Palm Oil Giants Linked to Collusion, Business Watchdog Says

The Business Competition Supervisory Commission (KPPU) will investigate alleged cartel practices implicating palm oil companies grouped together under the Indonesia Palm Oil Pledge (IPOP).

The IPOP was established initially to promote sustainable practices in the palm oil business. Later, it set particular standards that made it impossible for small farmers to sell their crops to the giant companies.

Using environmental standards as a pretext, the IPOP allegedly demanded that giant companies reject palm oil produced by small farmers. By setting this standard, the IPOP potentially acted beyond its authority because the government sets the standard for the industry. The government-set standard is known as the Indonesia Sustainable Palm Oil (ISPO) system. 

“IPOP has influenced business players and negatively affected business competition. It is a violation of Law No. 5/1999. The KPPU will investigate this alleged violation,” KPPU chairman Syarkawi Rauf said Thursday.

Law No. 5/1999 regulates the problem of monopoly and unhealthy business competition in the country.

Syarkawi said the IPOP had created a system that made it difficult for small farmers to sell their products to IPOP members.

The Agriculture Ministry’s plantations director general Gamal Nasir said he wanted the IPOP to be eliminated as it was not in line with the 1945 Constitution, which stipulates that the country’s natural resources shall be managed for the benefit of all people.

The Agriculture Ministry will soon file a letter with the Office of the Coordinating Economic Minister, he said.

“In addition, we already have the ISPO that we agreed to develop with Malaysia. We want to have a standard system,” he added.

The IPOP was first signed by palm oil giants Wilmar, Golden Agri Resources, Cargill and Asian Agri in September 2014 during the UN Climate Summit in New York. Musim Mas then signed up in March 2015 and Astra Agro Lestari followed in February this year. 

The ISPO system, meanwhile, was developed by the government in 2009 to make sure that all palm oil players met required agricultural standards.

While both systems impose criteria related to high conservation value forest (HCVF), the IPOP also applies criteria related to a high carbon stock (HCS), an important consideration for plantation and consumer companies committed to zero deforestation in development or in their supply chains.

Indonesia’s palm oil and its derivative products are often subjected to international scrutiny as many are considered environmentally unfriendly. The image has made the country’s palm oil products less appealing in certain markets.

When forest fires hit Sumatra and caused thick haze in Singapore, the city-state’s largest supermarket chain banned paper products from Asia Pulp and Paper Group (APP), which is a member of Sinar Mas Group and a major supplier of paper, pulp and packaging.

IPOP team executive director Nurdiana Darus said the IPOP aimed to boost Indonesia’s palm oil image worldwide.

“Our commitment is clear. We want to help the government and boost global demand for Indonesian palm oil by producing sustainable palm oil that meets global customer standards,” she said.

Source:, 15/04/2016
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