Are you orphaning young orangutans on Borneo if you buy smooth shower gel and spread in the supermarket in Germany? This is one of those questions that can hardly be answered clearly in the value chains of the globalized economy and their moral implications. Markets gave a clue this week when they panicked over a ban on palm oil exports announced by the Indonesian government.
President Joko Widodo, known as Jokowi, announced the ban on the export of edible oil and the raw materials needed to produce it, which will come into force on Thursday, last Friday in Jakarta. The government wants to get the rising prices in its own country under control – the announcement, however, caused cooking oil prices in the rest of the world to skyrocket. They have been at an all-time high since February, driven by droughts in countries like Canada and Argentina, labor shortages in the second largest producer, Malaysia, and Russia’s invasion of Ukraine, which disrupted supplies of sunflower oil from the Black Sea region. Palm oil is currently showing the sensitivity of a commodity world in which everything depends on everything else.
In the past few weeks there have been demonstrations in the Indonesian capital Jakarta and other cities on the island state, and approval ratings for Widodo have fallen loudly Jakarta Post by twelve percentage points in a short period of time. According to a survey by the opinion research institute “Indicator Politics Indonesia”, this could be attributed directly to the rising prices. More than 60 percent of those surveyed spoke out in favor of an export ban.
Indonesia produces far more palm oil than its residents consume
This is bizarre in that in normal times Indonesia is the world’s largest exporter of palm oil. The country produces about four million tons of the coveted substance every month and only uses about one and a half million tons of it. Trading brings in between $2.5 billion and $3 billion a month.
The export ban will initially put an additional burden on cost-sensitive consumers in Asia and Africa, and the prices for edible oils such as soybean oil, sunflower oil and rapeseed oil will rise. Pakistan and Bangladesh get almost 80 percent of their palm oil from Indonesia. India is currently the largest importer of palm oil in the world. If the huge country with more than 1.3 billion inhabitants has to stock up on other markets, it will have repercussions as far away as Alaska. China is also among the recipients. The longer the spell lasts, the bigger the circles it will draw.
“Indonesia’s decision has implications not only for the availability of palm oil, but for vegetable oils worldwide,” James Fry, chairman of commodities consultancy LMC International, told Reuters. Rasheed JanMohd, Chairman of the “Pakistan Edible Oil Refiners Association” also stated: “No one can compensate for the loss of Indonesian palm oil. Every country will suffer.”
Because exporting brings in so much money, locals can no longer afford their own products
The government actually wants to relieve the poor who, after two years of the pandemic, could no longer afford their own product. Just as the farmers in Peru, Bolivia and Ecuador no longer eat quinoa because it makes so much money when exported, instead there are cheap, unhealthy french fries in the Andes. Palm oil is found in an incredible number of products that ensure well-being in western households, not just in shower gel and nut nougat cream. It makes plastic toys more flexible, but it also mixes with bio-diesel, face creams, cleaning products and shaving foam. Some of this can be avoided, but not all. And most enlightened consumers have long understood that domestic luxury means exploited workers in Southeast Asia, cleared rainforests and displaced animals.
The coveted oil, which is found in more and more food, but also in care products and plastic toys, is extracted from the palm oil fruit.
(Photo: Christiane Oelrich/dpa)
“If we don’t pay attention to the sustainability of products, we can’t blame the oil palm growers either,” says Signe Preuschoft, who runs a school for orangutan orphans in Borneo for the animal welfare organization “Four Paws” whose parents are involved in slash-and-burn operations have died. In everyday life, however, Preuschoft does not only deal with traumatized monkeys. There are also oil palms next to the house where she lives. She knows farmers who make a living from it. She knows how important cultivation is for the region.
Borneo is the third largest island in the world, other animal species are also affected, gibbons, macaques, sun bears, clouded leopards and hornbills. But the orangutans have become symbols of excessive palm oil consumption in recent years. A smaller part of Borneo belongs to Brunei, the rest is shared by Malaysia and Indonesia, and these two countries together produce about 80 percent of the world’s demand.
Many orangutans end up in orphanages because their parents die when they are burnt and burned.
(Photo: Chris Granger/dpa)
The palm trees, on which the fruit clusters with the nuts grow, are a bit stockier than those you know from postcards from holiday paradises. To harvest the nuts, you need low-wage workers. So the orangutan orphans are not the only victims, the exploitation of the workers is also a problem that the supply chains create at their origin, as well as land grabbing and burning. At the same time, growing these trees is a clear improvement over rubber or sugar cane that would otherwise grow here. The biggest enemy is anyway the coal mining. The palm trees provide opportunities for different species of animals to live in a plantation. They can be cultivated more closely, provide more raw material at better prices and are relatively robust. For farmers in Malaysia and Indonesia, they are the best way to secure a small income.
It is still unclear how long the export ban will apply. It may even be expanded
So the moral and economic problems of the workers and peasants in Indonesia can hardly be solved. But maybe not in western supermarkets. Actually, something like this should be a task for politicians – and that’s exactly what Indonesian President Joko Widodo is trying to do at the moment.
Market excitement calmed down a bit this week after it became clear that the regulation would only affect refined, not crude, palm oil. The export ban, which will come into effect at midnight on April 28, will initially only apply until the price of cooking oil has fallen to 14,000 Indonesian rupiah (about 90 cents) per liter, Economy Minister Airlangga Hartarto said on Tuesday evening . At the same time, the Reuters news agency reported that the government in Jakarta wants to extend the ban “if there is a shortage of refined palm oil”. After the all-clear, it didn’t sound like it.
The prospect of further export restrictions is not only making the markets nervous, but also Indonesian palm oil producers. Not only because prices for fresh fruit bundles have already fallen by 400 to 1,000 rupiah per kilogram since the announcement, the Indonesian Oil Palm Growers Association said in a statement. “Based on a simple calculation, with a total ban, all tanks would be full in a month,” said association general secretary Eddy Martono. The country has no infrastructure available to store the oil in the longer term. As soon as the space in the tanks is exhausted, the oil mills can no longer process the fresh fruit bundles, which would quickly rot, Martono explained.
So the government is under pressure from both inside and outside to allow unrestricted trade again. But is that a good idea? At least, consumers in Europe will soon be even more aware of how many everyday products the raw material is actually used in. Depending on how long the blockade lasts, this will not only affect the karma account, but also the household budget.