Indonesia, Malaysia mount protest to EU over palm curbs

Malaysian palm oil futures reversed losses in its second half of trade on Thursday, rising to a one-week peak as sentiment turned bullish on higher price forecasts from an industry conference.

JAKARTA/BRUSSELS: Indonesian President Joko Widodo and Malaysian Prime Minister Mahatir Mohamad have signed a joint letter of objection to the European Union over its plan to phase out the use of palm oil in renewable fuel, and sent delegations to complain in Brussels.

The letter was sent to the EU over the weekend, said Luhut Pandjaitan, coordinating minister for maritime affairs, who also oversees natural resources issues. He declined on Monday to disclose the content of the letter.

Indonesia and Malaysia, the world's top producers of the vegetable oil, have both threatened a World Trade Organization challenge against the EU over its plan to phase out the use of palm oil by 2030 in renewable transport fuel.

Delegations from both countries arrived in Brussels for an official visit on Monday and Tuesday.

Indonesia's coordinating minister for economic affairs Darmin Nasution said the country would definitely file a WTO complaint once the new rules were adopted. Tan Yew Chong, secretary general for Malaysia's ministry of primary industries, said his country would do the same.

The joint mission of the Council of Palm Oil Producing Countries, which also includes Colombia, have a series of meetings with EU officials, lawmakers and national governments to convey their disappointment and to fight the act put forward by the European Commission.

It will become law unless a majority in the European Parliament or in the group of EU countries objects. So far, there are no indications that either will do so.

The EU plans to increase its use of renewable energy sources and to take into account deforestation when it determines what products can be labelled renewable.

Last month, the European Commission determined that palm oil has resulted in excessive deforestation and that it should no longer be considered a renewable transport fuel, albeit with some exemptions.

Indonesia, the world's largest palm oil producer, argues that rather than promoting sustainability in the vegetable oil sector, the regulation is more about protecting and promoting the European Union's home-grown vegetable oils, such as rapeseed and sunflower.

Nasution said the EU was ignoring vastly higher yields of oil from palm and said 64 percent of his country was still covered in forest.

Indonesia would, he added, review its relationship with the EU. The two are currently in talks on forming a free trade agreement.

European spirits makers said last week they are facing difficulties exporting drinks to Indonesia as tensions over palm rise, but an Indonesian official denied that it was a retaliation against EU's renewable energy policy. - Reuters