Palm oil producers: EU should involve developing countries in biofuels debate

The EU needs to consult developing countries that produce vegetable oils before making policy decisions that establish sustainability criteria for biofuels, Dato' Azhar Abdul Hamid, managing director of Sime Darby Plantation, told EURACTIV in an interview.

Dato' Azhar Abdul Hamid is managing director of Sime Darby Plantation, the oil palm cultivation and agri-business arm of Malaysia's leading conglomerate Sime Darby Berhad.

He was speaking to Susanna Ala-Kurikka.

To read a shortened version of this interview, please click here.

What are your views on EU legislation on the sustainability of biofuels?

My views are the same as any industry player's today. As far as the industry is concerned, we are concerned that the way the policies are being structured unnecessarily disadvantages palm for the future.

I think it will be a shame, because if you look at palm oil today, one: this aggressive journey to sustainability is well underway, and two: palm oil is one of the most efficiently produced energy oils. Talking about resources, it requires only one tenth of the area of land that would otherwise be required to produce the same amount of edible oil, if you compare this with soya or other edible oils.

Really, it's a very economically produced oil. If palm gets excluded in the future because of this policy that the EU is debating now, it'll be a shame. It is a very big concern.

There have been debates about whether sustainability criteria should be extended to other products, as palm oil is not used exclusively for biofuelsDo you think that would make sense?

As far as we're concerned, we're looking at this holistically, not just from a biofuels perspective. The sustainability criteria we are following is meant to serve the food perspective as well as the non-food perspective.

We can't have two schools, obviously, so we're just focusing on making sure that our sustainability practices in the industry are done. Whether the product ultimately ends up for food or energy is a different issue altogether.

But the EU debate is concentrated on regulating the sustainability of biofuels rather than other uses of vegetable oils.

I think the time will come. It's something that you really can't avoid. But what I think will happen is that the industry will be ahead of the game here, because the initiative to make sure that palm is produced on a sustainable basis is very aggressive. So before any legislation comes into play, I think it will be done already.

For us, we want to make sure that all our business units are certified by the Roundtable on Sustainable Palm Oil (RSPO) by the end of 2011.

It promotes transparency as a principle, so whatever we do, the public needs to know about it. Secondly, we make sure that the industry follows any rule of law that is currently out there so we don't break any law.

This is creating an economically sustainable model. That's what we're all about: employing best practices at plantations, protecting biodiversity, respecting social aspects of employees in communities. Likewise at Sime Darby, what we do is we have a very stringent child policy, we have a very stringent gender policy. That's all part and parcel, and we make sure that the people who work with us in our estates are given the facilities to make sure that their work environment is conducive. We give housing, we give medical care, we provide schools for their children.

What are you doing in the area of biodiversity?

We have to make sure that whatever we do – whether it is maintaining or developing our estates – biodiversity must be preserved. For example, we develop a plantation, say, near a river. We must make sure that in that development we have enough riparian area, i.e. the planting of the estate cannot be close to the riverbanks. The reason for this is that you want to make sure that animals can walk past the corridors, you want to make sure that forest trees can continue to grow. So it is part and parcel.

Another thing is when we develop a plantation, we don't develop every inch of the land we have; we do an assessment. If it is classified as non-plantable, we will leave it as jungle sanctuary for birds or for animals.

That's what I mean by biodiversity.

The European Commission is currently preparing a report assessing the impact of land-use change on greenhouse gases. Do you think this is a problem that needs to be addressed?

Obviously I'm going to say it's not, provided that land-use change is managed properly.

As far as Malaysia is concerned, land-use is very highly regulated. Today, 60% of the land in Malaysia is by law supposed to remain as virgin forest.

What we have in Malaysia today is six million hectares of agricultural land, and of the six million hectares, four million hectares are covered with palm. Really, Malaysia hasn't got much more land to develop into palm because of that law that we have. That's why Malaysian investors are participating in agricultural development in other countries as well.

Some studies have suggested that boosting the amount of biofuels in a country's energy mix by legislating could increase emissions rather than reduce them, precisely due to indirect land-use changes.

