This is the second of a three-part series on EU’s proposed palm oil ban. The third and final article to come will offer a solution to the ban.

IT is a fact, and a scientific one at that, that palm oil can produce more oil than rapeseed or soybean.

The yield of the oil palm has been proven by agronomists to be “nine times higher than soybean, five times higher than rapeseed and eight times higher than sunflower seed.” 

The wide spectrum of palm oil can only be due to species, seed and soil conditions. But pound for pound, palm oil trounces rapeseed, soybean and sunflower seed, many times over.

The price of palm oil can rise to US$3,600 (RM14,000) per tonne or occasionally drop to US$2,700 per tonne when demand ebbs.

Come what may, the dollar value of palm oil is higher, and highest, when rapeseed, soybean and sunflower seed are several hundred US dollars more expensive, especially when they are less productive of the necessary oil extract.

What is interesting is that the European Union (EU) already has a commanding position in the rapeseed and soybean markets. The member states command up to 80% of the world market of these two agricultural products. 

With more scientific breakthroughs in the pipeline, EU can more efficiently convert rapeseed and soybean into biofuel as well. To put it differently, EU or the EU Parliament does not necessarily have to challenge the supremacy of palm oil per se, when EU has already monopolised the market for rapeseed and soybean. If it does, EU will be looking for a total monopoly on rapeseed and soybean, even when palm oil is proven to be more efficient and sustainable.

Thus, for members of EU Parliament to  insist that palm oil should be banned or replaced, there can only be two reasons .

The EU is either driven to stub out palm oil once and for all to allow rapeseed and soybean to reign supreme in the commodities market –  a possibility Malaysia cannot discount outright – or there are genuine environmental concerns coming from the left, especially after the signing of the Paris Accord on April 22, 2016 with the effective date being November 4, 2016.

Either way, Malaysia should be wary of the politics of EU on both issues. Why? Well, the Financial Times has reported that the EU is a labyrinth of regulations. When the members of the European Parliament introduce a resolution to ban a thing, the discourse may be internalised and accepted first by the European Commission, then the European Council of Ministers and eventually, the respective 27 member states of the European Union.

As and when the United Kingdom resigns from the EU on March 29 next year through what is known as “Brexit”, the EU will be a collection of 26 countries, but one that is no less potent.

If Malaysia is not careful, all 26 countries may have a prejudiced view of Malaysia, may indeed, even lump the palm oil producing methods of Malaysia with Indonesia, even though they are poles apart. 

For example, Malaysian plantation owners do not believe in wide scale open burning that can lead to peat, or relentless bush fire, which is a serious environmental hazard due to the haze it can generate across the region.

As things stand, however, Malaysia and Indonesia already control up to 90% of the palm oil business in the world, with most of Malaysia’s processed palm oil going to EU, China, and India, in that order. 

And, ideally, they should be sent within two weeks of harvest, to ensure the integrity and quality of the oil extract. 

Indeed, the environmental practices of Malaysia must be separated from Indonesia. Yet, the European Parliament has made no distinction between the two. 

Due to the geographical proximity of Malaysia and Indonesia, the member states of EU, especially the European MPs, have tended to see Malaysia and Indonesia as one and the same. 

Yet, as early as 2004, the roundtable on sustainable palm oil (RSPO) was formed with the objective of promoting the growth and usage of sustainable palm oil products through credible international standards. 

Although the standard was  developed by RSPO, it is accredited as a certification body for the RSPO with authority to audit and certify palm oil-related organisations.

However, should 2021 come and go with neither Malaysia nor Indonesia able to conform to the sustainable development goals of the United Nations, EU would be obliged to ban palm oil imports.

This is why despite the importance of RSPO and Malaysian Sustainable Palm Oil (MSPO), which address sustainability issues and challenges for the multi-stakeholders  in the industry which complies with Malaysian laws and ratified international agreements, there is still a need to work closely with the UN development programme (UNDP) and the EU.

Last year, two million tonnes, or 15%, of Malaysia’s palm oil exports worth RM10.3 billion were shipped to the EU alone. It goes without saying EU is a major lifeline of Malaysian palm oil.

On the surface, since both Malaysia and Indonesia are both faced with the EU ban, it may even look good for the two countries to work together to remove the ban.

But there is a serious flaw to such an argument. Half of Indonesia’s palm oil plantation is cultivated by small time plantation owners. 

