Malaysia, Indonesia team up against EU anti-deforestation regulation

Malaysia and Indonesia, the world’s largest palm oil exporters, have launched a diplomatic campaign against the European Union’s anti-deforestation regulation, which they have called imperialistic and discriminatory against small producers.

The countries said they already have their own guarantee systems to prevent forest loss, but agreed to form a special team with the EU to address the implementation of the new regulation.

The controversy involves mainly palm oil, a versatile and inexpensive product used in a wide range of goods, from processed foods (such as cookies, pastries, or ice cream) to cosmetics and biofuels.

Palm oil has long been linked to deforestation in Malaysia and Indonesia, although the loss of forests has decreased in both countries.

The EU adopted the Deforestation Regulation on May 16 to prevent imports of certain raw materials and derived products, such as palm oil, beef, soy, coffee, rubber, wood, or chocolate, from causing deforestation in third countries.

Under the regulation, companies must issue a due diligence declaration to ensure they have not caused deforestation in their places of origin as of 2020, which includes sharing geolocation coordinates, among other requirements.

After 18 months from the regulation’s entry into force, around the end of 2024, the European Commission will create a classification of the countries of origin of products based on low, medium, or high risk, which will determine the frequency of checks.

Indonesian Coordinating Minister for Economic Affairs, Airlangga Hartarto, called the EU’s intention to create a country classification as “regulatory imperialism.”

In May, Hartarto and the Malaysian Plantation Industries and Commodities Minister Seri Fadillah Yusof traveled to Brussels to express their dissatisfaction with the regulation in the approval process. After a visit by a European delegation to Malaysia and Indonesia, both formed a special team in June to jointly address its implementation.

Hartarto stated in a press release that the European regulation would negatively impact Indonesian products such as cocoa, coffee, rubber, wood, and palm oil, while asserting that his country has reduced deforestation levels.

A study by Chain Reaction Research showed deforestation in Indonesia, Malaysia, and Papua New Guinea was reduced by 50 percent between 2020 and 2021, reaching 19,000 hectares, a historical low.

On July 13, The EU’s High Representative for Foreign Affairs Josep Borrell said in Jakarta that the implementation of the new regulation will be adapted to the “socio-economic situation” of the producers. “We will seek practical solutions,” Borrell told EFE during a regional forum in the Indonesian capital.

Indonesia and Malaysia account for 85 percent of global palm oil exports, and the EU is the third-largest importer of palm oil from these countries, following China and Pakistan, though figures are declining.

Indonesian palm oil exports to the EU decreased by 22 percent in 2022 to 2.24 million tons, with Spain being the main destination with 622,000 tons, according to Indonesia’s statistics office data.

In the same year, Malaysia shipped 1.47 million tons to the EU, representing a 10.1 percent decrease compared to the previous year.

Fadhil Hasan, the head of Foreign Affairs of the Indonesian Palm Oil Association, agreed with Hartarto in describing the EU’s regulation against deforestation as “imperialistic” and “a colonial mentality.”

“The relation between countries should be equal. You can’t just say that a certain country [has low or high risk] based on a criteria made by yourself,” Hasan told EFE.

The Indonesian official also expressed skepticism about the EU’s offer of technical assistance. “Even if they are assisting, how big of a help is it that it can reach all palm farmers in Indonesia or other palm-producing countries like Malaysia?” said Hasan, adding that he feared exports to the EU would continue declining due to the regulation.

Muhammad Faisol Amir, from the Centre for Indonesian Policy Studies, said the majority of the palm oil sector in his country consists of small producers who will face challenges in meeting the technical requirements.

Tags: anti-deforestation regulation, exports, Indonesia, EU, European Union, Malaysia, palm oil