ASEAN: Regional Trends in Economic Integration, Export ... - USITC

corporations have announced that they will use only RSPO-certified palm oil no later
than 2015. 54
Other leading markets, such as China, India, and Pakistan, are less influenced by RSPO
efforts. Largely for price reasons, they have continued to provide ready markets for
uncertified palm oil, hampering sustainability standardization efforts, and hindering the
increase in values that certification can bring. 55 Each of these countries has a great need
for low-cost vegetable oils as food for their large, poorer populations and has
demonstrated a willingness to purchase palm oil that has not been RSPO certified. 56 This
demand has lessened the pressure on palm oil producers to undertake the additional costs
necessary for RSPO certification, and because these markets are obtaining enough of the
low-cost oil they want, they have little incentive to pay higher prices for RSPO-certified
oil. 57 This situation hampers the uniform application of RSPO standards and efforts by
palm oil producers to increase the value of their export product.
Nonetheless, the RSPO certification structure has served to increase the export
competitiveness of palm oil in markets (e.g., the EU and United States) where palm oil
production is perceived as being more environmentally destructive (primarily by
deforestation) than production of other vegetable oils, as well as to draw investment by
companies desiring to ensure supplies of such sustainable oil. U.S. companies with a
significant presence in palm oil-producing countries, such as Cargill in Indonesia, operate
their own plantations adhering to RSPO standards, as do Malaysian companies
transferring their environmentally sensitive production practices to investments in
Indonesia. 58
Inbound Investment
Indonesia is the destination for the largest number of palm oil investment activities
among ASEAN countries (table 8.6). As the largest producer of palm oil in the world,
and the country with the greatest amount of land under cultivation (7.2 million hectares in
2009), Indonesia is a natural destination for investment in establishing, enlarging, and
managing palm oil plantations. 59 Investments in refining operations, on the other hand,
occur in multiple ASEAN countries because construction of a refinery is not affected by
the climate and growing conditions that limit where plantations are located.
54 Hickman, “Online Protest Drives Nestlé to Environmentally Friendly Palm Oil,” May 19, 2010.
55 The reportedly largest food processor, manufacturer, and trader in China is the only RSPO member
there. Similarly, India has four or five RSPO members, and Pakistan has none, leading some Indonesian
industry representatives to believe that there is no demand for RSPO palm oil in these countries. Industry
representatives, interview by USITC staff, Jakarta, Indonesia, March 2, 2010; BACP, “Market
Transformation Strategy for Palm Oil,” May 1, 2008, 13.
56 Industry representative, interview by USITC staff, Singapore, March 5, 2010.
57 Industry representative, interview by USITC staff, Washington, D.C., February, 18, 2010.
58 USITC, hearing transcript, February 3, 2010, 36–38, 51–52 (testimony of Rosidah Radzian, Embassy
of Malaysia); industry representatives, interview by USITC staff, Kuala Lumpur, Malaysia, March 12, 2010.
59 Bromokusumo and Slette, “Indonesia: Oilseeds and Products Annual,” March 18, 2010, 14.
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