Singapore approves anti-haze bill and Jokowi eyes drones to stop land misuse (update 2)

Khor Reports: While a study quoted in Nature.com debunks the view that palm oil plantations are the key culprit in Indonesia deforestation (blame fibre plantations!), Singapore passes its anti-haze bill. Jokowi, Indonesia's next president speaks of embarking on a more balanced development approach, to protect forests and challenge land misuse with the use of drones. The Jokowi-Jusuf Kalla manifesto has an interesting new approach laid out in it. This calls to mind the expanding efforts by Brazil to change its approach to rein in its rates of deforestation (read our blog posting on it here: http://khorreports-palmoil.blogspot.com/2014/07/how-brazil-clamped-down-on-deforestation.html)

Update 2 - adds on Malaysia planned usage of drones.


News links:

Singapore approves bill to fine companies that cause air pollution, Aug 5 — "Singapore’s parliament passed a bill today proposing fines for companies that cause haze pollution regardless of whether the companies operate on the island. Last year, Singapore suffered its worst haze on record, as smoke from forest clearing in neighbouring Indonesia shrouded the city. Some of the forest clearing was believed to have been done by plantation companies with Singapore connections. The bill will go to the president who will sign it into law.... Under the bill, companies found guilty of causing haze could be fined up to S$100,000 (RM255,837) for each day they pollute, with the maximum aggregate amount being S$2 million. They will also be subject to civil claims from parties who say they have suffered damage caused by haze.... The bill targets entities directly or indirectly involved in slash-and-burn, and grants use of circumstantial evidence to prosecutors, such as satellite images or maps from non-government organisations. Defendants will bear the onus to prove the evidence wrong.The law is designed to have extra-territorial reach, meaning it could be applied to culprits outside Singapore, though enforcement might be difficult.... Lawmakers hope overseas companies will comply to retain access to Southeast Asia’s banking and business hub. A number of palm oil and forestry companies are listed on the Singapore Exchange...." http://www.themalaymailonline.com/world/article/singapore-approves-bill-to-fine-companies-that-cause-air-pollution

Fibre production drives deforestation in Indonesia - Study debunks belief that palm-oil plantations are main culprit. by Natasha Gilbert 21 July 2014; "Palm-oil plantations are generally though to be the main driver of deforestation in Indonesia, which is home to the world’s third-largest tropical forest and has the highest rate of forest loss. But fibre plantations — where species such as Acacia mangium are grown for use in pulp and paper production — now seem to be the main culprit.... Of the 14.7 million hectares of forest destroyed between 2000 and 2010, 12.8% was removed for fibre plantations, 12.5% for logging and 6.8% for palm-oil plantations; the remainder was removed for mixed concessions and mining1. All told, 45% of forest loss during the period occurred on land leased to industry..." http://www.nature.com/news/fibre-production-drives-deforestation-in-indonesia-1.15589#%2Fb1.

Reference to Abood, S. A., Lee, J. S. H., Burivalova, Z., Garcia-Ulloa, J. & Koh, L. P. Conserv. Lett. http://dx.doi.org/10.1111/conl.12103 (2014): "We found that the four industries accounted for ~44.7% (~6.6 Mha) of forest loss in Kalimantan, Sumatra, Papua, Sulawesi, and Moluccas between 2000 and 2010. Fiber plantation and logging concessions accounted for the largest forest loss (~1.9 Mha and ~1.8 Mha, respectively). Although the oil palm industry is often highlighted as a major driver of deforestation, it was ranked third in terms of deforestation (~1 Mha), and second in terms of carbon dioxide emissions (~1,300 – 2,350 Mt CO2). Crucially, ~34.6% (~26.8 Mha) of Indonesia’s remaining forests is located within industrial concessions, the majority of which is found within logging concessions (~18.8 Mha). Hence, future development plans within Indonesia’s industrial sectors weigh heavily on the fate of Southeast Asia’s remaining forests and carbon stocks...."

