The two faces of tropical palm oil

Malaysia produces palm oil both sustainably and non-sustainably

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By Juhana Rossi in Borneo
     
     The tropical sun in Sarawak on the island of Borneo brings beads of sweat to the face of Puding Bing Guan.
     The young face has an absent, but concentrated expression, as is typical for those doing heavy piecework.
     Puding grabs a pole that has a scythe-shaped blade at the end, with which he first clears away a few leaves from the top of an oil palm.
     Then he cuts the base of a fruit cluster about the thickness of a person's wrist. The large fruit cluster plummets to the ground.
     Puding then plunges a metallic hook into the cluster, lifts it onto his back, and carries it to the side of the road.
     One cluster weighs between 20 and 30 kilos. There are nearly 50 clusters in a ton. Puding manages to handle three tonnes in a day.
     
Puding is a small part in a mechanism that operates the world's palm oil business, which is concentrated in Malaysia and Indonesia.
     He earns less than EUR 2.50 for every ton that he harvests. In a month he can make up to EUR 200.
     A bigger wheel in the mechanism is Lee Shin Cheng, the founder and main owner of the Malaysian IOI Group. Lee's income is at a completely different level than that of Puding. Frobes magazine estimates that his property holdings are worth about EUR 3 billion.
     IOI, the world's second-largest producer of palm oil, supplies the Finnish refiner Neste Oil with palm oil, which is turned into bio-diesel fuel at the Porvoo refinery.
     Lee's attitude toward his oil palms is an indication of the economic significance of the trees. "I love all of my oil palms, because they are also my workers. When we sleep, they work for us without complaining, 24 hours a day", he said in a recent interview.
     
IOI's plantation in Sabah on the island of Borneo, has 1,200 hectares of Lee's beloved oil palms.
     With an average of 135 oil palms growing on a hectare of land, the plantation has 1,6 million trees. Planted in straight rows, they form a massive green labyrinth.
     While the palm trees work around the clock, Indonesian migrant workers harvest the fruit from sunrise to sunset.
     Water buffalo pull the fruit in carts to the sides of the roads. From there the fruit clusters are taken by tractor or lorry to the plant where the oil is extracted. This has to be done quickly: if the oil is not pressed the same day, the quality of the oil suffers.
     The plant has an odour similar to that of deep-fried jelly donuts. The oil is carried in tank trucks and barges to IOI's own refinery in the coastal city of Sandakan, and from there it is shipped around the world.
     
The whole chain of production has been honed down to the finest details. At the oil extraction plant, the origin of the fruit of the palm is carefully noted, and the quality of the oil that comes from the various locations is monitored.
     The fruit is carried on trailers specially designed for the purpose. The Indonesian migrant workers who harvest the fruit wear helmets. Puding, who works in Sarawak State on the other side of Borneo, does not.
     The difference stems from the different employers. Puding works through an employment agency for some large Chinese company operating in Sarawak; he does not even know the name of the company. The Chinese companies are not as interested in the well-being, or in the company's reputation as IOI is.
     IOI is a listed company which collects capital from international investors. It is also part of the Rountable on Sustainable Palm Oil (RSPO), which seeks to promote the production of palm oil in a manner compatible with sustainable development.
     RSPO creates a certification system. The aim in the production of certified palm oil is not to harm nature or people.
     Getting a certificate requires meeting certain criteria. That is why IOI is so meticulous about documenting its activities.
     
The pay levels and the nature of the work are similar both with Puding and with the migrant workers who work for IOI.
     IOI has more than 2,000 Indonesian migrant workers on its plantations. They comprise 95 per cent of all workers at the plantation.
     The pay level at the IOI plantations is about the same as at the plantation where Puding works. In other respects, the position of the IOI employees is better. In addition to piecework, IOI pays a bonus of one Malaysian ringgit - about EUR 0.20 - for each day that the employee shows up in the morning, says Prakash Arumugam, one of the deputy managers of the plantation.
     In addition to the pay, IOI offers its migrant workers a place to live, basic health care, and education for their children.
     "During about two months in each year there is little harvesting to do. At that time we offer them other work, such as planting seedlings and caring for small trees", Prakash says.
     
The IOI plantation shows the positive face of the palm oil industry. Puding's plantation in Sarawak shows the other.
     New entrepreneurs specifically seek out Sarawak, because the best parts on the Malaysian peninsula and in Sabah were taken over a long time ago.
     Entrepreneurs are attracted to Sarawak by both the land, and by the local administration, which wants income from palm oil, and which readily grants permission to companies to clear forest for the establishment of oil palm plantations.
     This is confirmed by local people, and by a report published last year by the British organisation Forest Peoples.
     Permission to clear the forest is often granted in violation of the rights of the local indigenous people, the Dayaks.
     The Dayaks in Sarawak lack political power, and even if courts hand down rulings that might favour them, those in power often ignore such decisions.
     
In both Sarawak and Sabah the rising price of palm oil is encouraging new producers to set up plantations in locations that are not well suited for growing oil palms.
     Seedlings are planted on terraced slopes. Tilling the land depletes the topsoil, exposing sand and clay.
     Even a layperson can see that in the coming years, tropical rains will wash large amounts of soil down the hillsides. This ends up in the rivers, which become polluted.
      Kawi lives on a river bank in Sarawak, near a new plantation established on a hillside. He complains that fish catches have declined over the years, now that the forests in the area have been cut down.
     The Chinese companies need to go deeper inland to find more forest to clear. Old forests can be seen near the coasts only in special nature reserves.
     Replacing the old forests have been young brush-type forests and increasingly, oil palm plantations.
     
It is hard to imagine what might keep the felling from moving forward.
     The entrepreneur can sell the trees cleared from the forest to get the capital needed to set up an oil palm plantation. Capital is needed. It takes three or four years before oil palms start producing a crop.
     Now they are very productive. Representatives of IOI are not giving exact figures, but an internal report left inside a company car shows that on the Pamoil plantation, the production of one tonne of palm oil last summer cost slightly more than EUR 150.
     In January, the market price for palm oil hit a new record - more than EUR 680 a tonne.
     Therefore, palm oil generates plenty of income for Malaysia, but the profits are unequally distributed.
     The small farmers and migrant workers working in the forests of Sarawak live in corrugated sheet metal shacks.
     A new neighbourhood has emerged in the town of Miri, named Miriwood by the local people, where businessmen who have grown rich from clearing forest and growing oil palms, have built palaces that rival each other in opulence.
     
Helsingin Sanomat / First published in print 3.2.2008

More on this subject:
 COMMENT: Getting out of palm oil

Previously in HS International Edition:
  Neste Oil believes certification will remove obstacles to use of palm oil in bio-diesel production (10.12.2007)
  Greenpeace: Neste palm oil-based biodiesel not so green (31.10.2007)
  Finnish oil company Neste to invest billions in biodiesel production (28.9.2006)

Links:
  IOI Group - Corporate Social Responsibility
  Roundtable on Sustainable Palm Oil

JUHANA ROSSI / Helsingin Sanomat
juhana.rossi@hs.fi