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Wednesday October 5, 2011

Indonesia’s withdrawal puts Roundtable on Sustainable Palm Oil on shaky ground

By TEE LIN SAY
linsay@thestar.com.my


PETALING JAYA: The jury is still out on the implications of Indonesia's withdrawal of its membership from the Roundtable on Sustainable Palm Oil (RSPO).

On the one hand, some industry observers reckon the absence of Indonesia, being a sizeable producer, can derail the workings of RPSO. But others think that as long as major palm oil producers such as Sime Darby Bhd and Wilmar International are still members of RSPO, there should be no negative impact on the grouping.

“The resignation of the Indonesian Palm Oil Association (GAPKI) will not impact the palm oil industry in a big way, as it is an association, and not a palm oil producer,” said one industry player.

It is unclear if the decision by GAPKI will have any bearing on the Malaysia Palm Oil Association's (MPOA) stand on RSPO. When contacted, MPOA chief executive Datuk Mamat Salleh said he had no comment on the issue.

Last Friday, GAPKI officially withdrew its membership from RSPO.

Fadhil Hasan, the executive director of GAPKI, was quoted as saying the association decided to resign because Indonesia already had the Indonesian Sustainable Palm Oil (ISPO).

The RSPO is an industry body of consumers, green groups and plantation firms that aims to promote the use of sustainable palm oil products. Many major European palm oil buyers say the RSPO will continue to be the international sustainability benchmark.

On its website, RSPO said: “It is regretful that an association representing Indonesian palm oil producers has decided to relinquish its presence in RSPO. However, we accept its decision as the RSPO is a voluntary membership-based organisation. We also acknowledge the contribution of GAPKI in promoting sustainable palm oil and thank it for its instrumental role in our mutual vision to date.”

An analyst, however, said that there was dissatisfaction among members of the RSPO, as it was very skewed towards the rights of the non-governmental organisations on such issues as growing oil palm at the expense of deforestation.

But an industry observer said it would not be easy for large plantation firms to abandon the RSPO.

“Having an RSPO certification is now seen as an international benchmark. It is demand driven. Even for small companies that use palm oil in their products, banks won't lend them money unless they are RSPO certified.

“Unless ISPO becomes an international benchmark, then perhaps the impact will be different,” he said.

Responding to queries from StarBiz, the RSPO said it remained open and accessible to constructive criticism, as it believed that this paved the path for continuous improvement and innovation.

“Operating on a multi-stakeholder platform, decisions within the RSPO (including the executive board) are made through consensus. In the RSPO, consensus' accentuates that any stakeholder group within the board regardless of the size of its representation has a right to veto or object to any proposals or key decisions being discussed. In fact, at times, we bend over backwards to ensure no marginalisation of any stakeholder,” said the RSPO.

RSPO has just recently achieved one million hectares of certified production area around the world. Malaysia and Indonesia contribute 88% of total certified sustainable palm oil (CSPO). Out of this, Indonesia produces 40% of global CSPO, second to Malaysia with 48% of production.

CSPO is currently at close to 5.1 million tonnes, more than 10% of global production of crude palm oil.

Together, Malaysia and Indonesia make up more than 85% of the world's palm oil production. In 2010, Malaysia produced 17 million tonnes of crude palm oil while Indonesia produced 21 million tonnes.

Malaysia makes up 41% of world's palm oil production and 47% of world's exports. It is No. 2 in terms of production and No. 1 in terms of exports.

Some 11.1% of the world's total oils and fats production and 27% of world's oils and fats exports come from Malaysia.

The RSPO was formed in 2004 with the objective of promoting the growth and use of sustainable oil palm products through credible global standards and engagement of stakeholders.

The mission of the RSPO, among others, is to monitor and evaluate the economic, environmental and social impact of the uptake of sustainable palm oil in the market; to develop, implement, verify, assure and periodically review credible global standards for the entire supply chain of sustainable palm oil.

According to the RSPO website, Malaysia has 98 members and Indonesia 85 out of 521 members. European members make up more than 50%. Indonesia and Malaysia produce more than 85% of the world's palm oil.

Meanwhile, the RSPO secretariat is now working closely with Indonesian producer members to have an interim representative for Indonesian growers on the RSPO executive board until a new representative is formally chosen at the RSPO general assembly in November.

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