Jokowi Announces Indonesian Palm Oil and Mining Moratorium

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Background

Indonesian President Joko “Jokowi” Widodo announced on 14 April a moratorium on new palm oil and mining projects. The temporary ban, which should come into effect later this year, comes after the December 2015 Paris United Nations Conference on Climate Change (COP21), at which Jokowi promised to address the annual problem of the haze caused by slash-and-burn land clearing practices in Indonesia. The moratorium seems to be aimed at protecting Indonesian forests while attempting to increase the productivity of existing palm oil plantations. Speaking to reporters, Widodo claimed that the country’s palm oil growers could be twice as productive ‘provided they use the right seeds’. Mining companies do not appear to be concerned by the move given that an oversupply of coal and dwindling demand from China has caused the price of coal exports to fall. Supriatna Suhala, executive director of the Indonesian Coal Mining Association, also said that the temporary ban could help to reduce illegal mining if improved monitoring resulted from it.

Comment

The primary motive behind the temporary ban appears to be in keeping with the promises made at the COP21, specifically, that Indonesia would do more to protect its forests. Following last year’s haze, which was among the worst on record, the Indonesian Government has been under pressure from neighbouring countries to address the issue. While environmental activists have welcomed Jokowi’s recent announcement, some still remain sceptical. Kiki Taufik, a Greenpeace campaigner in Indonesia noted that ‘We have learned from weak enforcement of the existing moratorium that a presidential instruction lacks teeth’. According to the Wall Street Journal, a current ban on palm oil licences in peatland and some forest areas is not adequately enforced. Weak enforcement has impeded government efforts to preserve the country’s forests. As noted in a previous Strategic Weekly Analysis, due to some of the weaknesses associated with the Indonesian judicial system, it is unlikely that any “crackdown” on those responsible for starting fires will be an effective, long-term fix for the haze problem. The slash-and-burn technique is a deeply-engrained practice that is both cheaper and faster than mechanised land clearing. There needs to be an incentive, therefore, for poorer farmers, as well as large corporations, to abandon such practices. Given the government’s track record so far, though, it is understandable that environmental activists are cautiously optimistic about any positive implications that this new moratorium may have for Indonesian forests.

There may also be ramifications for the palm oil industry. According to Indonesia Investments, the productivity of palm oil plantations is low due to poor quality seeds and less-than-optimal farming techniques. Widodo believes that by changing those techniques, palm oil plantations can be twice as productive. The farmers who account for forty per cent of palm oil exports, however, lack the financial means and awareness to invest in better quality seeds and to change farming practices. If the majority of farmers do not change their methods, which seems likely, the ban may slow a sector which has grown rapidly in recent years. According to the Indonesian Palm Oil Producers Association, palm oil production has increased dramatically in the past five years from 21.8 million tons in 2010 to 32.5 million tons in 2015. As this ban will only affect new projects, however, any effect on existing production should be minor.

Jokowi provided few details about the mining ban. Announcing it more as a possibility, the president implied that the moratorium would have the same goal as the palm oil ban: the preservation of Indonesian forests. It is unlikely that this ban, if it is put in place, will meet any resistance. As the Indonesian Coal Mining Association’s Mr Suhala puts it: ‘In the situation of prolonged low prices of mining products due to significant oversupply, presumably a lot of (our) members will agree with the policy’.

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