Not Giving Up: A Closer Look at Indonesian Palm Oil Companies’ Corporate Diplomacy

Is the development of palm oil industry in Indonesia(and Malaysia) a blessing or a curse? Or both of them?

Since the last two decades, palm oil has increasingly become more significant for these two countries. Rising demands from China and India have driven the development of palm oil industry further. Now, Indonesia and Malaysia supply around 90% of certified palm oil (CPO) in the global market.

Globally, proponents of the palm oil industry have hailed palm oil as an important factor that contributes significantly to the food security of people in the developing countries. The proponents also argued that palm oil is an ideal crop for the developing countries in the tropics. This positive view is also popular among the ranks of the government of Indonesia, who also see palm oil as an important commodity that will bring tremendous benefits for the welfare of its people.

However, for many others, the development of palm oil industry in Indonesia is portrayed as a disaster. In its report, Greenpeace argued that the palm oil sector was the single largest driver of deforestation in Indonesia during 2009-2011. It accounts for about a quarter (300,000 hectares) of forest loss, which contributed significantly to global carbon emmissions. Apart from the enviromental impacts, many also raised concerns about the negative impacts of the expansion of palm oil industry in the social aspects, from land conflicts to human rights abuses.

As the industry grows, demand for more control for its business practices is also growing. Global and local NGOs are stepping up their pressure on the government to prevent further damage allegedly caused by the expansion of palm oil industry. Apart from pressurising the government, NGOs are also attempting to influence the market and try to disrupt the demand from environmentally and socially problematic palm oil companies. Greenpeace, for example, frequently directs their criticisms towards global companies who bought palm oil from ‘dirty’ sources in Indonesia.

My research, conducted under the ASEAN Canada Junior Fellow scheme, attempts to understand how Indonesian palm oil companies are responding to such development. What kind of corporate diplomacy is employed? While the research is focusing more on Indonesia’s case, it also tries to look at their counterparts, the Malaysian palm oil companies.

Preliminary research has found that Indonesian palm oil companies frequently responded to the pressures by accusing them as part of a global ‘black campaign’ against palm oil. According to the narrative (which I identify as “trade war narrative”), campaigns by NGOs to put more controls to the palm oil industry are supported by countries which are producing rival vegetable oils (soybean and rapeseed). The next rounds of the research will try to understand the construction of such narrative and how the narrative is projected through various channels.

This blog post has been written by Shofwan Al Banna Choiruzzad.  Shofwan is Executive Secretary of the ASEAN Study Center and lecturer in the Department of International Relations of the Faculty of Social and Political Sciences at the University of Indonesia. He is also Junior Fellow (2013-2014) under the ASEAN-Canada Research Partnership. For more information on the ASEAN-Canada Research Partnership, please click here.