Whose Forest?
The palm-oil business is pressuring wildlife.
 Newsweek International
Dec. 26, 2005 - Jan 2, 2006 issue - In Malaysia and Indonesia, palm oil is viewed as the "wonder oil." It's easy to see why: Malaysia's production of the oil has doubled over the last 20 years, while Indonesia's has tripled. Between them, Malaysia and Indonesia now account for 84 percent of global production of the cash crop and 88 percent of global exports—worth some $11 billion last year between them. And demand for palm oil is rising: since 2004, it has pipped soybean oil as the world's biggest vegetable-oil crop. It's widely used in Asia for cooking, and in Europe for processed foods and toiletries ranging from bread to soap, ice cream to lipstick. In the United States, where usage is low, imports have been rising steadily because palm oil, unlike other vegetable oils, contains no trans fats. Palm oil also has potential as a biofuel, particularly with prices for crude oil so high.
The problem is that oil-palm plantations need land to expand, and their swelling size has raised alarms among environmentalists. The land occupied by oil-palm plantations in Malaysia has risen dramatically, from 642,000 hectares in 1975 to nearly 4 million hectares in 2004. Much of that space has been carved out of primeval forest, home to the endangered orangutan. According to Friends of the Earth, a London-based environmental group, the business has become "the primary threat" to the survival of the orangutan and other endangered species in the forests of Southeast Asia. Other environmental groups describe palm as the "cruel oil."

The standoff is prompting a debate echoed in China, India and other developing countries: can economic growth coexist with a healthy environment? Malaysian and Indonesian officials, bristling at the criticism, note that oil-palm planters tend to use land that has already been logged, not virgin forest. And they point out that on Nov. 23 in Singapore, the Roundtable on Sustainable Palm Oil (RSPO), a fledgling organization representing environmental, government and plantation-owner groups, agreed to a ban on new plantations in areas with so-called high conservation-value forest—meaning, essentially, virgin forest. Still, RSPO secretary-general Andrew Ng acknowledges that getting the whole industry to agree to these measures remains a question when illegal logging is already a problem in national parks in both countries. "Let's call a spade a spade: there are issues and we're trying to find ways to deal with them," he says.

Development is clearly going ahead. Malaysia already boasts more than 800,000 small oil-palm landholdings, and the industry employs more than 1 million people—one tenth of the entire work force. Those numbers are sure to rise: Procter & Gamble, the consumer-products giant, has announced plans to ramp up usage of palm oil, instead of crude oil, in its detergents. Meantime, the Malaysian government is planning to build three palm-oil biodiesel plants in the next year, and would like to export the new fuel to Europe. In August Indonesia signed an $8 billion financing deal with the China Development Bank to create the world's largest palm-oil plantation in the Indonesian part of Borneo. The proposed site covers an area half the size of the Netherlands and skirts several national parks.

While many plantation owners, particularly in Malaysia, are well established and believe in sustainable planting and the importance of wildlife protection, abuses occur. Some planters strip virgin forests, clear land that is too hilly for practical use, burn their plots in ways that lead to forest fires and get into conflicts with local communities. Government officials don't dispute the problem of illegal logging, but don't appreciate the meddling by outside groups. "This is our country, so of course we care about our forests and its biodiversity," says a senior government official. "We're trying to work out an arrangement whereby palm oil is sustainable. Instead of supporting us, some of these foreign groups just want to attack us." He points out more than half of the land area in Indonesian and Malaysian country is forested, compared with 12 percent in Britain and 25 percent in America. That number, however, is fast shrinking.

© 2006 Newsweek, Inc