Shifting exports and negotiating, the right moves for Indonesia to face EUDR
This article has been translated by PwC Indonesia as part of our Plantation News Highlights service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Investor Daily - Alihkan ekspor dan negosiasi, jurus tepat bagi RI hadapi EUDR
27 June 2023
By: Tri Listiyarini & Ridho Syukra
Jakarta - Shifting palm oil export from the European Union (EU) to other markets, such as Africa, along with negotiation efforts, is the most appropriate strategy for Indonesia at the present to face the European Union Deforestation-Free Regulation (EUDR). By negotiating, it does not mean that Indonesia is subject to the EU, but it is an opportunity for Indonesia to demonstrate its firm stance against the EUDR. In fact, the implementation of the EUDR will make it more difficult for the EU because several countries in the region are experiencing high inflation.
Segara Research Institute Executive Director Piter Abdullah said that the shifting of palm oil export that was planned by the Indonesian government after the EUDR implementation was the right measure. The EU is merely looking for excuses because it is difficult to dispute the efficiency of palm oil. With a small area of land, the production from oil palm plantations is tremendous. Meanwhile, the production of soybean and sunflower oil by farmers in the EU with the same area of land is lower. This means the deforestation occurring in the EU is even greater. “We [Indonesia] have palm oil. If the EU does not want [to accept] it, we will look elsewhere. The government has taken the right measures. We cannot back down against the EU. No plantation has always been a plantation in the past. Previously, it must be a forest. The plantations in the EU used to be forest too,” said Piter when contacted by Investor Daily on 24 June 2023 and the results were written on Monday (26/06/2023).
According to Piter, in addition to shifting export market from the EU to other countries that are more accepting of palm oil, Indonesia can still carry out negotiations with the EU. However, these negotiations do not mean that Indonesia has softened towards the EU. Instead, it is a platform to explain EU’s hypocrisy to the world. “Negotiations must proceed. It is necessary, but it is not intended [to show] that we soften. This is where we show our face and attitude. It should be emphasised that no developing countries are free from deforestation. Developing countries will not live if they are not allowed to clear forests,” said Piter. On the other hand, the government needs to continue efforts to increase domestic market absorption through the development of biodiesel and other downstreaming measures. “These efforts are very appropriate,” said Piter.
Piter added that the EUDR implementation could make it difficult for the EU because several countries in the region are experiencing high inflation. “This makes it even more difficult for them, because now the price of non-palm vegetable oil is expensive. If they do not want to use crude palm oil (CPO), and use soybean or sunflower oil instead, it will further affect their inflation. Europe is facing the problem of high inflation,” said Piter. On the other hand, Indonesia as the largest producer of palm oil has the right to shift its market to other countries that really need it and that do not hamper the entry process. “Whatever the reason, whether protecting the farmers or stemming deforestation, we must not be weak, there are many other markets that still need it, whether Africa or any other country,” he said.
Previously, Maritime Affairs and Investment Minister Luhut Binsar Pandjaitan stated that the Indonesian government will prepare the latest strategy to counter the EUDR by seeking new export markets. Palm oil export to the EU is planned to be shifted to Africa. This has been conveyed to the EU Parliament. This effort is in parallel with the follow-up on the joint mission strategy that has been carried out by Indonesia and Malaysia. The EU implements EUDR which requires every exporter to conduct verification to ensure that their products do not originate from deforestation. This regulation places Indonesia at a disadvantage, and even tends be ecologically discriminating. In 2022, Indonesia’s palm oil export to the EU region was around 2.05 million tonnes, down 23% from 2.66 million tonnes in the previous year. Based on data from Statistics Indonesia (SI), in 2022, Indonesia’s palm oil export to the EU market targeted Spain, Italy, the Netherlands, Greece, and Germany.
Business competition
Meanwhile, President Director of Oil Palm Plantation Fund Management Agency (BPDPKS) Eddy Abdurrachman explained that, with a high level of palm oil productivity, this commodity is highly competitive in the international trade of vegetable oil. These conditions pose extraordinary challenges to non-palm vegetable oil producing countries, such as Europe, in terms of business competition.
