by Hanim Adnan (22 Nov 2011, The Star)
Kota Kinabalu TODAY marks the start of the three-day Roundtable on Sustainable Palm Oil (RSPO) annual meeting (RT 9) in the beautiful city of Kota Kinabalu in Sabah, the land below the wind.RT 9 is believed to be the largest sustainable palm oil gathering in the world to date, pooling seven RSPO multi-stakeholder segments producers, retailers/consumers, NGOs, and etc. Last year's RT 8 attracted over 800 delegates from 30 countries.
Malaysian palm oil growers, to be represented by the Malaysian Palm Oil Association (MPOA), have deep interest in the RT 9. Armed with a barrage of complaints and grouses, they will present their case to the RSPO executive board.
Given the absence of MPOA's counterpart, the Indonesian Oil Palm Association (GAPKI), which exited the RSPO in September, the Malaysians particularly will want to highlight their agenda.GAPKI had left citing its intention to focus on its own mandatory standard, the Indonesia Sustainable Palm Oil (ISPO).
For RT 9, MPOA chief executive officer Datuk Mamat Salleh has highlighted some of the salient points which warrant serious attention from the RSPO executive board.
The main dissatisfaction among local producers, without a doubt, is the poor premium paid for RSPO-certified palm oil, which has plunged from US$50 per tonne in 2008 to only 50 cents currently.
This is not only very discouraging but it cannot even cover the cost of implementing RSPO certification activities. It is believed that producers cannot formally discuss this issue in the RSPO since it is against anti-trust laws.
With the total area certified reaching one million hectares now and production standing at five million tonnes, the supply never been fully taken up. The purchase was only 25% of total production in 2009 and 45% in 2010 and 2011.
In fact, only half of CSPO produced can be marketed, meaning there is no demand for it on the world market, thus explaining the drop in premium, as claimed by MPOA.
Perhaps it is because the buyers are actually waiting to buy the CSPO only in 2015.
Furthermore, oil palm growers are getting wary and tired of the extensive NGO campaigns. Palm oil producers in RSPO have not been spared. They were in fact the first to suffer in the hands of green activists.
Some palm oil growers have even said it is better to not be a member of RSPO, as non-members tended be left alone by the NGOs.
It is not worth being “good” boys trying hard to produce sustainable palm oil.
Under such a situation, Mamat has indicated that Malaysian growers that have undertaken RSPO certification are considering a moratorium at the RT 9 for further implementation and certification until 2015, given that many Western manufacturers and consumers are pledging to buy RSPO-certified palm oil by then.
“Why should palm oil growers produce the surplus when there is no market demand and price premium for the CSPO unless we can bring it forward to 2015?” asks Mamat.
In the RSPO, there is also governance issues in the executive board and general assembly representations. Producers feel that they are being trampled on as the minority at 30% compared with 70% non-producers.
Even though there is a small representation of NGOs in the RSPO executive board, these NGOs are seen as dominating the RSPO.
The burden of implementing RSPO-certified sustainable palm oil is shouldered mostly by the producers but there are not many obligations down the supply chain, according to MPOA.
From the industry's perspective, Mamat maintains that the certification should be credible, have some value addition in terms of market accessibility and some price premium to at least cover the cost of implementation.
In addition, it should be practical to implement and not incur double the cost.
Another hot topic up for discussion at RT 9 is the voluntary RSPO certification versus the ISPO and the soon-to-be-introduced Malaysia Sustainable Palm Oil (MSPO) standard.
It is still unclear whether the multiple certification standards will be complementary, competitive or even create direct confrontation between the three certification schemes.
All will depend on which scheme is the preferred certified scheme by the developed countries, as well as major palm oil importers China, India and the remaining developing markets.
One thing for sure, the palm oil market may likely be transformed to a CSPO market that will be targeted at niche markets for each certification scheme.
The importing countries, manufacturers and consumers will have a wide choice of sustainability brands to choose from.
Market rationalisation will determine which sustainability scheme will be sustainable .