These are statements made by policy people. My only comment about this is that things are seen in the right perspective. If you want to relate that policy to basically the possibility of causing more deforestation, I don't think that's quite fair.

Whether you like it or not, if you do a survey of the world today, what is the biggest global issue that we have in front of us? If you take terrorism, climate change poverty, I can tell you without a shadow of a doubt that poverty is going to rank number one.

If you do not allow developing countries to regulate land-use change in order to live equally in their respective economic environments and enhance help to eradicate poverty, what are the other alternatives? Are the EU states going to give a country, say in Africa, X billion US dollars every year so that they can maintain their forests?

If that's a possibility, I'm going line up and take a number, because to Malaysia with our current development, the palm oil industry itself is worth 60 billion ringgit (€14bn) to the country's economy. Likewise, for a poor country in Africa that's now only thinking of developing plantations to support their economy, it's worth money that can be diverted into health care, schools, education for the people.

If not for well-regulated land-use change to create these economic revenues for each respective state, where's the money going to come from?

Put the money where the mouth is and I'm sure we can talk.

There are reasons why countries want to develop, and this is to make sure that poverty in their respective states is eradicated.

Just like Indonesia. Indonesia is a big country and its dependence on agriculture is very high. It's only just visibly started but is now the number one producer of CPO [crude palm oil]. That money is actually going back to the people.

A lot of Malaysian companies participate in the Indonesian palm oil sector, and we have seen people who are very poor and participate in joint development schemes with us as small farmers. We have seen their lives change over a period of five to ten years from living in wooden shacks to living in brick houses and owning a TV, which is taken for granted in the West. This is a result of well-managed development in these respective areas.

So you wouldn't encourage the EU debate towards setting criteria on indirect land-use change?

Careful thought must be given into this.

People can be debating, but are the right people debating? It concerns me when there are stories being floated around that policymakers in the EU, even the director-general of DG environment as far as the EU is concerned, are funding a lot of these NGOs who are really banging hard for deforestation and orang-utans and it's alarming when 66 million euros goes through the DG's office to all these NGOs.

What we want is a fair table to make fair decisions, not create a lobby situation, which can be unfair in many respects.

As far as the palm oil industry is concerned, we're going to continue making our case. We're not going to make empty statements, we're not going to make false statements. Granted, we’re not all angels – there are culprits out there – but under the RSPO umbrella, there will be fewer culprits. A lot of them will be converted to good practices and that's what we want to see.

Hopefully, when the RSPO is strongly intact, that will create a well-regulated environment. I think the West will benefit and the developing countries will also benefit at the same time.

Should palm-oil producing developing countries be involved in EU decisions to regulate sustainability?

I think they should. Before any policy is made, instead of having lobby groups, I think there should be direct discussion, direct interaction, so that the real picture can be obtained and everybody is on the same page.

The problem right now is that the NGOs are all on one page, the EU-27 is on one page, the palm industry is on one page and developing country governments are on another page. So that's a situation of alarming concern, because we may be barking up the wrong tree.

The vegetable oil used for biofuels in Europe is not palm, but mainly soy and rape, and palm is a negligible amount. The discussion is about palm but the actual use is not palm but soy and rape oil.

What developing countries are saying, they've got the right to development, that's the basic premise of development. But if you look at Europe, Europe is already developed, but before it was jungle out there. When now developing countries want to do the same and develop, Europe doesn't like it.

It must be strongly highlighted that these developing countries, whilst they want to develop, are sensitive to the environment. We have laws to protect the environment. There are countries that have laws and lack enforcement, but that can only get better.

By the same token, developing countries could argue that if Europe and the US are so concerned about this, why don't you allocate 20% of your country to reforestation and help Mother Earth?

What do you think about the potential use of forest credits under a UN climate agreement to give developing countries monetary incentives to keep their forests intact?

Who's going to put the money in? It will work if everybody puts their money where their mouth is, but I'm afraid the world doesn't work that way.

What if you made it part of the Clean Development Mechanism to allow industrialised countries to offset their emissions by funding forest protection in developing countries?

It's an option, but the CDM has been in existence for a long time now and we don't really feel the benefit of it. 

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