Haze Fines Win Indonesia’s Support With Caveats: Southeast Asia, By Brian Leonal and Fitri Wulandari  Jul 30, 2014 12:55 PM GMT+0800; "Joko Widodo, the Jakarta governor known as Jokowi who won this month’s presidential election, agrees that companies implicated in unlawful fires may be fair game for Singapore’s enforcers. The sticking point is the sovereignty of Indonesia, where “incredibly prickly” officials have yet to join other ASEAN nations in signing a transboundary-haze pact, according to the Jakarta office of Control Risks Group. ... “We should have some detailed protocols to guarantee the sovereignty of Indonesia,” said Sonny Keraf, Indonesia’s environment minister from 1999-2001 and adviser to Jokowi. “But we do appreciate the commitment of the government in Singapore to penalize these companies’ activities,” he said in an interview this month.... Singapore’s new fines will require Indonesia to cooperate with gathering evidence in its territories, which may be seen as infringement, said Eugene Tan, an associate professor of law at Singapore Management University. The city would need “watertight” evidence to win in local courts, he said. By pursuing culprits in Indonesia, Singapore may risk retaliation, said Alan Khee-Jin Tan of the National University of Singapore Law School. “There is a likelihood of Indonesian lawmakers enacting retaliatory laws that target individuals or entities in Singapore for infringing Indonesian law,” Tan said. “That would be diplomatically messy.”.... Jokowi will push to extend the ASEAN pact beyond haze to include other environmental threats, Keraf said. Jokowi also plans to continue a moratorium on new permits to develop peatlands and primary forests. The ban, set to expire in 2015, was part of an agreement for $1 billion in aid from Norway.... The next president wants a network of drones to help monitor and stop land misuse across an archipelago of 17,000 islands that would stretch from New York to Alaska. “Drones are not only for the military but also for the economy, like for illegal logging,” Jokowi said in an interview on July 21...."
http://www.bloomberg.com/news/2014-07-29/haze-fines-win-indonesia-s-support-with-caveats-southeast-asia.html

About drones usage: Ecologist Lian Pin Koh makes a persuasive case for using drones to protect the world's forests and wildlife. These lightweight autonomous flying vehicles can track animals in their natural habitat, monitor the health of rainforests, even combat crime by detecting poachers via thermal imaging. Added bonus? They're also entirely affordable. TEDGlobal 2013  ·  13:30  · Filmed Jun 2013; https://www.ted.com/talks/lian_pin_koh_a_drone_s_eye_view_of_conservation

Malaysia: Command centre to fight illegal deforestation; Updated: Wednesday August 6, 2014 MYT 7:47:17 AM; "A command centre, under the Natural Resources and Environment Ministry, will be set up to manage and patrol forest areas to deter unscrupulous people from clearing land here. “We will streamline and have a systematic approach to patrol the forest areas to try to catch and stop people from burning and cutting down trees,” ministry secretary-general Datuk Seri Zoal Azha Yusoff told the media yesterday.... “At the moment, we have 10 to 15 officers involved and they will be conducting the patrols,” he said, adding that unmanned aerial drones would be used to capture photographs of culprits in action. Palanivel said he would discuss with Agriculture and Agro-based Industry Minister Datuk Seri Ismail Sabri Yaakob on issuing temporary occupation licences (TOLs) to certain farmers to stop them from clearing new land. “We can’t evict them. Agriculture is important. But the farmers need to follow regulations,” said Palanivel, who is Cameron Highlands MP...."

Forrest pushes Australia-China 100 year agriculture - food partnership (update 1)

3 August 2014:

Khor Reports: Australia to go for uniform marketing for its agribusiness (mostly meat, dairy, grain, and also sugar) competitive strength. Forrest argues for strength in uniformity under a new set of agreed policies on quality, food safety etc . He compares this approach as being more favourable than what he experienced in the iron ore sector where producers competed against each other. He notes that this resulted in Japan taking a view that Australia iron ore was not so reliable and it subsidized Brazil instead, to Australia's disadvantage. Quality is a major issue for this upcoming China-Australia FTA deal; with a goal to "get it right" by the end of 2014. He notes that China wants food security. He wants Australia agribusiness to collectively come together and market under one Australia brand. Some backlash to this idea, including concern of who comes to control the supply-chain i.e. widespread consolidation and fear of foreign ownership of land. New Zealand has done better on dairy - but some say that Fonterra is regarded as New Zealand "picking a winner" and will the same happen in Australia agribusiness? Forrest reckons that his ASA100 will give Australia farm investors confidence to invest, including in water supply. Forrest argues that foreign investors are more interested in the farm-gate to table / wardrobe supply-chain segment and in any case, you cannot take away land. Australia's goal should be the "prettiest girl on the dance floor" and a "friend to all" in terms of international business.

