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Indonesia Goes Green to the Dismay of Palm Oil Producers

Indonesia Goes Green to the Dismay of Palm Oil Producers

Photograph by Haryono Yt/Reuters

To environmentalists, Indonesia is the home of developers who clear virgin rain forests, destroy the habitat of orangutans, and contribute to global climate change. But on May 13, Indonesia extended a policy of keeping virgin rain forest off-limits to the palm oil industry, a main driver of deforestation.

The first moratorium, imposed in 2011, had some enforcement problems. This time the government seems to be taking a new approach to green issues, and activists such as Glenn Hurowitz are unlikely fans. “There are now people at the highest levels of government who really believe the country can develop and protect its natural resources at the same time,” says Hurowitz, managing director of consultant Climate Advisers and senior fellow at the Center for International Policy, a think tank. The change, he says, is “quite extraordinary.”

Indonesian President Susilo Bambang Yudhoyono renewed the moratorium in part because of multinationals that don’t want to be linked to deforestation in Indonesia, the top producer of palm oil, which is used in cooking around the world. Companies such as Nestlé, Unilever (UL), and Cargill have pledged to stop using palm oil from trees planted on land that had been virgin rain forest. By 2015, even Girl Scout Cookies will use only palm oil certified as sustainable. The moratorium, says Indonesian Palm Oil Board Chairman Derom Bangun, “is good for improving our image.”

In Indonesia, government departments often disagree about what constitutes virgin forest and what areas stay open for developers. “They each have their own definitions, each have their maps, which don’t specifically correlate to each other,” says Satya Tripathi, director of the UN’s Office for REDD+ Coordination in Indonesia, an agency focused on deforestation, conservation, and sustainable forest management. The government is creating a single map of forest areas to eliminate conflicting accounts.

Indonesian industry isn’t happy with the government’s ban. “We will lose the momentum,” says Joko Supriyono, secretary general of the Indonesian Palm Oil Association. Already, plantation owners such as Malaysia’s Sime Darby are looking to less regulated countries in sub-Saharan Africa.

Some environmentalists aren’t totally satisfied either. According to Yuyun Indradi of Greenpeace Indonesia, banning new plantations on primary rain forest isn’t enough, because planters can still clear secondary-growth forest. A more comprehensive ban “is what’s really needed,” he says.

The bottom line: Indonesia is moving to address multinationals’ concerns about the destruction of rain forests for palm oil plantations.

Einhorn is Asia regional editor in Bloomberg Businessweek’s Hong Kong bureau. Follow him on Twitter @BruceEinhorn.
Rusmana is a reporter for Bloomberg News in Jakarta.
Listiyorini is a reporter for Bloomberg News in Jakarta.

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