Several Palm Oil Companies Ready to Exit IPOP

General Director of Plantation, Ministry of Agriculture Gamal Nasir, stated on Thursday in Jakarta that the large company felt forced to sign the agreement in order to secure its market.

"I have received information that, if I am not mistaken, two parties would withdraw (resign) from the IPOP," he said.

In September 2014, five large palm oil companies, Wilmar Indonesia, Cargill Indonesia, Golden Agri Resources, Musim Mas, and Asian Agri signed the IPOP agreement.

The signing of the declaration, which took place at the UN Summit on Climate Change held in New York, United States, was witnessed by President Susilo Bambang Yudhoyono.

Several criteria have been determined in the IPOP, including a ban on the expansion of palm oil plantations or "no deforestation", a ban on palm oil plantations on peatland or "no peatland", a ban on palm oil plantations using land with high carbon stock or "no high carbon stock" (HCS), and a ban on accepting fresh fruit bunches from palm oil plantations resulting from deforestation, peatland, and HCS (traceability).

With this agreement, the five large companies refused to purchase CPO from companies considered as violating the IPOP regulations, causing the farmers` harvest to be unaccepted.

This would lead to losses and closure for farmers and small palm oil companies, as there would be no buyers for their products. Furthermore, the five companies accommodate 80-85 percent of Indonesias total of fresh fruit bunches and CPO, including fresh fruit bunches from 4.5 million farmers.

Related to this matter, the General Director of Plantation stated that his party has sent a letter to the management of IPOP Indonesia and the "big five company" signatories of IPOP to postpone the implementation of the IPOP, which has been in effect in Indonesia since the start of 2015.

This measure was taken to uphold the countrys sovereignty and avoid being restricted by the demands of the European Union (EU) and the United States (US) in the palm oil business. The reason is that they cannot buy fresh fruit bunches and CPO that are not environmentally friendly, as stipulated in the IPOP regulation.

Regarding the fact that until now, the five large companies are still refusing to purchase CPO from companies considered as violating IPOP regulations, Gamal stated that his party is ready to conduct inspections and summon them.

"We will conduct inspections later on. Because I have sent them a letter to postpone the IPOP. I will summon them later on," he said.

Previously, the Minister of Agriculture, Amran Sulaiman, had stated that his party has warned the IPOP management and the five large companies (the big five company) that signed the IPOP agreement to comply with the official letter issued by the General Director of Plantation.

According to him, the governments determination is to protect farmers in order to improve their welfare, but the existence of IPOP in Indonesia contradicts the Ministry of Agricultures efforts to encourage the welfare of farmers.

"The CPO processed by small and medium-sized companies mostly absorbs fresh fruit bunches from farmers. We must pay attention to small farmers and their welfare. Therefore, we will conduct inspections (in the field on companies that are still refusing to accept farmers fresh fruit bunches)," said Amran.

The Minister of Agriculture stated that regarding the standardization of palm oil plantations, it must refer to the Indonesian Sustainable Palm Oil (ISPO), a standardization system created by the Indonesian Government, and that this ISPO standardization is mandatory for all palm oil companies in Indonesia.