They cannot, in most cases, afford a rigorous process of certification and sustainability checks. Each test will hold them back, if not add to their cost as well. If Indonesia is bushwhacked, so will be the palm oil producers in Malaysia.

Malaysia, on the other hand, is entirely different. If Malaysia makes a concerted effort to work with the UNDP or  EU, Putrajaya and the private sector stand a good chance of meeting the goal of sustainable development.

The key rests in working closely with UNDP or even civil society or consumer groups concerned about the sustainability or safety of palm oil products, including biofuel.

To do well with UNDP or the larger civil society, such as the Third World Network of Martin Khor in Geneva, a paradigm shift in how Malaysia undertakes its agricultural priorities has to take place. The place to begin is not necessarily through government to government relations.

Entities like the Malaysian Palm Oil Council (MPOC) or Malaysian Palm Oil Board (MPOB) can and must work with local NGOs like Anak (Persatuan Anak Peneroka Felda Kebangsaan) to ensure the welfare of the farmers so that their livelihood can be drastically improved. 

If the debt burden of the farmers is further reduced, there is no reason for them not to want their palm oil products to be cultivated with organic and sustainable methods that conform to UN or EU demands. Take the 12th of the 17 goals of UNDP’s sustainable development plan, for instance.

The 12th goal affirms the importance of safe production and consumption of any agricultural products. The point is not just valid but poignantly true.

Abut 70% of the world’s water consumption is dedicated to agricultural usage, according to an environmental study. At such a rate, the speed and scale at which water tables and rivers would diminish is faster than the rate of production of agricultural goods.

In turn, the prices of agriculture would also begin to spike, creating a general trend of global inflation, especially when the world population has already exceeded seven billion and could reach nine billion by 2050. 

If Malaysia, where palm oil is its second major industry, does not practise sustainable development, very soon the whole country will be caught in a global income trap, if not global income debt. Thus, it is in the national interest to avoid unnecessary friction with the European Parliament.

Rather than to accuse the rapeseed and soybean lobby of challenging Malaysia’s palm oil, Putrajaya should double – even quadruple – its efforts to attain full compliance with sustainable development.

If it takes up to seven years for the oil palm to reach maturity, it makes sense to urge the planters to try more organic methods to make the eventual fresh fruit bunch even more productive. 

If Malaysia cannot compete against rapeseed and soybean, then it makes sense not to persist against them, in the same manner Malaysia moved away from the sheer tilling of rubber plantation at one stage to alternative crops now.

Deputy Chief Minister of Sarawak, Amar Douglas Uggah Embas, has said that when the price of rubber dropped, Sarawak moved successfully to the planting of pepper in the 1980s. To the degree the migration of such a method is imbued with many challenges, the government may then step in to provide the necessary subsidies and skills retraining.

Come what may, taking EU to the World Trade Organisation is bound to be long and time consuming, not  to mention resource sapping and expensive. As John Maynard Keynes once said, “In the long term we are all dead”.

Nor can Malaysia ban products of EU or impose on it a unilateral embargo since its economy far outsizes ours, and Malaysia produces nothing strategic that EU cannot procure from another Southeast Asian country. 

One must remember that Malaysia shares the same climate with many Southeast Asia countries. If Malaysia reacts to EU’s potential ban on palm oil with its own embargo, there will be no shortage of other Southeast Asian countries to will replace it.

Thus, step one is to stop this illusion, that by combining forces with Indonesia, Putrajaya and Jakarta can undo the prospective ban of EU on palm oil and biofuel by 2021. Indeed, half of Indonesia’s plantations can never reach the compliance standards EU demands.

Thus it is better to shoot for the higher prize of satisfying the UN’s sustainable development goals.

To achieve that, Malaysian society must also be democratic and civil. Without some modicum of respect granted to civil society, especially Malaysian consumer groups and pro-environment NGOs, Malaysia will always be locked on the twin horns of dilemma, where the state and the EU (which is a body primarily driven by citizen movement and pressure groups, either from the left or right) will always find themselves far apart.

There is no need to challenge EU to a fight in WTO, or to resort to a  tit-for-tat. When Malaysia is pro-sustainable development or pro-UN, our improved agricultural and trade practices will naturally make our products more competitive and profitable than others. EU would not be in a position then to ban anything from Malaysia.

God save Malaysia.

* Dr Rais Hussin is a Supreme Council member and the policy and strategy bureau head of Bersatu.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.