“The tricks of the plantation industry bring to mind the Wild West”

When Switzerland votes on the trade agreement with Indonesia on 7 March, the issue will be palm oil. In the run-up, there has been little debate about Indonesia’s interests and who profits from the palm oil industry there. Heinzpeter Znoj, social anthropologist at the University of Bern and President of the CDE Board, has conducted research in and on Indonesia for years – including on corruption. He says: “The latest developments in Indonesia’s palm oil industry directly contradict the goals of the trade agreement.”

“We need to ask ourselves: how has it come to this?”, says Heinzpeter Znoj. Photo: Monika Flückiger

Interview: Gaby Allheilig

You criticize the trade agreement between the EFTA States and Indonesia as not providing sufficient incentives for Indonesia to transition to a sustainable palm oil economy. What is the main basis for your scepticism?

It’s only in a footnote that the Swiss negotiators were able to place the clause providing for lower tariffs on “sustainably” produced palm oil compared to conventionally produced palm oil. If Indonesia were serious about a transition to sustainability, they would have agreed to place the clause in the main text.

How do you gauge Indonesia’s intentions?

Since the conclusion of negotiations between EFTA and Indonesia, expansion of the “conventional” palm oil economy has continued unabated. Corruption plays an important role in this. Directly or indirectly, the palm oil industry finances local politicians; they return the favour of electoral support by granting land concessions, often illegally.


“The military has always had a share in the profits”


National laws also play an important role. Six months ago, the Indonesian parliament passed the “Omnibus” legislation package. The laws drastically reduce the environmental standards and workers’ rights that plantations have to comply with. So the palm oil industry is actually developing in exactly the opposite direction to what is stipulated in the trade agreement. But there was no outcry by the EFTA negotiators.

You mentioned corruption. Who else profits from the palm oil business besides the companies and local politicians?

The military has always shared in the profits from these companies. It protects logging firms when they deforest indigenous land, and accepts payment for it. Former generals have enriched themselves massively in this way. Today, some of them are among the country’s palm oil tycoons. It’s an oligarchy that dominates business and politics.


“I see the standards as a typical case of ‘greenwashing’”


That means members of the government are also involved?

The man who negotiated the agreement with EFTA on behalf of Indonesia is a former general: Luhut Binsar Pandjaitan. He’s a kind of super-minister for extractive industries. He clearly represents the interests of the palm oil industry. Prabowo Subianto Djojohadikusumo, also an ex-general and known for his atrocities during Suharto’s reign, is now defence minister, and his brother proclaims to run plantations the size of Belgium. To the West, these people present themselves as clean politicians. But some of them have a very bloody past and act only in their own interests.

The consideration, for the first time, of sustainability standards in a trade agreement concluded by Switzerland could be celebrated as an achievement. Do you generally believe that trade agreements are the wrong means to stimulate major changes towards sustainability?

The standards that this agreement stipulates for palm oil to be labelled “sustainable” are so weak that they do more harm than good to the cause. For example, palm oil can be called sustainable even if it’s produced on plantations for which, more than 20 years ago, rainforest was cleared and indigenous people were displaced. The violations of human rights and the destruction of rainforests don’t count as long as they happened sufficiently long ago. I see this as a typical case of greenwashing.


“Palm oil companies make indigenous people dependent on them, to cause them to cede their land”


How does that work?

Wilmar, for example, is one of the world’s largest processors and distributors of palm oil. In Indonesia, the company is one of the most powerful plantation owners. In the larger cities of West Papua, it employs agents who establish relationships with indigenous communities, give them gifts, and supply them with food and alcoholic beverages. Often, the chiefs are also invited to Jakarta. In the end, they are presented with the bill and have to sign a document ceding their land. These tricks enable the corporation to show buyers like Nestlé the contracts it has “legally” concluded with indigenous groups. That is what lies at the start of the palm oil supply chain. It’s like in the old days in the Wild West, where indigenous people were made compliant and dependent through alcohol, and then driven off their land.


“Overproduction is almost inevitable, and it will impoverish smallholders”


The agreement could also generate new opportunities for small-scale farmers.

