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All roads lead to the April 17 presidential and legislative elections in Indonesia – even across the vast Sumatran plantation country, where President Joko Widodo and his government are unfairly blamed for the low prices of the world palm oil market. rubber.
Sumatra again wishing to be the only one of the eight main islands to win over his opponent in the presidency, Prabowo Subianto, it was perhaps understandable that Maritime Co-ordination Minister Luhut Panjaitan has recently opposed the imminent restrictions imposed by the government. European Union (EU) to the use of palm oil.
The same is true for the decision by Indonesia and the other two members of the Tripartite Rubber Council (ITRC) – Malaysia and Thailand – to reduce natural rubber exports in order to stabilize the world price of the product, which it's now stabilized after falling to such a low level. US $ 1.2 per kilogram at the end of last year.
According to a recent survey, Prabowo is leading Jokowi between 50.5% and 37% in the 10 provinces of Sumatra, with 12.5% undecided. This is wider than the margin available to the retired general in 2014, when only 129,000 votes separated the two candidates.
At the time, Aceh and West Sumatra made the difference, in the three major provinces of North Sumatra, South Sumatra and Lampung, the latter hosting five million migrant migrants Javanese mostly pro-Jokowi.
Panjaitan, a native of Sumatra and close presidential advisor, threatened last month to ban some EU imports if the bloc wanted to impose tighter limits on the use of oil from the EU. in biofuels under the revised renewable energy package (RED II) adopted by the European Parliament. Parliament last December.
He also later warned that Indonesia could pull out of the historic Paris climate change agreement of 2015. "If the United States and Brazil can break the deal on the climate, we will also consider it because it is related to the interests of the population, "he said.
This has not helped the world prices of crude palm oil fall over the past year from $ 700 per tonne in March 2018 to $ 539 in November, before rising slightly to the current level of 570 USD.
Rubber prices also remained stubbornly low, affecting the southern and northern areas of Sumatra, Riau and Jambi. Earlier this month, the ITRC agreed to reduce its exports by 240,000 tonnes over a four-month period to bring prices back above $ 1.6 per kilogram.
More than 20 million Indonesians, in Sumatra and Kalimantan, depend on palm oil for their livelihood. But plantation companies are under fire from critics in a conservation-minded Europe for causing widespread deforestation and endangering the habitats of the orangutan and other rare wildlife.
In the Indonesian defense, officials have announced a moratorium on new licenses for oil palm plantations, which Widodo finally signed last year, three years after pledging to do so following the crisis in the country. fires and haze that hit Southeast Asia in 2015.
Producers complain that in many cases, the illegal killing that continues to occur in their concessions is the work of the army, the police and other local power holders. "We are blamed," said a Sumatran leader, "but most of the time, the land is not used for palm oil."
"We suspect that these are commercial interests (European producers of vegetable oil), not environment," said an official from the Maritime Coordination Department, extolling the virtues of olive oil. palm with yields well above those of any other crop. After all, palm oil is cheaper than sunflower oil. "
On April 5, President Widodo and Malaysian Prime Minister Mahathir Mohamad sent a joint letter to the European Commission and the European Parliament to protest against the measures taken against the largest agricultural product exported by Southeast Asia and against the threat of trade sanctions.
"Our two governments consider that it is a deliberate, calculated and unfavorable political and economic strategy aimed at removing palm oil from the EU market," they said. they said. "If this delegated regulation were to come into force, our governments should review our relations with the EU as a whole, as well as with its member states."
Wishes the two countries to organize an aggressive diplomatic campaign, including by seizing the Geneva-based World Trade Organization (WTO). "We told the EU that we had to retaliate if it continued this unjust discrimination against palm oil," he said.
RED II does not explicitly prohibit the use of palm oil as a biofuel, nor even restrict trade. But it promises to limit the consumption of biofuels produced by food and feed crops in the transport sector to 7% by 2021 and eliminate it completely by 2030.
In addition, palm oil biodiesel will no longer be considered part of the energy mix of renewable energies and therefore eligible for existing subsidies.
The restrictions stem from the adoption by the European Parliament of resolution 2016/2222 calling on the Member States to take measures to protect endangered tropical forests and the use of sustainable palm oil , already more regulated than all other vegetable oils.
The former chairman of the Palm Oil Producers' Council (CPOPC), Mahendra Siregar, has called for cooler heads, pointing out that Indonesian palm oil exports to the country are likely to be more expensive. Europe have fallen from 77% to only 16% of total production since 1990. The palm oil market is very important for Indonesia at present, and this is the state of mind we must have, "he said recently.
The value of palm oil imports from Indonesia in 2018 fell by 22% compared to 2017, but with the addition of Indonesian refined biodiesel, the total was only 2% lower than the previous year, despite the fall in world prices.
Indonesian exports increased by 8 percent to 34.5 million tons last year, or $ 20.3 billion. India (24.5%), the European Union (16.1%) and China (12.01%) are the top three markets. Exports to Europe have been relatively stable, averaging 3.5 million tonnes, or 2.2 billion euros a year.
According to badysts, even though Panjaitan's harsh rhetoric will be welcomed nationally, and show voters that the government is concerned about the well-being of its plantation workers, it is unlikely that the EU will persuade the EU to change course and could even have the opposite effect.
Threats can also be empty. The minister said that aircraft produced by European companies could be the target of any boycott, but the national carrier Garuda wishing to cancel an order for 49 Boeing 737 MAX airliners in difficulty, its options are now limited.
Garuda already has 22 European Airbus A330s and 16 Franco-Italian ATR 72 turboprops, as well as 43 A-320s and 8 new A320neos driven by the Citilink budget subsidiary, as well as 27 previously ordered aircraft.
Crude oil palm (CPO) exports for food and beverages are not disrupted, but the limitation of OCP fuel consumption will weigh on aggregate demand and deprive producers of they expected the increase in production, from 20.5 million tonnes in 2008 to a record 46 million tonnes in 2018.
Nearly half of the palm oil imported from the EU is now used for the production of biofuels. However, with the bloc apparently changing its policy, Indonesian producers hope that domestic consumption and increased shipments to India and China will help fill the gap.
Encouraged by the government's decision to use biofuels to reduce costly oil imports, national use of palm oil reached 13.4 million tonnes in 2018, including 4.3 million biodiesel. Local fuel consumption said B20, or 20% of palm oil, increased 72% over the previous year, or 3.8% of the total energy mix.
The government wants the national oil company PT Pertamina to modify its two refineries in Sumatra, Plaju and Dumai, with a cumulative daily capacity of 300,000 barrels a day, to produce biodiesel with the aim of saving up to $ 25,000. To 23,000 barrels of imported crude oil.
Indonesia plans to use renewable energy from 13% to 23% of the energy mix by 2025, with biodiesel accounting for about 30% of total current palm oil production. An executive of a palm oil company said: "There will be marginal increases in aggregate output over the next few years, but the moratorium will eventually limit it."
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