The China-Australia FTA has been long in discussion and a sticking point has been the agricultural sector and China seeking investment in the dairy sector. "Canberra hopes to replicate the dramatic increase in diary exports to China enjoyed by New Zealand since it signed an FTA with China in 2008. NZ exports, of which one third is diary, have more than doubled since the deal was signed..." http://www.theaustralian.com.au/national-affairs/policy/china-to-sign-fta-by-years-end/story-fn59nm2j-1226965619255.

This comes alongside changes under the Abbott administration in Australia that repealed its carbon tax (http://online.wsj.com/articles/australian-repeal-deals-blow-to-global-carbon-emission-plans-1406507851; putting Australia back in the US and Canada camp and further isolating the EU approach) and is going ahead with projects criticized on environmental grounds: The Great Barrier Reef and the coal mine that could kill it, http://gu.com/p/4Gdam.


Australia agribusiness to market a single brand to improve competitiveness

Agribusiness set to drive Australia's economic future By Ticky Fullerton Updated Fri at 3:15pm; "Australia's agricultural soul is stirring in a way it has not done since the end of the great wool years, and the drive is coming from business. Big business.... Forrest and the Business Council of Australia, which brought together an A-list of food power: Federal Agriculture Minister Barnaby Joyce; state agriculture ministers; top bureaucrats; peak body leaders; and industry chiefs including Wesfarmers' Ian McLeod, Anthony Pratt from JBS, AA Co's Jason Strong and, yes, Harold Mitchell.... What emerged was an agreement that Australian governments and producers will form a single brand to broaden the nation's competitive markets in China.... "That brand is going to be synonymous all over Asia and particularly in China with quality, food safety, reliability, friendliness, adequate quantity, with everything you need if you're sitting looking after a billion-plus people and wondering how to feed them and Australia can give you an answer," said Andrew Forrest...." http://www.abc.net.au/news/2014-08-01/agribusiness-set-to-drive-australia27s-economic-future/5641078; Andrew Forrest interview here: http://www.abc.net.au/news/2014-07-31/extended-interview-with-andrew-forrest/5639684. Barnaby Joyce interview here (noting the farmer getting less and less of the value-add share): http://www.abc.net.au/news/2014-07-24/extended-interview-with-barnaby-joyce/5622722.

Herd mentality missing from Australian agribusiness: Forrest, PUBLISHED: 01 Aug 2014 00:05:25  | UPDATED: 01 Aug 2014 04:54:03; "Billionaire Andrew Forrest says Australia’s agricultural businesses need uniform marketing, not increased scale, to be internationally competitive....
Mr Forrest's comments follow the inaugural meeting of his 100-year Australia-China agricultural partnership group (ASA) in Sydney on Thursday, which agreed to market Australian agriculture under one brand.... The meeting was hosted by the BCA and attended by Agriculture Minister Barnaby Joyce and representatives of all state agriculture ministers.... The ASA will comprise 50 members from each country who will initially meet bi­annually and then annually. Members will include state and federal government ministers, business leaders and major food producers and distributors..... Trade and Investment Minister Andrew Robb said he welcomed efforts to promote Australian agriculture and bolster trade ties with China.... "Agriculture is one of our great strengths and we have an enviable and growing reputation for 'clean, green and healthy' produce. We should look to leverage the premium 'brand Australia' at every opportunity," he said....."
http://www.afr.com/p/national/herd_mentality_missing_from_australian_SLQV5lsuk6hJFY8ADTMeuJ

List of China FTAs and negotiations: http://fta.mofcom.gov.cn/topic/enaustralia.shtml


1 August 2014:

Three of Asia's leading agribusinesses have joined iron ore magnate Andrew Forrest in what he described Thursday as an "unprecedented" 100-year partnership to position Australia as China's food bowl.... Forrest said China's New Hope Group and COFCO Corp., and Singapore-listed Wilmar International, had joined the Australia-Sino 100-Year Agricultural and Food Safety Partnership, known as ASA 100.... "This is an all-of-country response," Forrest, the founder of Fortescue Metals Group who has more recently turned his attention to agribusiness, told The Australian newspaper.... "I would like Australia to be seen as China's friendliest, largest, most reliable, highest quality, most competitive, most efficient food and agricultural products supplier." https://au.news.yahoo.com/thewest/business/national/a/24598052/asia-agribusiness-giants-tie-up-to-boost-china-australia-trade/

Khor Reports comment: This isn't about palm, but it's worth mentioning this interesting move by Australia, led by Andrew Forrest (the mining magnate and writer of radical welfare reform reports). A very senior Australian academic tells me that "Forrest is becoming very important" - so look out for info on the Australia-Sino 100-year agriculture partnership. I had lunch with a senior regional plantation analyst today and we were wondering if this meant off-take agreements and the like. Wilmar is big in sugar processing in Australia. Starting out mostly in palm oil and expanded in 2007 with a merger with Kuok Oils and Grains, it has large processing facilities in China and Indonesia and it is building itself into a diversified global agro-commodity processor.

