Middle of the Road Policy Regarding Indonesia's Palm Oil Industry
Last week, president Susilo Bambang Yudhoyono extended the moratorium on new permits to convert natural forests and peat lands for a further two years. In 2011, Indonesia's government signed the two-year primary forest moratorium that came into effect on 20 May 2011 and expired in May 2013. This moratorium implies a temporary stop to the granting of new permits to clear rain forests and peat lands in the country. The moratorium particularly aims to limit Indonesia's quickly expanding palm oil industry.
The moratorium was received with mixed feelings from the start. Skeptics said that the moratorium was weak as it did not include concessions that were already 'approved in principle' by the Minister of Forestry, meaning that those that have secured permits prior to the moratorium can continue to convert forests. Also, the country’s vast secondary natural forests fall outside the scope of the moratorium. As such, their conversion is possible. Therefore, skeptics claim that the 'business as usual' is continued regarding palm oil development.
Gapki, the Indonesian Palm Oil Producers Association, is worried that Indonesia will lose its dominating position in the worldwide palm oil business as the country's output is expected to fall in the years ahead. Normally production rises by about three million tons per year, but this figure is revised down to 2.0 or 2.5 million tons per year due to enactment of the moratorium. As fossil fuels are becoming scarcer, vegetable oil, such as palm oil, will play a more important role in the future. Therefore, countries such as Brazil, have been focused on expanding their palm oil businesses recently.
Palm oil is important to Indonesia as it is a major export commodity of the country. Indonesia is the largest producer and exporter of crude palm oil (CPO) worldwide. As such, it raises an annual 15 billions of US dollars for the country and provides employment for millions of Indonesians. Therefore, and despite environmental issues, there is a large community in Indonesia that supports expansion of the county's palm oil industry.
The extension of the moratorium will indeed limit expansion of Indonesia's palm oil business. However, it is considered to contain a number of 'loopholes' (mentioned above) that will make sure that the industry will still expand instead of stagnate.