Palm oil, ironic crisis, and a zany “sharp power”
When we talk about crises, most people may be likely thinking about the pandemic and its domino effect on every sector of living, the Ukraine War, or perhaps the surging petroleum oil prices. However, they would not be on my lines for this story. I want to discuss the ‘crisis’ that happened lately involving panic consumers, unrest kitchens, and strangely an eye-opening misfortune event for Indonesia but not its strategic position in global energy and diplomacy.
Global palm oil producer
Currently, Indonesia is the largest palm oil producer which comprises more than 60 percent of global palm oil production. Palm oil derivative products are not only coming as cooking oil, they are also used in food manufacturing, cosmetics, and hygiene products, as well as converted into biofuel and a substance for generating biodiesel. It is pretty easy to spot whether a consumer product like food and hygiene contains palm oil substances, they usually have ‘palm’ in their terms like ‘palmitate,’ ‘palmitoyl,’ or ‘palmate,’ and other variations. Despite its pivotal position in mass products, palm oil has to face criticism majorly over environmental issues. It is believed that palm oil plantation worsens land conversion and reduces forest areas. It made sense in the first place. But wait — is it really about saving the environment? Let’s look at DW Planet A’s report (3/4/22) on “Palm oil isn’t as bad as you think.”
Palm oil production is more efficient and needs less land to generate a larger amount of oil. In other words, in this context, palm plantation is more sustainable in using land rather than rapeseed and soybean plantation which are palm oil’s direct competitors. Ignoring this fact, the European Union is unilaterally demanding ‘green’ letters — ‘green’ this and that from Indonesia’s palm oil which is plausibly hard to be taken by smallholders, the significant and vulnerable party of this industry.
However, I am not gonna lie that there are many holes in the practice where corporates play dirty to make more money. In this case, it is government’s job to fix the management system and enforce strict regulations and sanctions on the criminal companies. In other cases, the palm oil boycott is not the solution since it requires higher “economic and environmental costs” of other vegetable oil sources (rapeseed, soybean, sunflower, etc.). We cannot see this issue only from one single perspective because this industry involves smallholder farmers that manage 40 percent of plantation areas and around 16 million workers make a living from the Indonesia’s commodity-in-chief — which shows its benefit toward poverty reduction and employment rate.
We have to note that environmental issues and a socially beneficial economy should be balanced and hand-in-hand under UN Sustainable Development Goals which poverty alleviation and job opportunities are among the 17 goals. Rich countries in the first world should participate in financing deforestation prevention and transfer of technology for sustainable agriculture management since it is not just about stopping palm oil but also about the people who depend their livelihood on this industry.
Domestic cooking oil shortage
Being a global palm oil producer does not mean we always get affordable cooking oil prices and overwhelming domestic oil stock. Since late 2021, mass media congested by the news of cooking oil scarcity and as of March 2022, the available stock in the market could not deal with consumers’ demands. A drama plotted around this crisis where an indication of the so-called ‘cartel’ and ‘mafia’ involvement hit mainstream media and social media users as the Indonesian Minister of Trade threw the hot ball during a meeting with the parliament after a conspiracy whisper by one of his aides, the Director General of Foreign Trade about revealing the culprits. Unknowingly, the whisperer was later suspected to be involved in the ‘cartel and mafia’ things as the Attorney General’s Office was a step ahead of the case.
This shortage is indeed an ironic crisis. It is like we cannot eat ice cream at Baskin-Robbins.
While prosecutors were being occupied scrutinizing suspects from palm oil producer enterprises and government officers, President Widodo got into the ring and introduced a palm oil export ban to prioritize domestic demand and hopefully could push down skyrocketing cooking oil prices. Pros and cons followed this decision but many doubted the ban could normalize the crisis, instead, worsening it and unbenefited Indonesia’s export chain and smallholder farmers.
Farmer representative, Wayan Supadno, on CNN Indonesia (4/24/22) argued that domestic demand only reached 7 million tons out of 47 million tons of total production. It could be a worst situation for smallholders who only managed crop and sold it to bigger entities since they neither had processing facilities nor the ability to keep the garners fresh. Furthermore, harvesting could be more costly since there was an operational cost for culling meanwhile no emptor would buy the fresh garners. The government may be in dilemma between consumers and smallholders, but for the time being, kitchen unrest is put first.
Domestic kitchens might sizzle again sooner or later as oil prices go down — how about foreign kitchens? The kitchens that sizzled by the 40 million tons that are currently on hold?
Strangely an eye-opening “weaponized soft power”
What had happened for the last 5 months was considered a serious food crux. However, I might be one of the least people who were barely affected by the shortage. It was not that I could afford the oil prices but I was being creative in cooking with less or even without oil. Even though I used much oil, it was self-made coconut oil from my family’s field. And perhaps, because of this distinctive situation of mine, I could see the crisis from a different angle — the soft power of Indonesia’s international trade.
International trade is considered a traditional tool of soft power where producing countries could make consuming countries become dependent on imported goods. The cooking oil shortage that forced the Indonesian government to set bars against outbound trade affected major consuming countries of Indonesia’s palm oil like China, India, Pakistan, and Bangladesh. Moreover, the fact that half of the products found on supermarket shelves contain palm oil may show that the ban further touched food producers rather than households. This condition potentially leads to worsening global food price inflation.
On one hand, there are other options for vegetable cooking oil like soybean, rapeseed, and sunflower but the war in Ukraine and drought in North America made producers and consumers hurt, and even though there are no war and drought, we may have to pay more for those non-palm oil sources. On the other hand, Malaysia as the second largest palm oil producer could not do more since the analyst measured that they could not meet the global demand.
From this perspective, I could see how significant Indonesia’s position is within the global food and energy supply. One single crisis that happened in our domestic food and energy supply chain affected globally. As far as I know, this sort of situation was not the first one. Prior energy crises in Indonesia also trembled other countries; take, for example, the nickel ban that set European exercising their diplomatic power to World Trade Organization to challenge Indonesia’s decision on prioritizing the domestic economy and downstream nickel products. Another one, the coal ban that threatened major coal importers to get blackout, especially China which at that time, they were in tension with Australia and its coal.
I do know that Indonesia is not a typical nation that plays zero-sum games. However, unknowingly, to some extent, we have weaponized our soft power in international trade just like how the U.S. and China did on each other — but without import tariffs battle. The two powerhouses weaponized their trade with tariffs and caused desperation in each other’s economies and business entities. What makes Indonesia different is our motive that is pure for national interest without holding grudge against particular countries or entities. However, this is only the embryo of our soft power consciousness. There are no big and influential nations that do not play with their soft power to strengthen their bargaining position. It is all about time for Indonesia to explore its soft power and weaponize it to ensure national interest then finally create a solid-and-controlled weaponized soft power or Joseph S. Nye, Jr. called “sharp power.”
Further reading
About “sharp power” and weaponized soft power
China’s Soft and Sharp Power by Joseph S. Nye, Jr. — Project Syndicate (project-syndicate.org)
The Hardening of Soft Power by Zaki Laïdi — Project Syndicate (project-syndicate.org)
About palm oil benefits— and Govt certification program
Reducing Poverty, Improving Sustainability: Palm Oil Smallholders are Key to Meeting the UN SDGs — INDEF
Driving Sustainability in Indoensia’s Palm Oil Sector: The Role of the Indonesian Government’s Certification System (ISPO) — INDEF
