JAKARTA (Reuters) - A new palm oil producer grouping being set up by Indonesia and Malaysia would replace "no deforestation" pledges made by major palm companies in favour of a joint set of standards proposed by the two countries, an Indonesian minister said late Tuesday (Oct 13).
Indonesia wants big palm oil companies to row back on the historic pledges made at a climate change summit last year, arguing that they are hurting smallholder producers who cannot afford to adopt sustainable forestry practices.
Indonesia is the world's biggest producer and exporter of palm oil producer, a key driver of economic growth, and legions of smallholders account for about 40 percent of its palm output.
"Indonesia and Malaysia have agreed to harmonize and combine our two standards," Indonesia's chief natural resources minister Rizal Ramli told parliament. "This is an example of how to fight for our sovereignty. We are the biggest palm oil producer. Why (should) the consumers from the developed countries set the standard for us as they want?"
Indonesia and Malaysia, which account for 85 per cent of the world's palm output, have since late August been discussing the plan to set up an intergovernmental organisation called Council of Palm Oil Producer Countries.
The move comes after major palm oil firms, including Cargill , Golden Agri-Resources and Wilmar International, signed the Indonesian Palm Oil Pledge (IPOP) following pressure to adopt better practices.
Indonesia, which is home to the world's third-largest tropical forests, has been criticised by green activists and other South-east Asian nations on forestry policy and for failing to stop the region's annual "haze" problem from forest-burning.
Ramli said IPOP protected the interests of developed countries' vegetable oil markets, and the new council would set a standard that would also consider the welfare of smallholders.
Top palm buyers India and China would be lobbied to accept the new standard, he said.
IPOP officials could not be reached for comment on Wednesday (Oct 14), a national holiday in Indonesia, but have previously said they are working with smallholder suppliers to help them meet the pledges.
The new Council would also look to promote the image of palm oil, stabilise prices, improve cooperation between top producers, and coordinate on production, stocks, biodiesel mandates and re-planting schemes, industry groups have said.
Further details are expected to be announced from late October. Previous attempts to develop better palm relations between the two countries have had limited success.
"It really depends on the will power of both governments, and I suspect they will come together more when prices are low than when prices are high," said Ivy Ng, analyst at CIMB Investment Bank.