Some links to news about Andrew Forrest:

• http://topics.bloomberg.com/andrew-forrest/
• http://www.smh.com.au/federal-politics/political-news/abbott-government-likely-to-reject-andrew-forrest-proposal-to-expand-income-management-20140731-3cvo8.html
• http://www.smh.com.au/federal-politics/political-news/andrew-forrest-calls-for-extensive-reforms-to-ease-crisis-in-indigenous-employment-20140731-3cx9d.html

Background info on Australia-China investment and trade

 

Australia’s mineral investment boom running out of luck 10 January 2014  Author: Luke Hurst, ANU
"The Australian minerals boom appears to have peaked, as commodity prices eased back after 2011 and investment has begun to taper. Currently there are 37 mineral resource projects in Australia, worth around A$33 billion in total, which have funding committed. But there are a further 165 mineral resource projects in the publicly announced and feasibility stages, which are yet to finalise their financing. These projects are worth around A$174.5–202.5 billion in total.... Yet Chinese investors have been seared by their experience in investing in Australia. The failure of the Rio Tinto-Chinalco tie-up and the massive cost over-runs of CITIC Pacific’s Sino Iron project—from around US$2.5 billion to US$8 billion—have sent a cautionary message to Chinese investors. These developments also revealed the complex connection between the economics and politics of international investment in Australia. The spill-over from these two big investment failures has been substantial. The delays and cost blow-outs associated with the CITIC Project precipitated the suspension of all Chinese magnetite investments in Western Australia as of 2011.... When Australian Treasurer, Joe Hockey, decided to block the sale of Grain Corp grain distribution business to American company Archer Daniels Midland, he noted that the Foreign Investment Review Board (FIRB), when considering Australia’s ‘national interest’, should ‘specifically have regard to the impact the decision on this proposal would have on broader Australian support for foreign investment and the foreign investment regime into the future’. This creates a dangerous precedent.... If managed properly, Australia’s minerals investment boom has much life left in it yet; and given that value of trade with China is equivalent to nearly A$15,000 to every Australian household, the continuation of its growth is most clearly in Australia’s national interest...." http://www.eastasiaforum.org/2014/01/10/australias-mineral-investment-boom-running-out-of-luck/

Singapore introduces canola subsidy to cut its palm oil consumption (update 1)

3 August 2014:

EU Report Taxes on High Sugar Salt or Fat Products do Lead To Reduced Consumptio​n, 29 Jul 2014

http://www.foodingredientsfirst.com/news/EU-Report-Taxes-on-High-Sugar-Salt-or-Fat-Products-do-Lead-To-Reduced-Consumption.html; "The study was able to confirm a number of impacts of food taxes on the agri-food sector competitiveness. Food taxes lead to an increase in administrative burden, notably if the tax is levied on ingredients or if the rules defining which products are liable under the tax are highly differentiated and complicated... The degree to which individual competitiveness is affected is highly influenced by the product category that is taxed (as brand loyalty may be strong enough to prevent consumer switching) and by whether many similar products escape tax (which makes substitution to non-taxed products easier).... A common argument against food taxes is that they raise the price of goods relative to the prices of the same goods in neighbouring countries where no such tax exists and thereby promote cross-border shopping. However, the study found that increases in cross border shopping were rather limited and that other factors, in particular other taxes on food/drinks, are more important drivers for the cross-border shopping effect...."