In the short term, yes. In purely economic terms, smallholder farmers near palm oil plantations can actually benefit by adapting to the palm oil companies. At the same time, they’re dependent on the prices paid by the plantations’ oil mills. As soon as they’ve concluded supply contracts, the prices drop. This is a frequent source of lament among smallholders. In addition, overproduction is almost inevitable, and it will further push down prices and impoverish them. A return to diverse agriculture will hardly be possible on the degraded and pesticide-laden soils.

What happens if smallholders refuse to grow oil palms?

They are put under pressure by plantation companies to grow oil palms in monoculture – or else lose their land. In Indonesia, farmers have a customary right to cultivate their land, but no valid land titles. In the past, the state recognized this right. However, since it embarked on the strategy of plantation farming, expropriations have been increasing. As a result, small farmers either become suppliers to the large plantations, or landless.


“Certification is too expensive for smallholders”


Does this mean that sustainable production of palm oil isn’t possible at all in Indonesia?

Certainly not at the low prices that made palm oil competitive on the world market in the first place. These come about through economies of scale on plantations of 7,000 hectares or more. In most cases, such plantations can only be established by clearing primary forest and driving the indigenous population off the land – as is currently happening in West Papua, with blatant disregard for human rights.

If Swiss voters reject the agreement on 7 March, Switzerland and the other EFTA States will still import palm oil – without any sustainability criteria being met. Is that the alternative?

With the trade agreement, EFTA will have no choice but to allow the import of cheap palm oil. Whether this is labelled “conventional” or supposedly “sustainably” produced is irrelevant. Both are produced on huge plantations. The much-mentioned small farmers are left out of the loop when it comes to “sustainable” palm oil anyway, because they simply can’t afford to get certified. This means that the sustainability clause in the trade agreement will further entrench the dominance of the large plantations.


“Switzerland could take a stand by imposing higher tariffs for palm oil”


Without a trade agreement, on the other hand, Switzerland could impose higher tariffs on palm oil and thus take a stand against the practices of the palm oil industry.

What would it take to create the basis for sustainable palm oil production?

It’s illusory to believe that free trade alone will bring about democracy, freedom, and prosperity –and neither will sustainability labels and clauses in the footnotes of trade agreements. They only serve to reassure consumers and voters here in Switzerland.


“International investors would have to insist on compliance with environmental standards and human rights”


But there could be a ray of hope – if international investors insist on compliance with environmental standards and human rights. Much would be gained if an investor like Nestlé were to say, we want to go beyond the RSPO standard and no longer have oil palm monocultures, but instead develop a model together with experts, indigenous people, and small farmers that strengthens them; and if Nestlé were willing to pay more for this palm oil. This could come about through pressure from consumers and the public. But the current agreement sets different standards. I consider this a big mistake – not least in view of the upcoming trade agreements with Malaysia and Mercosur, which will demand equal treatment from EFTA.


“The Indonesian oligarchy has enriched itself immensely”


In Indonesia, it’s not only palm oil that’s associated with considerable social and ecological grievances. Cultivation and mining of rubber, coal, tin, bauxite, copper, and gold, etc. are also extremely problematic. Is palm oil just the tip of the iceberg?

Rubber can be produced very well by independent smallholders, but it’s increasingly being displaced by palm oil. Palm oil production on mega-plantations is part of the extractive industry with which the Indonesian oligarchy has enriched itself immensely in recent decades. It has contributed to the country’s transformation over the last 50 years from a largely egalitarian society into the nation with the world’s third highest level of inequality.

The issue of palm oil appears to be well researched. What research gaps remain, and what contribution does science still have to make on this issue?

Research on palm oil is far too sectoral. The issue must be studied from a holistic and interdisciplinary perspective. We need to explore the social and political impacts of the palm oil supply chain at all levels and scales; we also need to understand its historical roots and path dependencies in order to identify effective entry points for a transition to a sustainable economy. We need to ask ourselves: how has it come to this?

Swiss referendum on trade agreement with Indonesia

In anticipation of the Swiss referendum on 7 March 2021, CDE is periodically publishing facts and scientific insights on palm oil. We seek to shed light on the issues from different angles: