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Exclusive: Mahathir weighs taking EU to court over palm oil ban

Malaysian leader and Indonesia's Widodo 'disappointed' over negative sentiment

"This is about world trade, and we have to look into trading practices first," Malaysian Prime Minister Mahathir Mohamad said in an interview. "If it breaches any international law, of course, we will go to the international court." (FIle photo from June 2018 by Takaki Kashiwabara)

KUALA LUMPUR -- Malaysian Prime Minister Mahathir Mohamad said his country, the world's second-largest producer of palm oil, is considering bringing a case to the International Court of Justice over the rising anti-palm oil initiatives in the European Union.

Speaking to the Nikkei Asian Review, Mahathir said both Malaysia and Indonesia, the world's largest palm oil producer, were disappointed with negative publicity campaigns against the commodity in Europe, which has been boosted by recent legislation that would phase out and eventually ban palm oil-based biofuels. Both countries had previously signaled their intention to file a formal complaint to the World Trade Organization on the move by the European Parliament.

Faced with accusations extending back decades that palm oil is hazardous to the health and its plantations are unsustainable, Malaysia and Indonesia continue to dominate the global market with an estimated palm oil production of 20 million tons and 43 million tons, respectively, this year, boosted by rising demand from China and India. Indonesia and Malaysia jointly supply about 85% of the global market.

"We are very disappointed and we feel that this [anti-palm oil campaign] is not so much because of palm oil is dangerous to health, but more because of the competition in the edible oil business," Mahathir said in the interview.

Malaysia and Indonesia are "thinking about" taking the issue to the International Court of Justice in The Hague, he said. "This is about world trade, and we have to look into trading practices first. If it breaches any international law, of course, we will go to the international court," said Mahathir, who received Indonesian President Joko "Jokowi" Widodo during an official visit to Kuala Lumpur earlier this month.

A worker collects palm oil fruits at a plantation in Bahau, Malaysia. To alleviate concerns over sustainability and deforestation, the government has embarked on the Malaysian Sustainable Palm Oil certification program   © Reuters

Mahathir said that both he and Widodo were concerned over the negative publicity, and agreed to intensify their countries' cooperation to bolster any challenges over the use of palm oil. There have been public campaigns in Europe over the unsustainability of palm oil plantations and the alleged health risks. Succumbing to pressure, some major European retailers now label products that contain palm oil.

The European Commission adopted a proposal in January 2018 that will gradually limit and eventually phase out biofuel imports into the bloc by 2030. The regulation also suggests that palm oil cultivation contributes to deforestation, greenhouse gas emissions and "indirect land-use change" and classifies it as a "high-risk" activity.

The EU is the second-largest buyer of palm oil from both countries after India. Europe currently consumes 7.5 million tons of palm oil a year -- about 10% to 15% of global demand.

Palm oil is a major ingredient in a wide range of products, from food to cosmetics, but it has long been controversial. Environmentalists say it drives deforestation, with huge swathes of rainforests logged in recent decades in order to make way for plantations.

Its use in food and cosmetics has already been dropped by major companies in Europe, partly due to pressure from green groups, but has been increasing in biofuels.

In retaliation for the EU's move to eliminate palm oil-based biofuels, Mahathir has proposed a boycott against the EU, which would include a multibillion-dollar fighter jet deal with a European manufacturer placed on hold. In March, Mahathir said Malaysia could look elsewhere to upgrade its aging air force fleet of Russian MiG-29 fighters -- in effect abandoning plans to purchase France's Rafale jet or the Eurofighter Typhoon, as shortlisted by the previous government.

When asked about the state of the boycott, Mahathir noted that there has been a slight improvement in sentiment among Europeans over palm oil, thanks to various promotional activities conducted by Malaysian palm oil agencies.

"There have been some responses towards our campaigns. If these responses materialize and increase the awareness for the need for Europeans not to discriminate palm oil, this idea of boycott will not be carried out," he said.

To alleviate concerns over sustainability and deforestation in palm oil plantations, Malaysia has embarked on the Malaysian Sustainable Palm Oil, or MSPO, certification program, emulating the Roundtable on Sustainable Palm Oil, which is widely recognized and accepted in Europe and other Western countries.

The government has achieved only 42% of its target to certify all palm oil plantations in the country with MSPO by year-end, in part because of the lack of knowledge among small independent growers and costs. The government is running a campaign to absorb certification costs for the farmers to encourage them to come forward.

Mahathir said it would be an arduous task to meet 100% of the certification target in the next four months. "We still have 58% to go, and the time by year-end is limited. We might not achieve 100%, but we will try very hard," he said. "The MSPO is about adhering to best practices in regards to the environment and preservation of the forest. When we do this, the intention is we would not cause more of our forest to be cut down and disturb the habitats."

Meanwhile, in an opinion column published on Bloomberg's website on Monday, Mahathir called on Britain to engage with palm oil growers to encourage sustainable production, rather than pursuing boycotts after its scheduled exit from the EU.

"A fresh attitude toward palm oil, unencumbered by influential special-interest groups, could lead to even better trade terms between the U.K. and the [Southeast Asian] region than it currently enjoys," Mahathir wrote. "We hope to avoid a trade war with Europe," he said. "But if one transpires, that doesn't mean the U.K. has to get caught in the crossfire."

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