Food taxes are gaining more interest, including on sugar. Some news links here: http://khorreports-palmoil.blogspot.com/2014/06/sugar-food-tax-ideas.html

Responses from some readers from the palm oil industry to the Singapore news article include:

• Reader A: "They imply saturated fats are bad at ANY amount. People should be educated to realise that BALANCE is important. MPOB and Brandeis university came up with the optimal formula, which was marketed by Smart Balance to great success and this formulation comprised equal proportions of saturated, mono-unsaturated and poly-unsaturated oils. In other words, saturated fats are required but the proportion must be correct. A simple analogy to illustrate the importance of of balance in so many things we do. Exercise is beneficial, but if one were to exercise without adequate rest, that would not be good. Same goes for saturated fats. Studies have shown that saturated fats in palm oil does not seem to have same effect as other saturated fats in clogging arteries etc. This observation has not been explained scientifically yet. Past data on saturated fats were associated with animal fats (vegetable oils only displaced lard etc in a big way starting about 40 years ago). Palm oil (and other vegetable oils) saturated fats have slightly different molecular structure, and scientists think this may be the reason why why palm oil saturated fat does not display have adverse effect on health as animal saturated fats do."
•  Reader B: "I am not a human nutrition expert, a notoriously difficult science,  but  from the MPOC website, I saw this apparently positive set of results from an experiment at UM http://www.palmoilhealth.org/news/research-news/what-really-happens-to-your-cholesterol-when-you-use-a-cooking-oil-blend/ and also  there has already been a response  http://www.todayonline.com/voices/canola-oil-mix-may-not-be-healthier-palm-oil which appear to indicate that it may be wrong to push that the cooking oil blend pushed by the Singaporean authorities is healthier. Furthermore there is this statement on MPOC's website " Malaysian red palm oil has a neutral effect on cholesterol. Its effects on blood cholesterol levels are similar to olive oil, and better than common cooking oil blends." http://www.palmoilhealth.org/faq/red-palm-oil/. However it appears specifically to refer only to red palm oil and not the usual refined product." 

2 August 2014:
Ever since French legislators proposed a "Nutella Tax" on palm oil and it was defeated, palm oil producers breathed easier. However, a recent move by Singapore, the key financial and trading hub for Southeast Asia (located alongside mega palm oil producers Indonesia and Malaysia) questions the health aspects of palm oil and uses a subsidy (instead of a tax) to make canola oil more attractive to be blended for cooking oil usage in the city state. Analysts worry that this move by Singapore, with its well regarded bureaucracy, sends a negative signal. It is not only developed markets looking at "fat taxes" or its variants. A 2013 paper by Basu et al.* in the British Medical Journal notes that 43% of India's current population consume palm oil in their home; the paper looks into the cost-benefit of taxes to constrain palm oil usage in India. For pricing reasons, alternative oils have recently been gaining some ground in India. 

*They simulate the effects that a 20% food tax on palm oil would have on serum cholesterol and mortality from coronary heart disease and cerebrovascular disease in India. The modeling approach combines an economic model of household consumption with a health micro simulation model that translates changes in oil consumption arising from the tax into changes in mortality from myocardial infarction and stroke.
 

 

News item: HPB to Subsidise Healthier Cooking Oil at Food Joints Oil subsidies to promote healthier fare at food joints - HPB wants food outlets to buy palm-canola mix of cooking oil By Salma Khalik, The Straits Times, 14 Jul 2014; "TO MAKE eating out healthier for food-loving Singaporeans, the Health Promotion Board (HPB) will be spending millions a year on subsidies to get food joints to use healthier oil. Starting this month, the HPB will absorb the difference in cost between palm oil - which is generally used by food outlets - and a healthier mix of palm and canola oil, which costs 20 per cent to 30 per cent more. The HPB is subsidising wholesale oil suppliers to get them to sell the healthier mix to restaurants, hawker stalls and other food outlets at the same price as palm oil. The aim is to get 20 per cent of food outlets to switch from palm oil to the canola mix by 2020. Palm oil is the cheapest cooking oil and costs around $6 to $8 for a two-litre bottle in retail shops. But it has 50 per cent saturated fat, clogs up the arteries and can lead to heart attacks and stroke. The canola and palm oil mix reduces the fat saturation to 38 per cent. The HPB hopes that this will make a huge difference to diners' health - provided they do not use it as an excuse to eat more deep-fried food. Said Mr Zee Yoong Kang, HPB's chief executive officer: "By the time the oil gets down to the individual plate, we're being literally poisoned for one or two cents a plate. "But if you sell 5,000 plates, it makes an appreciable difference to the bottom line."..... Health Minister Gan Kim Yong had said in Parliament last week that the Government would work with community partners to make healthy living as "effortless as possible".... Ms Ong (of Sime Darby, Singapore) suggested using soya oil instead, as it costs less than half the price of canola. But Prof Henry said soya does not have the same heart-healthy benefits as canola, which contains omega-3, omega-6 and alpha-linolenic acid...."

