Case Studies

Indonesian palm oil is a significant import for the US (with 2022 imports of palm oil being valued at $1.9 billion) and is used in various U.S industries from food production to cosmetics. Indonesia has been identified as the largest source of deforestation exposure for US imports for the period October 2021 to November 2023, with oil palm accounting for 96.7% of this exposure. This exposure is linked to the fact that the expansion of palm oil plantations in Indonesia to meet global demand has led to massive forest loss, as forest areas are cleared to make way for production. 

US palm oil imports are inextricably linked to the palm oil industry in Indonesia, which is characterised by widespread corruption and bribery, and there is a general lack of transparency in palm oil companies’ political activities and how they can interfere with government policies. Notably, high-profile cases such as that of palm oil tycoon Darmadi highlight how corruption facilitates illegal land conversion and deforestation. Damardi was sentenced to 15 years in prison for bribing officials to convert protected forests into palm oil plantations, resulting in substantial environmental damage. 

The production of palm oil in Indonesia is also associated with exploitative labour conditions and human rights abuses. Workers on plantations often endure poor working conditions, low wages, and lack of job security. Indigenous communities, such as the Ibans and Orang Rimbas,  face land dispossession and livelihood disruptions due to the expansion of palm oil plantations.  

 
Keywords: South East Asia & Pacific, Indonesia, palm oil, trade and transport, corruption and bribery, illegal deforestation

Sources: https://www.dol.gov/sites/dolgov/files/ILAB/images/storyboards/palm-oil/Palm-Oil.pdf  

https://www.aljazeera.com/economy/2023/2/24/indonesias-palm-oil-tycoon-darmadi-gets-15-years-for-corruption  

https://news.mongabay.com/2024/02/palm-oil-deforestation-makes-comeback-in-indonesia-after-decade-long-slump/  

An investigation by the Associated Press revealed that human rights abuses, including slavery and rape, as well as child labour are prevalent in Malaysia’s palm oil industry. The investigation documents widespread labour abuses, including forced labour, debt bondage, child labour and sexual harassment. Workers live in poor conditions and work long hours for minimal pay. Human rights violations also include physical violence and lack of medical care. In the face of such abuses, workers are unable to escape their situation of exploitation since they are hired on a day-to-day basis by subcontractors, and their passports are confiscated. In addition, women face sexual harassment and rape, with some cases involving minors. The Associated Press documents the case of a 16-year-old girl who was raped by her boss and threatened with an axe. Women perform the most difficult jobs, working in hazardous conditions and carrying heavy loads. This can cause long-term health issues, including collapsed wombs and miscarriages, that are left untreated. Major Western banks, financial institutions and brands have been linked to these abusive supply chains.  

Keywords: South East Asia & Pacific, Malaysia, palm oil, primary production, human rights violations, labour rights violations

Sources:  https://www.aljazeera.com/news/2020/11/18/rape-abuses-in-palm-oil-fields-linked-to-top-cosmetic-brands-ap 

https://globalnews.ca/news/7355279/palm-oil-forced-labour-top-brands-banks/ 

According to the Star, the government of the Malaysian state of Sabah is pursuing taxes owed by companies involved in the evasion of the crude palm oil sales tax. In collaboration with the Malaysian Anti-Corruption Commission (MACC), the government has introduced a voluntary scheme allowing companies to pay their taxes by the end of 2023 without penalty. One notable case of tax evasion involved a former public servant arrested in May 2022 for allegedly evading millions of ringgit in crude palm oil sales tax. The suspect was detained following the arrests of two state government officials. These officials were implicated in receiving RM700,000 (approximately US$154,000) in bribes from a palm oil mill in Lahad Datu. The bribes were reportedly given to overlook the falsification of crude palm oil production quantities, resulting in an estimated tax evasion of RM2 million (approximately US$440,000) per month since 2015.  

Keywords: South East Asia & Pacific, Malaysia, palm oil, primary production, tax evasion, fraudulent documentation, forgery, corruption and bribery

Sources: https://www.thestar.com.my/news/nation/2023/08/18/sabah-working-with-macc-to-claim-sums-owed-in-tax-evasion-cases 

According to a 2024 article by Euractiv, there are significant issues raised by the amount of used cooking oil (UCO) imported by the UK and Ireland from Malaysia. Under EU rules, biofuels made from waste materials, including UCO, can be double counted towards renewable energy targets, which has incentivised producers to label palm oil (which is cheaper) as UCO and to charge more for it. Ireland, in particular, is heavily reliant on biofuels to decarbonise its transport system. The discrepancies between collected and imported UCO has raised concerns of biofuel fraud. Indeed, Malaysia has reported collecting 48-71 kilotonnes of UCO annually, while British and Irish authorities show 151 million litres of UCO imported from Malaysia in 2020. This troubling discrepancy suggests that substances such as palm oil, which are restricted in the EU, might be fraudulently labelled as UCO. Observing such gaps between export and import data, the International Council for Clean Transportation (ICCT) and Farm Europe have indicated potential fraud. To combat this issue, the European Biodiesel Board (EBB) has indicated support for the creation of a biofuels database to improve traceability. Meanwhile, the Irish government has set up a working group to address biofuel sustainability and potential fraud. 

Keywords: South East Asia & Pacific, Malaysia, palm oil, primary production, tax evasion, fraudulent documentation, forgery

Sources:  https://www.euractiv.com/section/fuels/news/discrepancy-in-british-and-irish-used-cooking-oil-imports-raises-biofuel-fraud-concerns/ 

https://www.euractiv.com/section/agriculture-food/news/to-tackle-biofuel-fraud-ireland-takes-matters-into-its-own-hands/ 

According to a report by Mongabay, the illegal expansion of palm oil production in Mexico, particularly in the areas Chiapas, Campeche, Tabasco, and Veracruz, has led to significant deforestation. Between 2014 and 2019, at least 5,400 hectares of forests and jungle were lost due to oil palm cultivation. Now, the plantations are beginning to encroach on protected areas, such as the La Encrucijada Biosphere Reserve. During the 1990s, Mexican state programmes promoted palm oil cultivation, emphasising its superior economic benefits. This has pushed farmers towards the commodity, which has been very profitable for local communities. But now, research indicates that oil palm plantations have replaced not only cattle pastures and agricultural lands but also young forests and high jungle areas. Significant deforestation has been detected in municipalities like Benemérito de las Américas, Marqués de Comillas, Palenque, and Salto de Agua, and has affected critical ecosystems. As major companies begin to expand beyond permit areas, acquisition is becoming increasingly illegal, sometimes carried out without proper authorisation for land-use changes.  

Keywords: Latin America, Mexico, palm oil, primary production, illegal deforestation, illegal production

Sources:  https://news.mongabay.com/2023/06/palm-oil-the-crop-that-cuts-into-southeastern-mexicos-jungles-and-mangroves/