ASEAN Environmental Rights Working Group (AER WG) charged with the task of formulating this framework, is set up at the earliest.

Yet alone, this working group won’t proceed as fast as it should.

That’s why the ASEAN Ministerial Meeting on Environment or AMME should also support the proceedings politically.

The last time AMME gathered was in 2021, even if the ministries had convened in Singapore in 2022 for the 17th Meeting of the Conference of the Parties to the ASEAN Agreement on Transboundary Haze Pollution (COP-17). The next meeting of the AMME is supposed to be this year in Laos.

Indonesia still has roughly six months at the helm of the chairmanship of the bloc to ensure that the discussions related to the framework can move ahead as swiftly as possible.

At the end of the day, Malaysia, Indonesia and the whole South East Asia need a “system approach” to deal with the sustainability challenges posed on their economies not by legislation coming from Europe but from their own internal practices.

The nations of the region should move from crisis management to one that proves their commitment towards sustainable practices.

That is why a country like Indonesia should drop its resistance over a wide and ambitious international legal instrument on due diligence.

The current negotiation is at a stalemate and lacks any involvement from any top world leaders, which would see mandatory due diligence applied worldwide.

The problem with Indonesia is that it does not want such a framework to be applied to its own major corporations, indirectly safeguarding the ones involved in the palm oil industry among others.

In a written statement during the 8th session of the so-called “Open-ended intergovernmental working group’ negotiating the treaty, Indonesia explained that the scope of the instrument should be “formulated in a precise manner to govern over business activities of transnational corporations and other business enterprises that have a transnational character in their operational activities, and should not apply to local businesses registered in terms of relevant domestic law”.

While the international treaty is still years of negotiations away, something more pressing might determine the way Indonesia is dealing with its palm oil industry.

The Indonesia-EU Comprehensive Trade Agreement (IEU-CEPA), still being hammered out, can be truly transformational if designed in the right way, promoting high environmental standards and overall respect for human rights.

Yet in this complex context and considering the challenges, it remains to be seen if an agreement on this strategic file is going to be reached.

Proactively engaging the global community for progressive policies that safeguard small farmers while holding big corporations truly accountable is the only way forward for countries like Indonesia and Malaysia.

Enforcing local legislation already in place and coming up with even more forward-looking policies, including a different approach to the international mandatory due diligence treaty, would enable countries like Indonesia and Malaysia to show environmental stewardship.

That would prove that South East Asia is determined to grow sustainably, putting the rights of Planet Earth and those of its people at the centre of its ambitions.

The best way to do so is to engage the EU not on the defensive but with an ambitious agenda, a plan of measures that could project the palm oil industry towards credibility and respect that still do not fully deserve.

Such a vision could make the palm oil industry in South East Asia the benchmark of environmental sustainability even though the reality is that that the days ahead of the palm oil in the biofuels industry are going to be, inevitably, numbered.

Simone Galimberti writes on democracy, social inclusion, youth development, regional integration, SDGs and human rights in the context of Asia Pacific.

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