Refer to Khor Reports' newsletters: http://khorreports-palmoil.blogspot.com/2014/02/khor-reports-palm-oil-janfeb-2014-issue.html and http://khorreports-palmoil.blogspot.com/2013/03/khor-reports-palm-oil-newsletter-1.html
 

Background on France "palm oil free" and tax proposal, from Khor Reports' Palm Oil e-newsletter Mar/Apr 2013:

 

Some are unconvinced by sustainable palm oil and have questions on health impacts. In 2012, palm oil faced a strong negative campaign in France. The three‐prong anti‐palm oil campaign uses classic tactics. We can call it the “shun it, tax it, ban it” combination.

Shun it, tax it … “Palm oil free” products were being launched and gaining traction in the EU markets, especially in France where the “Nutella Wars” were playing out in the latter part of last year. The chocolate hazelnut spread, made by the Ferrero Group, was facing a challenge by a similar new product made by the Casino Group, which was marketed prominently as “sans huile de palme”. The Casino Group has been aggressive in switching its food products to other vegetable oils. It reports: “In 2011, the Casino brand had 312 items without palm oil, or 62% of its food offer. The removal of palm oil is continuing and should reach 72% by 2012. In the case of non‐food products… the Group has been using the RSPO supply line since March 2011.” Casino claims that its brands have a 50% market share in France. Green campaigners also encouraged the Mayor of Paris to ban palm oil from use in schools and in government contracts. This should have a domino‐effect, to push others to do likewise. At the same time, the French Senate Committee on Social Security proposed an amendment for a tax of EUR 300 per MT on palm oil. On top of the existing tax of EUR 100 per MT in France, the amended tax would amount to EUR 400. This was dubbed the “Nutella tax.” The campaign against palm oil in France was based primarily on claims that palm oil is bad for health and the environment.

 

The defence. The anti‐palm oil campaign has been unravelling. In June 2012, a case was brought by smallholder farmers from Cote d’Ivoire to the Tribunal de Commerce in Paris against Systeme U’s
advertising campaign against palm oil which said “No to palm oil, yes to low prices. But not if it costs the earth.” In December 2012, the French retail cooperative (comprising about 800 independent hypermarkets and supermarkets) was ordered to end its misleading advertisements. Systeme U was to cease all further dissemination of anti‐palm oil advertisements or be subject to a penalty of EUR 3,000 per infringement. The French Senate's “Nutella tax” amendment was defeated in its own chamber, and in the National Assembly. Representations were made by delegations visiting from Malaysia and Indonesia. Various food manufacturers such as Ferrero and Carrefour also publicly defended palm oil usage. Malaysian smallholders also spoke out.

Palm sustainability news

Fibre production drives deforestation in Indonesia - Study debunks belief that palm-oil plantations are main culprit by Natasha Gilbert, 21 July 2014; http://www.nature.com/news/fibre-production-drives-deforestation-in-indonesia-1.15589#%2Fb1; "....Palm-oil plantations are generally though to be the main driver of deforestation in Indonesia, which is home to the world’s third-largest tropical forest and has the highest rate of forest loss. But fibre plantations — where species such as Acacia mangium are grown for use in pulp and paper production — now seem to be the main culprit.
Of the 14.7 million hectares of forest destroyed between 2000 and 2010, 12.8% was removed for fibre plantations, 12.5% for logging and 6.8% for palm-oil plantations; the remainder was removed for mixed concessions and mining1. All told, 45% of forest loss during the period occurred on land leased to industry. “Palm-oil agriculture has borne the brunt of the blame for causing deforestation in Indonesia,” says Lian Pin Koh, a conservation ecologist at the University of Adelaide...."

The world’s largest palm oil players commit to funding High Carbon Stock Study, Kuala Lumpur, 30 July 2014 - "The world’s largest palm oil players are jointly funding a comprehensive 12-month study that will:

• clearly define what constitutes a High Carbon Stock (HCS) forest;
• provide practical guidance on how to delineate HCS forests on the ground; and
• establish thresholds for HCS that take account of regional socio-economic conditions and opportunities.

