From The Jakarta Post

Palm oil producers facing more demanding costumers

Kornelius Purba, Jakarta

The fourth Round Table on Sustainable Palm Oil (RSPO) session, which was held recently in Singapore, clearly shows that while the demand for crude palm oil, including for bio-diesel fuel, will continue to increase in coming years, it is just a matter of time for CPO producers to face more demanding consumers. Of course they want cheaper price but better quality.

For Indonesia and Malaysia, which produced about 85 percent of world's total production, the consumers' demand, including on environment, the rights of small farmers and indigenous people, need to be anticipated as early possible, because the imbalance of supply and demand will force consumers to strengthen their bargaining power.

Private sector which has related with this industry -- starting from oil palm growers, palm oil processors and traders, consumer goods manufacturers, retailers, banks and investors, and nature conservation NGOs -- has taken anticipative measures by actively participate in the RSPO sessions.

Big names like Unilever, Rabobank, Standard Chartered Bank, Bayer and WWF are active members of the RSPO, because they want to be involved in the movement from the very beginning that they can influence the RSPO decision making process and to counter the civil society movements which focus their activities in protecting environment, small farmers and indigenous people.

"This (RSPO) is the forum for all stake holders to meet, exchanged views and explained their position on palm oil issue," said Rudy Ready Lumuru, chairman of non-governmental organization Sawit Watch which also played major role in the RSPO sessions.

During the forum in Singapore, small farmers from Kalimantan and from Sumatra disclosed their bitter experiences in facing major palm oil companies which occupied their customary land by force or cheated the uneducated farmers. But representatives of big companies also had the chance in the forum to deny accusations of the farmers. An international chemical company quickly denied the claim of Malaysian farmers that its product was very harmful for the plantation workers.

"Confrontational approaches are often not effective now," Rudy answered when asked about the purpose of the RSPO sessions.

Indonesian government apparently paid little attention to the sessions. Indonesian government apparently has not learned from its repeated failures to anticipate civil society movements because it still sticks to old paradigm that the NGOs are just anti-government organizations who depend on foreign fundings.

Indonesia tends to ignore the protests if its neighbors over the rampant forest burnings during dry seasons Indonesia although the haze has affected not just their environment but also their economy. Just a matter of time the haze issue will affect oil palm marketing, because consumers can use this issue to pressure oil palm producers for lower prices.

Vice President Jusuf Kalla has strong reason to expect that Indonesia will become world's largest crude palm oil (CPO) producer in 2008, replacing Malaysia, because the difference of production between the two countries last year was quite small while Indonesia has an advantage for having more land for plantation.

To reach the target, the government said Kalla, would accelerate the development of more infrastructures, like roads, special seaports for CPO export, and processing factories close to oil palm centers.

"I am confident the target (to be World No. 1), can be achieved," said the Vice President when opening national seminar on palm oil and the establishment of Indonesian Palm Oil Board(DMSI) in Bali earlier this month.

Citing official figures, a business newspaper recently reported Malaysia produced 43 percent of world's crude palm oil production, while Indonesia 43.6 percent in 2005.

According to Kompas daily however last year Malaysia produced 13.3 tons of CPO while Malaysia about 15 million tons. This year, Indonesia is expected to produce 15.2 million tons, while Malaysia 15.1 million tons. Until last year, Indonesia has 5.6 hectares oil palm plantations, including 1.98 million hectares own by small-scale farmers, 2.9 million hectares major private companies, while state-owned companies only controlled 676,204 hectares.

However as Sawit Watch studies show, the government is facing mounting problems in the palm oil industry, from the illegal land seizures, the destruction of forests for palm oil plantations and the failure to protect smallholders to get fair price and cheap credit.

The government is very confident that it will control world market in 2008. So far it pays little attention on the consumers' movement, especially the European Union, one of the largest CPO importers from Indonesia.

It needs to humiliate itself to be more willing to work together with civil organizations which operate in palm oil sector, if it does not want to lose the market or to find itself in a much weaker position in facing the consumers.

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