JAKARTA, Indonesia – The government of Indonesia sent a letter to France decrying new law taxing palm oil, calling the move “discriminatory treatment.” 

In a letter dated Tuesday, February 2 addressed to Minister Segolene Royal of France’s Ministry of Ecology, Sustainable Development and Energy, Indonesian Minister of Trade Tom Lembong expressed Indonesia’s “great concern” about the French Sentate’s decision to apply taxes on palm oil and palm kernel oil beginning 2017.

“For Indonesia, given the strategic role of the palm oil sector in the economy, the impact of discriminatory treatment in export markets will have a devastating impact on the hard-won economic, social and political stability that we have earned since the early 2000s,” said the letter.

The letter also said the new law would “breach the principles of national treatment and non-discrimination, and lead to disruptions both in Indonesia’s palm oil sector as well as food production and consumption in France and other EU member countries.”

Lembong then urged Royal to “take the necessary steps to make sure that the amendment is not adopted” and encouraged her “to work with Indonesia to address and issue France may have with regards to palm oil.”

On Thursday, January 21, the French Senate adopted an amendment to apply a tax of 300 euros per ton on palm oil starting next year, and 900 euros per ton by 2020, with further increases on an annual basis. 

Indonesia says the tax would make palm oil and kernel uncompetitive, and breach the General Agreement on Tariffs and Trade 1994, which “provides that imported products shall not be subject, directly or indirectly, to like domestic products.”

The tax imposition would be a blow to Indonesia, which heavily relies on the palm oil industry. The palm oil sector employs 16 million Indonesians both directly and indirectly and contribute 1.6% to the Indonesian GDP. It generates $19 billion in export revenue annually.

About 50% of products on supermarket shelves contain palm oil – of which Indonesia and Malaysia are the world’s top two producers.

The letter also cited Indonesia’s commitment to environmentally-friendly and sustainable practices when producing palm oil, and said palm oil has been proven not to increase risk of cardiovascular diseases like other saturated fatty acids. 

France’s tax imposition comes in response to combat deforestation, the use of pesticides allegedly common in palm oil plantations, and to health scares associated with saturated fatty acids consumption.

The Indonesian government has already expressed its disapproval over France’s decision but the most recent letter is part of plans for continued diplomatic efforts to withdraw the amendment. 

Challenges 

Meanwhile, Indonesia Estate Crop Fund (IECF) Chief Executive Bayu Krisnamuthi called the tax imposition “character assassination” and a “very wrong decision.”

He told Rappler that it may be that other countries are threatened by the quality of palm oil in Indonesia, and the tax imposition is “not because we are bad, but maybe because we’re very good.”

“Our productivity is 9 times more than them, so with that, palm oil is very competitive, so the only way for them to deal with it is to use non-trade barriers, non-trade measures,” he said.

Krisnamuthi acknowledged that Indonesia still has work to be done in regards to environmental practices, adding there is especially a need to educate farmers on healthy practices as to avoid land burning – which causes massive deforestation, a regional haze problem and health issues.

But he also said “Indonesia is the most progressive in producing sustainable products,” saying in just 3 years, Indonesia managed to “produce half of total global international sustainable palm oil,” having produced 6 million tons of the 12 million tons of sustainable palm oil in the world in 2015. 

Krisnamuthi also said the imposition would not just harm Indonesia and its farmers, but France’s as well, since he said 117,000 are employed in the palm oil sector in Europe.

Despite this, Krisnamuthi remained hopeful that France would “see the truth, the objective fact, and deny the proposal.” – Rappler.com