Disguised trade barriers harm palm oil exports

UNREALISTIC PLEDGE: Environmental activists’ intention to do good is matched by their discretion to mislead. Stakeholders of the palm oil industry tell Ooi Tee Ching how the smear campaign by these activists is very much a trade wolf in ‘green’ sheep clothing.


MALAYSIAN Palm Oil Association (MPOA) chief executive Datuk Dr Makhdzir Mardan says palm oil is the most popular cooking oil consumed around the world. The bigger the industry grows, the easier it becomes a target of immoral smear campaigns.

Oil palms can only be cultivated in humid tropics. Southeast Asia is the lead producer of palm oil, followed by Latin America, Papua New Guinea and West Africa, all of which are developing countries.

According to data from industry regulators, Malaysia and Indonesia collectively ship out more than 35 million tonnes of palm oil to over 150 countries.

Oil World, an authoritative trade journal, stated that in 23 years, global palm oil consumption had expanded threefold. Rapeseed oil purchases, however, only increased by 2.5 times and soyabean oil's popularity just doubled.

As global palm oil usage increased in the last two decades, so did trade rivalry. Hence, the coveted smear campaigns on the oil palm industry.

Since mid-2013, Sime Darby Bhd, Kuala Lumpur Kepong Bhd (KLK), Felda Global Ventures Holdings Bhd and TH Plantations Bhd faced relentless allegations that have proved to be false. Damning rumours of air pollution, forced labour and land grabbing in Indonesia, Papua New Guinea and Liberia were wrongly hurled at these corporates. 


Makhdzir noted that vehement attacks against the oil palm companies and presumption of guilt on the basis of half truths and lies published by these activists on the Internet amounted to immoral media prosecution. "It's deplorable and exasperating."

Asked if KLK has been slapped with court restraining order from planting oil palms in Papua New Guinea, Makhdzir shook his head. He clarified that KLK is actively engaging with the local community, and clan leaders' written permission has been tendered as evidence at court proceedings there. 

KLK even took pains to explain to the claimants that they had violated laws when they threatened its representatives. "It's beyond logic to assume Malaysian oil palm companies, which are being threatened, are to be blamed for imagined problems of forced labour or land grabbing," Makhdzir said.

In December last year, green group World Wide Fund for Nature (WWF) arranged a signing ceremony for world's biggest palm oil trader Wilmar International Ltd and food giant Unilever Plc to undertake "No Deforestation, No Peat, No Exploitation" in their palm oil trades.

Although this looks like an ordinary business arrangement, Makhdzir said it is actually the start of a systemic choke on plantation companies being coerced into a suicidal pathway that will drain off deserving profits expected by shareholders. 

Indeed, plantation companies listed on stock exchanges are significant dividend channels for investors and key export contributors to developing nations like Malaysia and Indonesia. 

Hundreds of millions of corporate money have been and continue to be diverted from investors. These green activist groups have taken to execute coup d'etats to dictate business policies and behaviour based on their narrow definition of sustainability. 

Makhdzir said this had compromised what is equitable and fair to investors at the stock market. "Pension funds like the Employees Provident Fund of which you and me contribute to, the Armed Forces Superannuation Fund and Kumpulan Wang Persaraan are all heavily invested with plantation companies." 

If the general public think what is happening to oil palm plantation companies has no bearing on their savings, think again. "Do you invest in Amanah Saham Bumiputera, Amanah Saham Malaysia, Amanah Saham Wawasan 2020 or Amanah Saham Didik? Are you a depositor with Tabung Haji? Do you put money with Koperasi Permodalan Felda?" Makhdzir asked. 

He then highlighted that Permodalan Nasional Bhd, the country's biggest fund manager, and Lembaga Tabung Haji, the Muslims' pilgrimage fund, derive a big chunk of their dividends from palm oil exports. 

What this means is that an average Malaysian's savings is considerably tied to the country's palm oil sales. If palm oil exports shrink as a result of tariff and technical trade barriers, the pension and unit trust funds holding big stakes in plantation companies may not be able to generate as much dividends. If that happens, the funds may not be able to pay as much as it did to depositors and investors.

In a separate interview, Malaysia's Plantation Industries and Commodities Minister Datuk Amar Douglas Uggah Embas noted Wilmar's pledge is unrealistic.

Wilmar and its partners have adopted a discriminatory definition of "No Deforestation" to confine themselves to sourcing vegetable oil from farmers who plant their crop on grassland. This definition fits oilseed farmers in cold countries but disqualifies oil palm planters in tropical Malaysia and Indonesia. 

When tropical land is left idle for a long time, one can expect tree regrowth. So, the clearance of tree regrowth to plant oil palms automatically disqualifies a planter from selling his produce to Wilmar.

Uggah, who is also member of parliament for Betong, went on to question this insidious attempt at backdoor legislation disguised as business-to-business deals. "Where is the respect for Malaysia's laws enacted by Parliament and state assemblies that had shaped good tropical agriculture practices, workers' rights and sustainable return on investments for farmers?"

Last month, the United Kingdom's Telegraph newspaper reported that these green activists are given more than £90 million (RM498.6 million) from the European Union's "cash carousel". 

One Brussels-based lobbyist, the European Environmental Bureau, had received £10.5 million from the fund since 1997. The European policy office of the WWF, which is based in Brussels, received £7.4 million, while Friends of the Earth Europe, also based in Brussels, is the third highest recipient with £6.4 million.

Uggah, a seasoned politician, acknowledged big money from the EU at the disposal of these activists allow for large staff strength to produce immense volume of reports, press releases and media interviews, turning them into primary sources for journalists. The amplifying effect of these public pronouncements distort free-trade market forces. 

Uggah then pointed out another news article on the Internet of which green activists took great pride in their war cries to "systemically take apart the markets and capital sources of Big Oil Palm".

"Why should our oil palm industry be coerced into suicidal terms and agreements on land usage dictated by green activists who are financed by developed nations?" he asked. After pondering on it for a moment, he said the attempt to deny the rightful development of natural resources is a big disservice to the millions of oil palm farmers in developing nations.

2 Responses to Disguised trade barriers harm palm oil exports

  1. Dr Yusof Basiron tweets 25 February 2014 at 17:53

    Why must some EU edible oils buyers deny Sarawak oil palm farmers market access for their products as they only use 10% of their land for agriculture?!? When EU food companies dance to the environmental NGOs' music, using 10% of Sarawak for its agriculture becomes an issue. The problem must be the environmental NGOs.

    Sarawak has much sequestration capacity from its forest (80% of its land) that it is likely to be net sink country in terms of carbon dioxide emission.

    There is no evidence or justification to say that it is ok to use temperate peat for agriculture and not ok to use tropical peat for agriculture in Sarawak. About 8% of world's peat area (temperate peat) is used for agriculture Use of peat for agriculture in Sarawak is 0.24% of world's peat area.

  2. Environmental NGOs are naively recommending oil palm to be planted only on grassland, but tropical countries do not have permanent grassland. No Deforestation policy is not agreed by the UN as it hampers developing countries from pursuing development, thus perpetuating poverty.

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