Malaysia, Indonesia unite to fight ‘discriminatory’ EU over palm oil curbs

The leaders of the world’s top two palm-oil producers are demanding that the European Union ‘promptly address’ a new law aimed at forest protection
Onerous compliance conditions set out under the ‘unjust’ deforestation regulation will hit exports – and hurt the smallest farmers most, they say

Malaysia

Joseph Sipalan

Published: 6:30pm, 8 Jun 2023

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The leaders of Malaysia and Indonesia, the world’s two largest producers of palm oil, pledged on Thursday to work together to force the European Union to rollback “discriminatory” forest protection measures that could hit exports of the lucrative commodity.

The two Southeast Asian nations have so far acted separately to address a raft of regulations implemented by the EU that they claim impose unfair conditions on supply chains of palm oil, the world’s most widely consumed vegetable oil.

Malaysia and Indonesia account for more than 80 per cent of the world’s total palm-oil exports, which can be found in everything from pastries to cosmetics.

In a joint statement, Malaysia’s Prime Minister Anwar Ibrahim and Indonesian President Joko “Jokowi” Widodo said both countries will cooperate closely to address “highly detrimental discriminatory measures” imposed on palm oil following the introduction of the European Union Deforestation Regulation (EUDR).

A worker harvests palm-oil fruits at a plantation in the Malaysian state of Johor on Thursday last week. Malaysia has described the EU’s new deforestation law as “unjust”. Photo: Bloomberg

“The EU needs to promptly address such discriminatory measures and work towards a fair and equitable resolution,” said the statement, issued after the two leaders held a meeting during Jokowi’s first official visit to Malaysia since 2019.

In April, the European parliament approved the EUDR, a landmark deforestation law that will ban the import of goods if they are found to be linked to the destruction of forests in their country of origin.

Aimed at eliminating deforestation from the EU’s supply chains, the law will require companies selling goods to the bloc to produce a due diligence statement and verifiable information to prove that the products were not grown on land that had been deforested after 2020.

Besides palm oil, the law will also apply to soy, beef, wood, cocoa, coffee, rubber, charcoal and derivative products such as leather, chocolate and furniture, according to a Reuters report.

An ‘unjust’ handicap?

Malaysia has described the new law as “unjust” and an attempt to protect the EU’s domestic oilseeds market, which cannot compete with palm oil, and that it would have an adverse effect on small-scale farmers who would be unable to meet compliance costs.

EU policymakers have denied these claims, saying the rules apply to all commodities produced anywhere in the world and that the EU market remains open to sustainably produced palm oil.

Last month, Malaysia and Indonesia made their case in a joint-trade mission to Brussels where they met with top EU officials to raise their concerns over the new law.

A palm-oil plantation is seen near a protected wildlife reserve area in Indonesia’s Aceh region. The EUDR is aimed at eliminating deforestation from the bloc’s supply chains. Photo: AFP

Both nations also suspended trade talks with the EU pending negotiations for fairer treatment of palm oil smallholders affected by the EUDR, the Financial Times reported.

The EUDR is only the latest issue to affect ties between the EU and the world’s top two palm-oil producers.

In 2019, Indonesia filed a lawsuit with the World Trade Organization, calling out the EU for unfair trade practices in its decision to stop the use of palm oil-based biodiesel. Malaysia filed a separate challenge with the WTO in 2021.

Protecting workers’ rights

Anwar and Jokowi also discussed measures to protect the rights of Indonesian citizens working in Malaysia, with both leaders agreeing to establish a mechanism “to address all issues pertaining to all migrant workers in a comprehensive manner”.

Indonesia is a key source of labour for Malaysia, where foreign workers are typically hired in the tens of thousands to pick oil palm fruit in large commercial plantations and to staff factories, and also as domestic helpers.

Last year, Indonesia briefly stopped allowing its nationals to take up work in Malaysia following a dispute over the system used to recruit Indonesian domestic workers.

Malaysia’s government said at the time that numerous cases of abuse suffered by Indonesian domestic workers at the hands of their Malaysian employers was a major reason behind the temporary ban.

Indonesia is Malaysia’s sixth-largest trade partner, with 130.14 billion ringgit (US$28.4 billion) of total trade done by the two regional neighbours last year, according to Malaysian government data.