RSPO advances Indonesia sustainable palm oil initiative amid export ban uncertainty

11 May 2022 --- The Roundtable on Sustainable Palm Oil (RSPO) is collaborating with the Jambi province government in Indonesia to scale up oil palm smallholder inclusion in the sustainability ecosystem through ISPO certification. The move comes amid a palm oil exports ban in Indonesia, a defensive initiative to safeguard cooking oil reserves and try to control surging prices.

While smallholder production makes up 40% of the land used for palm oil development in Indonesia, according to data from the country’s agriculture ministry, only 1% of independent smallholders are certified either by RSPO or ISPO.

“Smallholders can play a critical role in enhancing ecosystem services and protecting biodiversity – improving soil health, minimizing air, water and soil pollution, supporting protected areas, access to resources, and protecting cultural landmarks,” says Guntur Cahyo Prabowo, senior manager of the RSPO smallholder program, Indonesia.

“Despite ongoing efforts to include and incentivize smallholders to adopt sustainability standards, it has not been enough to propel a large-scale inclusion of smallholders essential to achieving the RSPO’s mission,” admits Guntur.

Hence, RSPO has changed its approach, trying to incentivize landowners with a tailored approach for each case. Helping with technical support for farmers in gaining the national certification, formally registering their land, and navigating burdensome legal documentation requirements needed to acquire the certification.

Only 1% of independent smallholders are currently certified either by RSPO or ISPO.Malaysia eyes the market gap
While Indonesia has banned exports, Malaysia is seizing the opportunity and trying to ramp up its market share by halving its palm oil export tax from 8% to between 4% - 6%. A strategic move that will temporarily sacrifice government revenue to aim to fill the gap that Indonesia leaves in international markets.

Furthermore, Malaysia will water down the amount of palm oil in biodiesel usage to prioritize global and domestic food industries.

After the Indonesia export ban came into effect late last month, Zuraid Kamaruddin, Malaysia's minister of Plantation Industries and Commodities, said Malaysia could cater to the global demand for palm oil.

The move will offer some relief to countries like Pakistan, where price increases in essential products like cooking oils are set to reduce the country’s population purchasing power by up to a third—leaving nine in ten Pakistanis unable to afford a healthy diet.

Indonesia out of palm oil
The South-Asia country introduced its export ban to ease prices and protect national reserves of cooking oil. 

“As the world’s biggest producer of palm oil, it is ironic that we are experiencing a shortage of cooking oil. As president, I cannot allow that to happen,” says Indonesian President Joko Widodo.

The move limited cooking oil prices to just under US1$ per liter, compromising tax revenue to ensure consumer availability. 

“I understand the state needs taxes, needs revenue, needs state surplus. But fulfilling people’s basic necessities is an important priority,” says Widodo. 

RSPO a sustainable path to production boostMalaysia is set to take Indonesia's place as the World’s top palm oil supplier.
The assistance independent smallholders can reap from RSPO could be a solution to expand domestic production, with the added value of being, on top of it, sustainable. 

Giving farmers access to knowledge transfer and skill-building tools to better plantation management practices that follow applicable national and international requirements. 

RSPO focuses on improving organizational capacity for farmers to work as a group, access to tools and training, the potential reduction of rejection rates of fresh fruit bunches at the mill, improved harvesting practices, better fertilizer usage and improved waste management. The move would translate to efficient plantations with reduced costs for agri-inputs, according to the regulatory body.

Guntur expects the program to demonstrate the commercial value in scaling up certification and that successful smallholder stories will create a domino effect to bring more farmers and create an attractive sustainability narrative.

“The program is expected to open the pathway for effective government engagement and bring positive stakeholder sentiment, awareness and trust of RSPO and its standards,” says Guntur. 

As of February 2022, RSPO has certified 10,675 independent smallholders in Indonesia with a total area of 26,191 hectares. Compared to the previous year, this represents a 35% increase in certified smallholders and a 39% increase in the total certified area.

By Marc Cervera