Importing 3.0 million tons of palm oil per year from Indonesia, Pakistan has become an important market for Indonesia besides India and China. The South Asian country’s market is even now becoming more important amid growing tendency of European Union (EU) to restrict the palm oil exports through non-tariff trade barriers, which include its EU deforestation-free regulation (EUDR).
“Amid increasing obstacles in other markets, we have to ensure that our palm oil exports to Pakistan won’t decline. Pakistani market is important for Indonesia,” the economic coordinating ministry’s Expert Staff in charge of connectivity, development of services and natural resources, Musdhalifah Machmud said on the sidelines of Pakistan Edible Oil Conference (PEOC) 2024 in Karachi on Friday (12/1).
According to her, a requirement of deforestation-free products from EU, UK and USA is potential to reduce Indonesia’s palm oil exports to those three markets. Certainly, Indonesian smallholders who own 41% of the total Indonesian oil palm plantations, will find it very hard to comply with the requirement set by the EUDR.
Regarding the Pakistani market, it seems that the country will have to continue relying on imports of vegetable oils, mainly palm oil from Indonesia. There was once a plan to develop its own oil palm plantations, but apparently it could not succeed as the land and weather are not supportive for the oil palm cultivation. “Oil palm trees can grow in Pakistan, but their productivity is low. So, it’s not profitable there,” the Indonesian Palm Oil Association (GAPKI) Chairman Eddy Martono said at the same occasion in Karachi.
During the PEOC event, a number of participants questioned Indonesian production of palm oil, and why its smallholders’ productivity is far below the oil palm plantation companies’.
GAPKI’s Foreign Division Head Mohamad Fadhil Hasan said the smallholders’ productivity is low because they did not implement the good agricultural practices. “In the past the smallholders planted uncertified seedlings of oil palm, which are poor in quality and resulted in low productivity,” he said.
But he pointed out that Indonesia is now trying to increase the productivity by implementing the replanting program for smallholders’ plantations. Through the replanting program, the government in cooperation with the smallholders and plantation companies are expected to increase the smallholders’ productivity and sustainability.
“If the replanting program is well implemented, Indonesia’s palm oil production will significantly increase. It’s because the smallholders in Indonesia own 41 percent of total oil palm plantations in Indonesia. It also means that we can increase production without expansion of plantation areas,” Fadhil said.
But according to Moch Edy Yusuf, an Assistant to the economic coordinating ministry’s Deputy in charge of plantation agribusiness development, besides raising productivity of plantation areas per hectare per year, Indonesia can still increase its palm oil production through the expansion of oil palm plantation areas in its degraded lands. “We can expand our oil palm plantation areas without causing deforestation, by using only our degraded lands. We have around 10 million hectares of degraded land areas that can be used for the oil palm cultivation,” he said.
Fadhil Hasan added that considering the high productivity and efficiency of oil palm plantations, particularly on land use, palm oil production can be further increased to meet the rising global demand with the lowest impact of deforestation if compared to other vegetable oils, mainly soybean, sunflower, corn and rapeseed.
During the period of 2014 – 2025 the world needs an addition of 51 million tons of vegetable oils. The choices to meet the rising global demand are to push up production of palm oil or other vegetable oils, including the soybean, corm, sunflower and rapeseed
“More efficient in land use, the palm oil production per hectare per year can reach 3.9 tons, while other vegetable oils are much lower than that. Soybean, for example, can only produce around 0.52 ton per hectare per year. It means soybean will need 97.8 million hectares to fulfil the additional production,” he said.
But despite its higher efficiency and productivity, there is still a possibility of rejection against palm oil due to negative information on the aspects of health and environment disseminated by certain groups. Fadhil said the palm oil consumption had been once wrongly linked to heart disease in the past. Later such accusation was proven wrong with scientific data from the USA Food and Drug Administration (FDA), which shows that palm oil has a balanced composition of saturated and unsaturated fats.
“The FDA data has increased Indonesia’s palm oil exports to the USA. The USA is now Indonesia’s fifth largest destination of palm oil exports,” Fadhil said when giving a public lecture at the Institute of Business Administration (IBA) Karachi in Pakistan on Friday (12/1), which was also attended by Indonesian Consul General June Kuncoro Hadiningrat in Karachi.
He said that based on researches the palm oil has a high content of vitamin E (tocotrienols and tocopherols), which is potential to fight cancer. “After the receding issue of health, then environmental issues such as deforestation and biodiversity emerge. But these environmental issues have been also countered by the government, the palm oil industry players and other stakeholders,” he said.
Fadhil said that since 2011 the government has implemented a moratorium policy to stop the expansion of oil palm plantations on primary forest and peat lands. After being extended for several times, the moratorium policy has been made permanent since 2019.
According to Fadhil, Indonesia should keep implementing its positive campaigns on palm oil to counter the negative campaigns at the global market, including in Pakistan although it is still safe from the impacts of negative campaigns.
In addition to such condition, Musdhalifah said that as part of efforts to maintain the Pakistani market, Indonesia needs to accommodate the interest of Pakistan to balance its trade balance with Indonesia. “Of the total imports of Pakistan from Indonesia at the value of US$4.3 billion, US$3.1 billion is the value of its palm oil imports from Indonesia,” she said.
“During meetings with Kadin (Indonesian chamber of commerce and industry) and the government, besides ensuring the palm oil supply, they have also asked for improving the trade balance,” June Kuncoro Hadiningrat said during a meeting with the Indonesian participants to the PEOC 2024 in Karachi on Thursday (11/1).
Musdhalifah stated that Indonesia and Pakistan have the potential to improve bilateral trade. To balance their trade balance, Indonesia can import Pakistani products, such as dates, rice, beef and buffalo meat. Last year Indonesia imported rice from Pakistan, which was seen as a positive step to further improve bilateral trade. “Both countries’ business players should intensify their communication in seeking other potentials. I think Indonesian diplomats can also help by providing necessary information on trading opportunities in the foreign markets,” she said. Benget Besalicto
