Edwards ( 2019) estimates that the palm oil industry has succeeded in lifting 2.6 million rural Indonesians from poverty. The same result was obtained by Edwards ( 2015), who showed that expansion of palm oil’s share of land in the ten districts that experienced the largest expansion would decrease poverty rate and narrow the income gap. In terms of poverty alleviation, the palm oil sector has contributed to income distribution within the society. The contribution of the palm oil sector was shown by the growth, investment, output, and foreign exchange earnings it has also contributed to household revenue, playing a role in increasing household assets. Susila ( 2004) specifically analyzed the Indonesian palm oil sector and found that it contributed to economic growth, poverty alleviation, and income distribution within society. Several previous studies showed that palm oil has an important contribution to the Indonesian economy therefore, disruption in this sector will affect the other sectors. Based on this background, it is important to conduct a study aimed to observe and discuss the impact of palm oil export suspension to European Union on Indonesia. By suspending Indonesian palm oil exports to European countries, Indonesia will escape criticism from many parties in Europe and can focus on developing a sustainable palm oil system based on the national law and sustainable development goals (SDGs). Therefore, the discourse to halt Indonesian palm oil exports to European countries ultimately prevails. Indonesia has tried to undertake various diplomatic approaches to explain this problem, yet issues regarding palm oil continue to appear and develop. In addition, in May 2019 the European Commission has adopted the Delegated Act to limit the use of biofuels from palm oil which has indirect land-use change (ILUC) risks. This condition indicates that European Union countries necessarily need palm oil for their industry. In 2016–2017, demand for Indonesian palm oil in the European Union market increased by 15%, and during 1996–2016, palm oil consumption in the European Union increased by 31% (UN Comtrade 2018). On the other hand, the data of Indonesian palm oil exports to the European Union showed that the need and demand for Indonesian palm oil continued to increase through the years. Moreover, the framework of the Renewable Energy Directive (RED) regulates renewable energy use in the European Union, where CPO is phased out as the source of biofuel due to its high emission level, although it is yet to be finalized. One of resolutions and recommendations given is to stop Crude Palm Oil (CPO) imports (including from Indonesia) in 2021. This is confirmed by the Report on Palm Oil and Deforestation on Rainforests, which stated that palm oil is a very large problem related to the issue of corruption, child labor, violation of human rights, omission of the rights of indigenous people, and a trigger to deforestation and habitat destruction (European Parliament 2017). Several issues, including health, environment, and animal protection, have been considered to hamper the entrance of Indonesian palm oil to Europe. However, there have been many instances in the last several years where oil imports, mainly from Indonesia, have been hindered from entering European countries. Different from India and China, which directly consumed its palm oil, European market besides consumed directly it also serve as a trade hub for other countries in the region (Rifin 2013).įor a long time, countries of the European Union, particularly the Netherlands, have been the major market destination for Indonesian palm oil as well as being countries that connect Indonesia and other European countries. In 2017, Indonesia exported approximately 29 million tons of palm oil, with the largest destination countries including India, with a market share of 25.37% followed by the European Union, with 14.35% and China, with 12.39% (UN Comtrade 2018). Indonesian palm oil exports in 2017 reached US$ 22.97 billion, an increase of 26% compared to the value in 2016 (UN Comtrade 2018). One of the largest contributors to these exports is palm oil, amounting to 13.6% in 2017. Indonesian exports reached US$ 168.8 billion in 2017, an increase of 16.8% compared to the previous year (UN Comtrade 2018).
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