Malaysian companies IOI Corporation Berhad, Kuala Lumpur Kepong Berhad and Sime Darby Plantation, Indonesia’s Asian Agri and Musim Mas Group, and global agribusiness groups Cargill and Wilmar International, are funding the study and have committed to adopt the study’s findings in all their operations and supply chains..... The HCS study is a key component of the Sustainable Palm Oil Manifesto, which was signed by oil palm growers Sime Darby Plantation, IOI Corporation Berhad, Kuala Lumpur Kepong Berhad, Musim Mas Group, and Asian Agri, as well as global palm oil trader Apical and global agribusiness group Cargill. The Manifesto includes a commitment to no deforestation, creating traceable and transparent supply chains, and protecting peat areas, while ensuring economic and social benefits for the local people and communities where oil palm is grown.... To oversee this Study, a Steering Committee has been set up, independently co-chaired by Sir Jonathon Porritt, and Chief Research Scientist from Australia’s Commonwealth Scientific and Industrial Research Organisation (CSIRO), Dr John Raison......"

Some critique of the Manifesto group here by RAN:

http://www.ran.org/new_palm_oil_talk_and_log_initiative_a_step_backward_for_responsible_supply_chains

Palm oil productions threatens African apes by Maanvi Singh · NPR ·  Jul 11, 2014; http://www.mprnews.org/story/2014/07/12/palm-oil-productions-threatens-african-apes; ".....Now it seems palm oil production in Africa is picking up, too. And the new farms there are threatening great ape populations in West and Central Africa, according to a study published Thursday in the journal Current Biology.... "Africa seems to be the new frontier," says Serge Wich, a primate biologist at Liverpool John Moores University and the lead author of the report. Sixty percent of African oil palm concessions — or land that's been set aside for the development of oil plantations — overlaps with the ape habitats...."

Will other Asian consumer giants follow as Kao goes forest-friendly? GreenpeaceGreenpeace challenges Asian consumer companies such as India’s Godrej and ITC and China’s Liby and Nice to make similar commitments as the Japanese beauty products maker commits to forest-friendly policy; http://www.eco-business.com/news/will-other-asian-consumer-giants-follow-kao-goes-forest-friendly/

Aidilfitri 2014

Wishing to all celebrants Selamat Hari Raya Aidilfitri!

How Brazil clamped down on deforestation

Khor Reports comment: Worth reading this piece from The Economist: http://www.economist.com/news/science-and-technology/21603409-how-brazil-became-world-leader-reducing-environmental-degradation-cutting. I'm hoping to soon get hold of a the source article in Science. I've been reviewing soy sustainability. State regulations are an important part, as are proactive and well functioning industry associations that seem well engaged with all levels of administration. Some sources point out that Brazil has a well-engaged and active domestic NGO sector, which also pushed the earlier changes via domestic contestation. To be sure, implementation was a major question mark and international pressure has been for Brazil's relatively strict regulations to be followed. There are also efforts at information reporting on GIS mapping of deforestation and such. Bottomline, Brazil annual deforestation is now about 500,000 hectares and it's attributed significantly / mostly to smallholders.

The Economist writes, "But how did it break the vicious cycle in which—it was widely expected—farmers and cattle ranchers (the main culprits in the Amazon) would make so much money from clearing the forest that they would go on cutting down trees until there were none left? After all, most other rainforest countries, such as Indonesia and the Democratic Republic of the Congo, have failed to stop the chainsaws. The answer, according to a paper just published in Science by Dan Nepstad of the Earth Innovation Institute in San Francisco, is that there was no silver bullet but instead a three-stage process in which bans, better governance in frontier areas and consumer pressure on companies worked, if fitfully and only after several false starts." It concludes: "By any standards, Brazil’s Amazon policy has been a triumph, made the more remarkable because it relied on restrictions rather than incentives, which might have been expected to have worked better. Over the period of the study, Brazil also turned itself into a farming superpower, so the country has shown it is possible to get a huge increase in food output without destroying the forest (though there was some deforestation at first). Still, as Dr Nepstad concedes, a policy of “thou-shalt-not” depends on political support at the top, which cannot be guaranteed. Moreover, the policies so far have been successful among commercial farmers and ranchers who care about the law and respond to market pressures; hence the effectiveness of boycotts. Most remaining deforestation is by smallholders who care rather less about these things, so the government faces the problem of persuading them to change their ways, too. Deforestation has been slowed, but not yet stopped."

Source: Economist.com

Interview #2 Presidential race heats up, foreigners worry?

In the last two weeks, I've been in touch with six (6) people who represent large business interests in Indonesia including in palm oil (domestic and international owners) and three (3) Malaysians who work and/or are invested in Indonesia palm oil.
 
