Indonesia does not rule out retaliating if 'cornered' by EU on palm oil

Thick smoke spews from a crude palm oil factory in Langsa, Indonesia, on April 15, 2018. PHOTO: AFP

JAKARTA - Indonesia has not ruled out retaliating if it is "cornered" by the European Union which is considering banning the use of palm oil in biofuels.

Indonesia is the world's largest exporter of palm oil and Coordinating Minister for Maritime Affairs, Luhut Pandjaitan, who is close to President Joko Widodo, was in Brussels earlier this week for talks on the issue.

He condemned the proposed ban as discriminatory, saying that the EU should look closely at the progress made by Indonesia in addressing the environmental challenges associated with the planting of palm oil.

"We have no plan yet to shift orders to Boeing. Taking retaliatory action is not our culture. We want to continue negotiating to find a good solution for everyone, but they should not continue to corner us," Mr Luhut was quoted as saying in a statement issued by his ministry on Wednesday (Apr 25).

Indonesia's state owned carrier, Garuda, and other private airlines such as Lion Air had been buying planes from the US manufacturer, Boeing, as well as from its European rival, Airbus, Mr Luhut said.

The minister added that Indonesia would need a total of 2,500 planes in the next 20 years and was also considering ordering Airbus M400 military planes that the French-based company offered to him recently.

Mr Luhut also warned about the ramifications of a ban on palm oil on his country.

He said the industry had kept 10 million people out of poverty and a ban would hit smallholder farmers hard, sending many back to the poverty line.

"A number of those who committed radical acts were those who were economically unfortunate and what we fear is that if there are more people below the poverty line, that would further increase the chances of people falling into radicalism," Mr Luhut said.

"With all due respect, we have succeeded in maintaining regional security and radicalism and terrorist attacks have shown a declining trend.

"Prevention is vital," he added.

Palm oil has long been controversial because environmentalists charge that it drives deforestation, with huge swathes of rainforest logged in recent decades to make way for plantations.

The use of the commodity in food and cosmetics has already dropped in Europe, partly due to pressure from green groups on major corporations, but has been increasing in biofuels.

Alarmed by the choking haze that enveloped the region following fires on vast swathes of oil palm and pulp wood plantations in 2015, Indonesia began a crackdown on errant corporations and individuals who resort to cheap-but-illegal slash-and-burn methods to clear plantation land. Together with better fire prevention measures, the number of hotspots has dropped in recent years.

Mr Luhut advised his counterparts from the EU to visit Indonesia and check the ground situation themselves.

"Some of the key individuals I met apparently were not adequately informed about the progress Indonesia has made. They did not know our economic progress, security situation and the fact that Indonesia is doing environmental work," Mr Luhut said.

Indonesia and Malaysia produce nearly 90 per cent of the world's palm oil and both will be hit hard by a EU ban.

Indonesia produced 29 million tonnes of the commodity last year (2017) while Malaysia's output was 19.5 million tonnes. Oil palm plantations in Indonesia covered 11.7 million ha at the end of 2017 and in Malaysia they covered 4.49 million ha.

In Indonesia, the industry directly employs almost 6 million workers and annually generates US$20 billion (S$26.14 billion) in export earnings. A Malaysian official has said an EU ban threatens the income of some 500,000 planters across the country.

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