This is the final article of a three-part series on EU’s proposed palm oil ban. 

IF the scenario of the perfect storm comes to be, the resolutions against the use of palm oil in biofuel will take place by 2021 in and across the European Union.

To reach such a stage, the European Commission and the Council of European Ministers, together with all 27 EU member states would have to separately agree on the ban.

It is a tall order, but one where the likelihood cannot be entirely dismissed for three reasons.

Firstly, just as no one predicted Brexit in June 2016, it happened. By March 29, 2019, the United Kingdom would have to leave EU, making it a body of 26 member states.

Secondly, with the United Kingdom gone, Malaysia’s reliance on the UK as a strategic partner and defender of EU, would also disappear.

Not surprisingly, Malaysia has begun cultivating France and Sweden to speak out against the EU ban of palm oil in the use of bio fuel.

At 2 million tons a year to EU, the business is considerable and large. Losing EU as a trading partner would affect the livelihoods of some 650,000 owners and smallholders.

This is a figure that has been touted by Deputy Prime Minister Ahmad Zahid Hamidi, and seconded by Plantation Industries and Commodities Minister Mah Siew Keong.

Now, International Trade and Industry Minister Mustapha Muhammad can of course argue that any EU ban would be brought to the arbitration of the World Trade Organisation (WTO).

But that would practically pitch Malaysia against 26 countries in EU. Even with the 16 Malaysian missions in EU, Malaysia does not have the strategic and operational depth in Europe to launch a successful campaign.

Even if the research network and science of Malaysian Palm Oil Council (MPOC) and Malaysian Palm Oil Board (MPOB) are called into action, neither one is sufficiently strong enough to make a dent on the EU ban by or before 2021.

Thirdly, the ban on palm oil is centred on sustainable development. By this token, it is associated with good governance and government integrity – both of which lacks due to a government that has been hijacked by vested interest and kleptocracy.

When the right hand does not know what the left hand is doing, as is the case with Malaysia – where Felda is entwined with the business interests of Indonesian Peter Sondakh of the Eagle High Plantations, which is heavily opposed by second-generation settlers – it is not possible to wage an effective counter EU palm oil ban campaign.

So what are the solutions? The key is to learn from the current steps, after which Malaysia must then transcend these limitations.

To begin with, Indonesia has tried to go it alone by formulating what is known as the Indonesian Sustainable Palm Oil certification (ISPO). They have embarked on doing this at a scale of 300ha in Riau, Indonesia.

While the United Nations Development Programme (UNDP) is aware of Jakarta’s attempt to upgrade its standards of sustainable development, UNDP argues that it is not as comprehensive as what the UN demand.

In other words, ISPO does not meet the standards of the Paris Climate Change Agreement or the UNDP Sustainable Development Goal 12 (UNDP formulated 17 goals in all to replace the UN Millennium Development Goals).

To be sure, UNDP, which has an office in Putrajaya – though it is not linked to the Malaysian government in any way – admits that palm oil is an important commodity and a versatile raw material for both food and non-food industries.

By this token, palm oil for food industries would not disappear completely from EU. Only palm oil as a part of biofuel would be in peril once or when the ban is enforced. UNDP understands the latter very well.

Thus, UNDP is goading Indonesia and Malaysia to reach the sustainable development standards defined by Paris Climate Change Agreement 2016 and UNDP Sustainable Development Goal 12.

Furthermore, the mere formation of the Roundtable on Sustainable Palm Oil (RSPO) and Malaysia Roundtable on Sustainable Palm Oil (MSPO) initiative would not necessarily impress UNDP too, as UNDP has seen how ISPO has been done in Indonesia and understood its shortcomings.

Secondly, EU controls up to 80% of the rapeseed, soybean and sunflower seed business in the world. EU itself has every interest to promote these three commodities vis-a-vis palm oil. In the latter, it is Indonesia and Malaysia that are the top monopoly with nearly 90% of the market share.

However, it would be gravely mistaken if Malaysia and Indonesia forms an alliance –- the current thinking of Prime Minister Najib Razak – to counter EU together.

The reason isn’t so much the lack of resources, as Jakarta and Putrajaya can combine their money and diplomatic personnel to undertake the campaign of convincing the EU of the sustainability of Asian palm oil.

But, if Malaysia and Indonesia lock themselves into an alliance, then Putrajaya would be burdened by the slowness of the Indonesian reforms –close to 50% of Indonesian palm oil are still held by small plantation owners.

These farmers and planters lack the assistance from Jakarta to comply with the standards of EU and UNDP, let alone the Paris Climate Change Agreement. When Indonesia is slowed down, Malaysia is affected too.

Thirdly, the prospective EU ban is occurring at a time when green environmentalists in the EU parliament are either calling for the use of more electric cars or carbon free transportation systems like buses that run on gas, petrol, and diesel.

Malaysian diplomats and palm oil specialists do not have the proverbial wind in their sail to put a check to this  green movement.

The very fact that the green movement can get their governments to agree to the Paris Climate Change Accord, in and by itself, suggests massive organisational and lobbying power.

If Malaysia screams “palm oil apartheid” or “unfair trade practice”, as is Mah’s rally call, then the civil groups and environmental think tanks in EU will undertake a massive campaign to go against Malaysian palm oil in the bio fuel sector, if not Malaysian palm oil per se.

If anything, Malaysia needs to work closely with organisations like the Third World Network and the Penang Consumers Association, both of which led by Martin Khor and SM Indris respectively, to counter EU’s anti-palm oil campaign.

To work with Martin Khor and SM Idris, one would have to assure them that Malaysia will protect the rights of the consumers and laborers – without which neither one of these two distinguished Malaysians would want to do the government’s biddings.

More importantly, the one that should make the overture to Khor and Idris should be the group of Felda settlers itself, ie ANAK.

In addition, Malaysian palm oil producers, including Genting Group, SIME Darby, IOI and Tradewinds Plantations too should have a roundtable on how to improve the welfare of the workers and management, in addition to the sustainability of the palm oil.

Finally, FGV Global, together with the banks that have extended the credit facilities to the Felda planters, have to either waive the borrowers’ bad debts or reduce the size of their debts, without which the planters will carry too big a financial burden to be able to comply to the standards of UNDP and Paris Climate Change Accord.

Concurrent to all these measures, Malaysia should also pivot to improving its palm oil bulking stations.

If palm oil is left at the ports or train station longer than two weeks, the quality of the oil would begin to degrade, thus affecting the stock prices of the palm oil in the open market.

Anyone that can have monopolistic power of the palm oil bulking stations must be stopped, regardless of whether that company is Wilmar controlled by Robert Kuok or William Kuok, or some other special purpose vehicles and entities.

When the likes of these tycoons can affect the quality of the palm oil at the bulking stations, they will stand to gain from the price fluctuations.

In this sense, there is a need for an Asean palm oil watch dog that works closely with UNDP, which is already a Dialogue Partner of Asean.

But, as a start, Malaysia should get the ball rolling by aspiring to achieving the highest standards of UNDP, EU and Paris Climate Change Accord now, instead of waiting for the “perfect storm” to become reality. – February 24, 2018.

* Dr Rais Hussin is Bersatu supreme council member and heads its policy and strategy bureau.