View of Indonesia invested MNC interests:
One observed that Indonesia ethnic Chinese businessmen were initially fearful of the Prabowo candidacy (relating to uncertainty over his exact role during the violation of social rights during the height of the Reformasi crisis). However, one close observer thought that they now seem to be quite accepting of him, especially with Santiago Uno playing a lead role in his economic team. Supporters say there is no firm evidence of his role during the troubles.

Some felt that Kalla seemed a tired face to put next to Jokowi; and other gripes about against Jokowi were that his role would be determined by Megawati with significant dissension reported in the family-controlled PDI-P. Moreoever, another source had recently visited at a more rural province – in talking to locals at warung, he heard that they liked Jokowi, but because the governor supports Prabowo, they thought they should vote with his recommendation. Hatta is from Palembang, and some hope that he will be good for plantations since as he would know about palm oil and rubber from his home town area; further he has been Coordinating Minister and is an in-law of SBY.

International investors are concerned with Prabowo’s rise in the polls and his economic policy ideas. He has a significant nationalistic, strong-man image and widely said to have a temper. Thus, they worry about downward pressure on the Indonesian currency and other Indonesia financial assets if he should come to win[1].

[1] What do foreign investors think? Nomura, 2 July 2014, “Asia Insights - Indonesia election: Pitting investor expectations vs views on the ground” reports: “Our global investor survey on Indonesia’s upcoming presidential elections show an overwhelming 90% of respondents expect a Jokowi win and by an average 8.5% margin of victory over Prabowo. This expected margin is high compared with the latest polls which are showing between 3-5%. However, these polls, in our view, are increasingly capturing the realities on the ground.  Indeed, our recent trip to Jakarta gave a clear impression that the presidential race will go to the wire, and that the election outcome remains uncertain. There is therefore a rising risk of market disappointment, in our view.” Also, view Economist article: http://www.economist.com/news/asia/21606330-indonesias-presidential-race-tightens-election-day-approaches-knifes-edge?fsrc=nlw|hig|3-07-2014|5356bdcd899249e1cca0fce6|

Indonesia domestic business interests
Domestic business interests sound hedged either way (as one would expect), well prepared to lobby for sectoral interests. Reaching out to specialists, we were also updated that a mooted foreign ownership limit is still in the drafting. Clearly it was not ready to be in place before the start of presidential campaigning. We also heard of hopes to launch palm oil sector programs prior to the election, but these may have run out of time. On the question of the rumoured export duty change - it really depends who you talk to i.e. whether they have interest downstream processing (ex-refinery) versus upstream. Some moot a convergence with the Malaysia export duty regime, which would tend to give palm oil farmers a better price. In this regard, the final presidential debate should be of interest as it will also cover energy and agriculture.

A recent interview source notes that SBY has declared his support for the Prabowo team. Presumably, SBY must have good reason (data support?) to do so. As mentioned earlier, Hatta is his in-law. Some senior Indonesians consider the first Presidential Debate a bit of tie while the others were won by Prabowo-Hatta. It is noted that the mainstream newspapers support Jokowi (but note from Interview #1 that most of the large TV stations support Prabowo). Prabowo has the money and the better organization in the electoral campaign. The marked preference that foreign investors have for Jokowi is also noticed by highly-placed Indonesians and there is suggestion of some bias in the way Prabowo’s policies are reported in the international media and by foreign bank analysts[1].

Malaysia observers

In the previous election presidential candidate debates, a Malaysia observer was much struck by the difference between Megawati and the outgoing President SBY. In a past debate, one source remembered that the former was more kneejerk hawkish on her preferred approach to resolve Malaysia-Indonesia dispute matter while SBY quoted the Pancasila and pointed to the need to first negotiate[2]. Clearly there is some discomfort with overly strong nationalistic approaches. However, some Malaysia investors seem relatively sanguine about business regulatory changes. They note that while the candidates may sound more nationalistic in campaigning and new regulations may seem tough, the implementation usually ends up more practical and business-friendly.
[2] Those interested in foreign policy can read this: RSIS Commentary 125/2014 Aspiring Regional Power: Indonesian Foreign Policy Under Next President by Yang Razali Kassim, published 3 July 2014; which finds both candidates willing to negotiate, but reckons that Jokowi is more dove-ish.


Do also view: Indonesia presidential race (update 4), http://khorreports-palmoil.blogspot.com/2014/06/indonesia-presendial-race.html and Interview #1: Presidential politics and Indonesian palm oil,
http://khorreports-palmoil.blogspot.com/2014/06/interview-1-presidential-politics-and.html