Europe should do more to support Indonesia’s farmers and SMEs
09/05/2023 (The Jakarta Post) - At the end of March, hundreds of oil palm farmers from across Indonesia rallied outside the European Union Embassy in Jakarta to protest a new regulation that bans the import of products made from agricultural commodities produced on recently deforested or degraded land.
The new law will mean that from 2024 the EU will require companies and smallholder farmers working in Indonesia, and other countries in Southeast Asia, to certify that their agricultural products – including palm oil, rubber, coffee, and timber – are not linked to recent deforestation and to provide data to prove it.
However, due to the strict requirements for traceability and geolocation data that the regulation imposes, Indonesia’s SMEs and smallholder farmers are likely to struggle to comply and therefore risk being excluded from EU markets.
This new EU regulation poses a direct threat to the livelihoods of farmers and risks exacerbating the very economic and social conditions that encourage encroachment into adjacent forests – already a major cause of deforestation and biodiversity loss. To help meet the new demands set by the EU, Indonesia’s farmers need more financial support and access to training and new technologies to help them increase yields, while transitioning to more sustainable practices.
Among ASEAN nations, Indonesia is among the most critical in the international fight against climate change. It is home to the third largest expanse of rainforest globally, which acts as an invaluable carbon sink. Just as importantly, its rainforests provide a habitat for vast biodiversity, including unique species like the Sumatran tigers, Borneo elephants, Sumatra and Javan rhinos, and more than three-quarters of the world’s orangutans.
Indonesia is also one of the world’s biggest producers of agricultural commodities – palm oil, timber, rubber, and coffee – for which global demand continues to grow at around 3 percent per year. These industries are critical to Indonesia’s economy, employing around 10 million people and accounting for around 5 percent of gross domestic product.
Indonesia stands out in ASEAN as having made strides in reducing deforestation. Yet while these commodities remain favored by consumers in Europe and globally, and while there is limited financial incentive to change growing practices, we will continue to see production coupled to forest and biodiversity loss.
Growing awareness among consumers in Europe, and other parts of the Global North, that their demand for agricultural commodities may be linked to deforestation and climate change has created a powerful momentum for change. Standards and regulations have proliferated to try to create “cleaner” and “greener” supply chains and encourage the transition of production to more sustainable practices.
This is welcomed and is supporting real improvements in Indonesia and other parts of Southeast Asia. However, there is a need to address the growing perception that regulations are being imposed on Indonesia and other producing nations, with limited dialogue or financial support for the farmers and smaller companies directly involved in production. This can lead to unintended consequences for communities, for farmers and the forests that the regulations are meant to protect.
Sustainable finance is a force for change.