The soaring price of cooking oil is unforgivable for ordinary Indonesians

The writer says the palm oil industry must remember the environmental and social costs of their businesses are enormous.

Kornelius Purba

Kornelius Purba

The Jakarta Post


Fruitful enterprise: A worker arranges oil palm fruit at a collection center in Kutamakmur, Aceh, on Nov. 7, 2021. As supplies of vegetable oil have been disrupted by the Ukrainian war, a number of European countries have shifted to palm oil. (AFP/Azwar Ipank)

May 13, 2022

JAKARTA – When neighboring countries condemned Indonesia for failing to control the annual forest fires that caused a haze to blanket their land and choke their people, the government quickly blamed palm oil smallholders as perpetrators of the man-made disaster. But many believe, even government officials often insist in private conversations, that the palm oil giants are innocent.

One of the worst forest fires in Indonesia occurred in 2019, burning no less than 1.64 million hectares of unproductive or idle forest areas and 670,000 ha of peatlands. The fires occurred in Central Kalimantan, Jambi, West Kalimantan, South Kalimantan, Jambi, South Sumatra and Papua.

In 2018 forest and peat fires razed 529,267 ha of land.

In 2015, the fires destroyed a record 2.6 million ha of forest, releasing 1.2 billion tons of CO2, which accounted for half of the country’s total carbon emissions that year.

“There has been much speculation in the news that Indonesian fires are ignited by land clearing activities to establish plantations. Clearing land for this purpose only partly describes the situation. Uncontrolled fires easily propagate well beyond the intended area of burning because of large areas of flammable idle and degraded scrubland, the legacy of past deforestation,” The Jakarta Post quoted from a report by the Center for International Forestry Research (CIFOR) in 2019.

Every time the government increased fuel and gas prices, people were angry because for years they had been addicted to government subsidies regardless of the fact that Indonesia is a net oil importer. When state electricity company PT PLN announced a possible rise in electricity tariffs last year people resisted, arguing that Indonesia was one of the world’s largest coal producers and exporters. Most power plants in the country are coal-fired.

Coal producers protested the government’s decision to ban coal exports in January this year. The bold policy was made because PLN’s coal stock was draining. Coal producers had refused to comply with the domestic market obligation amid the skyrocketing coal prices. The same producers asked PLN to buy their stock when international demand was down.

The coal miners of course invested a lot and deserve profits. But they should not forget the environmental degradation resulting from their extractive activities the whole nation will have to bear. As happened in Kalimantan, many open-pit coal mines have been abandoned and may have contributed to major floods there.

The palm oil industry tells the same story. Big, medium and small palm oil plantation owners can take pride in being sources of foreign exchange revenue for Indonesia, thanks to the skyrocketing prices of the commodity. But they should also remember the whole nation pays the cost of the environmental damages inflicted by their business.

In a recent webinar organized by Corona Mea Vos Estis (CMVE), an alumni association of a Catholic seminary in Pematang Siantar, North Sumatra, speakers pointed to the massive scale of the palm oil industry expansion in Indonesia. But they also underlined that almost all ministries and state agencies deemed it important that the businesspeople have a say in the policymaking related to the lucrative business. There are too many institutions that claim to have a right to manage the industry.

According to Tungkot Sipayung, a lecturer at IPB University in Bogor, palm oil is the most competitive commodity compared with soybean and sunflower oil. Indonesia controls 59 percent of the global production, with Malaysia 25 percent.

In the last 10 years, Indonesia has made major progress in downstreaming palm oil products. In 2010, crude palm oil (CPO) and palm kernel oil (CPKO) accounted for 57 percent of exports while processed palm oil and palm kernel oil 38 percent. The composition changed in 2021 when CPO only accounted for 7 percent of exports, while more than 80 percent were already in the form of processed palm oil. The export revenue from the industry reached US$36.2 billion last year.

Indonesia has 16.38 million ha of oil palm plantations in 22 provinces. Forty-two percent of them belong to smallholders and plasma farmers, whose land is about 2 ha, while 52.5 percent is controlled by big corporations and only 6 percent is managed by state-owned plantation companies. In 2021, Indonesia produced 52 million tons of CPO and CPKO.

Despite the huge production, for more than four months the government has remained unable to control the price of cooking oil, one of the diverse derivative products of CPO. People find it difficult to forgive President Joko “Jokowi” Widodo for his failure to bring down the price despite his bold decision to ban exports of palm oil until domestic supply is secured at an affordable price.

The President’s instruction has fallen on deaf ears. The cooking oil price is still rising.

What is more upsetting is the behavior of palm oil giants, who have belittled the President’s order. The Attorney General’s Office has detained three executives of major cooking oil producers for allegedly offering bribes in exchange for a license to export.

The palm oil giants shamelessly have demanded the acquittal of the three suspects, claiming them innocent. They also urged the government to subsidize domestic cooking oil prices.

Every time peatland fires occur, the government attributes the disaster to the slash and burn practiced by small farmers to clear land. The method is the cheapest and fastest way to expand palm oil plantations.

National and international nongovernmental organizations such as Greenpeace however suspect that major corporations are also involved in burning the forests because they needed more land to expand their business.

Meanwhile, the government has set an ambitious target of reducing emissions by 29 percent by 2030. In his speech at the United Nations Climate Change Conference (COP26) in Glasgow, Scotland, the United Kingdom, late last year, President Jokowi called for the support and contribution of industrialized countries. The provision of climate funds from advanced nations would be a game-changer in the mitigation and climate change adoption in developing countries. Thanks to the assistance, Indonesia could contribute to the world’s zero-emission target, the President said.

“The question is how much is the contribution of the advanced countries to us? What transfer of technology can be provided? This needs action, needs immediate implementation,” the President emphasized.

The palm oil industry has undoubtedly contributed much to Indonesia’s economic survival, especially during the COVID-19 pandemic. But those who continue to profit from the industry must also remember the environmental and social costs of their businesses are enormous, too.

Ordinary Indonesians just have simple but reasonable demands. In their mind cooking oil prices should be affordable because Indonesia is the world’s largest producer of palm oil. What happens now is unforgivable for them.

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