23/03/2023 (The Edge Markets), Kuala Lumpur - The European Union (EU) has apparently failed to understand the processes involved in the Malaysian palm oil supply chain and it has refused to recognise the existence of smallholders in the entire supply chain, said Sarawak Dayak Oil Palm Planters Association (Doppa).

Its president Napolean R. Ningkos said failing to recognise the existence of smallholders in the entire supply chain may cause the rejection of crop supply from smallholders to the processing facilities that have been certified with the European Union Deforestation-free Regulation (EUDR) and Corporate Sustainability Due Diligence Directive (CSDDD) compliance for the EU market.

“With the current escalation of agriculture input costs, smallholders are not able to absorb any more additional costs for new compliance by the EU.

“If the EU will not provide any incentive to smallholders to meet EU demand, then it is justifiable for the EU to accept the Malaysian Sustainable Palm Oil (MSPO), which is inclusive and has addressed all issues raised by the EU such as deforestation, child labour, and forced labour,” he told Bernama.

Napolean stressed that the implementation of the EUDR would pose a serious and adverse effect on Malaysian smallholders, as they could be potentially removed from the entire supply chain.

He said the EU failed to make a complete stakeholder engagement at the producing country and to provide options or practical solutions for smallholders.

“EUDR is biased and discriminating our rights to advance in socio-economic development and violating our Sarawak Indigenous smallholders’ legal right over native customary rights (NCR) land use,” he added.

He said Doppa strongly urges the EU to review the implementation of EUDR and initiate stakeholders’ engagement in the producing countries to find a common ground, agreed upon by all parties.

“Doppa’s perception of the EU action is that they are violating our human and legal rights and have failed to subscribe to the United Nations Sustainable Development Goals (UNSDG) to eradicate poverty and initiate partnerships through stakeholder engagement.

“We fully agree with Deputy Prime Minister Datuk Seri Fadillah Yusof’s statement that smallholders should be exempted from EUDR as the best option,” he said.

Previously, Fadillah, who is also the plantation and commodities Minister, reportedly said that smallholders deserve to be treated fairly and must be exempted from the EUDR’s unrealistic demands, as smallholders depend on the export of palm oil, rubber and other agricultural commodities to support their families.

On March 15 this year, more than 500 smallholders in the country signed a petition as a joint stance to urge the EU to review the EUDR, which is deemed discriminatory.

The petition, among others, seeks the EU’s endorsement of the MSPO certification and removal of Malaysia from the list of countries at risk if the EUDR is to be implemented.

Meanwhile, Nasional Association Of Smallholders Malaysia deputy president Adzmi Hassan described the EUDR as the EU’s lack of trust in Malaysia, even though the country has shown commitment.

He explained that the commitment shown by Malaysia included limiting oil palm plantations to 6.5 million hectares and mandating the MSPO, which has provisions on deforestation.

“In terms of costs, the EU will insist that smallholders carry out special certification for these regulations and this will cause additional costs.

“In terms of negative perception, there will be a spill-over effect for palm oil buyers and it will be difficult for us to get a high price,” Adzmi said.

He added that in terms of income, the sustainable cost of palm oil is obtained by subtracting the subsistence cost from the production cost of palm oil per tonne, while an acceptable sustainable price of palm oil is around RM850 per tonne.

“At present, the price of palm oil per tonne is RM650 to RM700 per tonne; this is not a sustainable price,” he said.

The Malaysian Rubber Glove Manufacturers Association (Margma) president Dr Supramaniam Shanmugam said the association has always advocated for better income and better lives for rubber plantation smallholders.

He said the association has done countless programmes, including awarding scholarships and back-to-school initiatives in support of families of these smallholders. For the industry to be successful, Margma wants the supply chain to be successful as well, Supramaniam said.

“Margma has been having ongoing discussions with the EU on the EUDR matter and we believe that there should be due consideration given to the economic landscape of each country, and that a reasonable timeframe for the smallholders to transition and meet the EU standards must be carefully considered.

“Not only will this protect the smallholders but also ensure that no unnecessary disruption is caused to the supply chain of products for the EU market,” he said.

Supramaniam said the Malaysian Sustainable Natural Rubber (MSNR) guideline is a good start for the stakeholders in Malaysia to address issues pertaining to the environment, as well as the economic well-being of smallholders.

“This will take time as it entails the creation of economies of scale, via the clustering of smallholdings to form optimal productive fields.

“It would not be a level playing field for smallholders in developing countries to meet EUDR demands overnight,” he added.

https://www.theedgemarkets.com/node/660371