Indonesia, Malaysia seek more time to implement EU anti-deforestation law

While big producers of palm oil, cocoa or coffee are ready to implement the EU’s newly adopted anti-deforestation regulation, governments in Malaysia and Indonesia say more time is needed for small producers to meet the EU’s bureaucratic requirements.

The EU regulation came into force on 29 June this year, imposing obligations on companies to monitor their supply chains and provide evidence that products placed on the EU market are not linked to deforestation.

Traders have until 1 January 2025 to implement the new rules, targeted mainly at meat, palm oil, soya, cocoa, and coffee but also other commodities like rubber, wood or leather.

Offenders could see their products suspended from the EU market, with operators facing fines as well as the confiscation of their products and revenues.

Indonesia and Malaysia, the world’s two biggest palm oil producers, initially reacted furiously to the EU’s new anti-deforestation law, saying it was “inherently discriminatory and punitive in nature”. In 2019, Jakarta also filed a case at the World Trade Organisation over EU plans to phase out palm oil as a feedstock for biofuels.

But the tone at a Euractiv debate last week was more cordial, with both sides showing willingness to help producers implement the EU’s anti-deforestation law.

“The big industry, they are ready,” said Rizal Affandi Lukman, secretary general of the Council of Palm Oil Producing Countries (CPOPC).

“But this is not the case for the smallholders,” he added, saying small farmers are the weakest part of the chain on the supply side.

According to CPOPC, smallholders account for about 41% and 27% of total oil palm planted areas in Indonesia and Malaysia respectively, and for about 35-40% of the global production of palm oil.

These people need more time to prepare, Lukman argued, especially the low-income farmers living in remote regions. For them, providing information on traceability like geolocation data will be a challenge because of barriers linked to education and digital literacy, he explained.

“It is a matter of time,” Lukman said, pointing out that SMEs in the EU were given until June 2025 to comply with the EU’s anti-deforestation regulation.

“So I think it would be fair enough for smallholders in producing countries to also be given this timeframe,” he told the Euractiv event.

Palm oil and the EU’s anti-deforestation law: Why the backlash?

The EU’s new deforestation law was hailed as watershed in the fight to protect the world’s forests. So why is it provoking such a fierce backlash in Indonesia and Malaysia? In the wake of a high-level meeting in Brussels last week, Giorgio Budi Indrarto charts what went wrong, and how to rectify it.

Indonesian and Malaysian representatives who spoke at the Euractiv event insisted on maintaining a transparent dialogue between EU authorities and palm oil-producing countries and praised the work of a Joint Task Force which brings together producing countries and the European Commission.

Launched on 29 June, the task force aims for “a win-win solution” to implement the EU anti-deforestation regulation and will hopefully “avoid disruptions” in January 2025 when the new law starts applying, Lukman said.

“We need to work together with the supply chains in the producing and consuming countries to find solutions” on issues such as traceability, Lukman insisted.

“So I think we are in a situation where we are seeking solutions,” he said.

‘Clearing house’ for traceability

One of the solutions implemented by Indonesia is the creation of a “clearing house” for palm oil producers where all the information needed to comply with EU rules can be entered and transmitted to European customs authorities, said Musdhalifah Machmud, Indonesia’s deputy minister for food and agribusiness.

The database will be available for palm oil producers but also for those cultivating other commodities like coffee, rubber, timber and cocoa, she said.

“We don’t want smallholders to be confused with the number of documents they need to fill. That’s why we want to implement a single scheme,” Machmud said, calling for time to put in place the digital infrastructure.

Malaysia is also providing assistance to smallholders – in the form of training and capacity building for certification – so they can comply with the new EU rules.

Traceability tools can also be put in place to suit the EU’s requirements so that palm oil trade with the EU can continue, she added, insisting that palm oil certified with the Indonesia sustainable palm oil (ISPO) label produce “no deforestation at all”, in line with EU standards.

Campaigners, however, question the feasibility of putting in place an IT system for tracing palm oil back to the smallest producers in remote areas.

After they are harvested, palm oil fruits are typically traded and change hands multiple times before they are eventually brought to the mill for processing, said Gert van der Bijl, senior EU policy advisor at Solidaridad, a development NGO.

“And having traceability for those kinds of farmers – that is really complicated,” he said, adding that compliance information also needs to cover labour laws, tax and anti-corruption legislation.

The risk, van der Bijl said, is that bigger traders in Indonesia or Malaysia will stop buying produce from smaller farmers because of legal compliance issues that pose a risk to their business.

The European Commission acknowledges those issues.

Astrid Ladefoged, a senior official at the Commission’s environment directorate, spoke of “very valid concerns” about keeping smallholders in the supply chain, saying it was working with producing countries as part of its Multi-Stakeholder Platform on Protecting and Restoring the World’s Forests.

But while complying with EU rules can be challenging, she insisted that the obligation for legal compliance and traceability falls on the big trading companies, not on the smallholders themselves.

“Some of the big companies have been engaged in this for years as part of their broader sustainability policies to actually include smallholders” in their sourcing strategies and ensure palm oil exported to Europe meets EU standards, she remarked.

“It’s not an obligation to use a certification scheme” to gain access to the EU market, Ladefoged reminded, saying the issue was left open on purpose because certification might make sense for some producers but not for others.

“The core of EUDR obligations are not on farmers but on the operators placing products in the scope of the regulation on the EU market,” an EU official told Euractiv earlier. The geolocation requirements can be completed with “a simple smartphone”, according to the Commission official, who played down the level of complexity.

Brussels refutes Indonesia's claims on EU anti-deforestation law

Indonesia and Malaysia have accused the EU’s anti-deforestation law of unfairly penalising small farmers, arguing that the regulation’s complex requirements will financially strain those least able to afford it – allegations the European Commission has rejected.

Transparent dialogue needed

Van der Bijl, meanwhile, said dialogue and bilateral cooperation were essential to ensure the law is properly implemented.

“In the end, what’s important is that meeting the requirements of EUDR will contribute to the broader objectives which is reducing deforestation,” he pointed out, saying this requires promoting sustainable agriculture in producing countries.

Taking Peruvian coffee growers as an example, van der Bijl said a key challenge for them was to increase the productivity of their existing land so they can export coffee to Europe without clearing more forests.

“If we want to reduce deforestation, we should work with farmers on increasing productivity to ensure that they can produce sustainably. And I think in the end that’s what is needed,” he stressed, saying bilateral cooperation can help promote sustainable agriculture in those countries.

Partnerships between the EU and producing countries should focus on the root cause of deforestation, van der Bijl said. “And I think, we should talk a lot more about that – which is poverty, governance and lack of capacity”.

Dato’ Haji Mad Zaidi Mohd Karli, secretary general at Malaysia’s Ministry of Plantation and Commodities, said they would “do our best to comply”. “And let’s see, we have another twelve months to go,” he added, saying he was hopeful there could be extra “room for negotiation” to bring smallholders on board.

“My wish has always been to have a transparent dialogue on how to resolve this” but any assistance from the EU to implement the rules would be welcome, he said.

Watch the full Euractiv event here.

[Edited by Zoran Radosavljevic]

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