Friday, October 8, 2010

Palm Oil Policy on Slippery Slope

When governments and international institutions make policy on where spending will be directed, they must take a number of factors into account. Sometimes these factors conflict to the detriment of one policy goal or another. Such is the case with the World Bank’s investment policies affecting palm oil production. Health and environmental issues clash with poverty reduction strategies. In this case, Africa stands to lose because of the perceived sins of others.

World Bank officials created in 1991 a strategy to reduce deforestation in developing countries. This policy has been unable thus far to achieve balance between alleviating poverty and facilitating environmental stability. Environmental activists have long noted environmental problems and biodiversity losses due to the palm oil business in Indonesia and Malaysia, the top two global producers of palm oil. Together, they produce 83% of global palm oil supplies.

Oil palms are an industrial plantation crop in Indonesia and Malaysia and are often grown on cleared rainforest land or in peat-swamp forests. Over the past four decades, the area planted with oil pal in Indonesia alone has expanded more than thirty-fold. In Malaysia, this area has grown twelve-fold. Moreover, Both countries have seen their lists of endangered animals balloon. In Indonesia, of the more than 400 land mammal species, 15 are critically endangered and another 125 are threatened. In Malaysia, of the nearly 300 land mammal species, six are endangered and 41 are threatened.

In the case of Africa, it has not been shown that environmental degradation due to palm tree cultivation is such a threat. Nevertheless, a global shift in palm oil policy would impact Africa as much as any country growing palm trees for palm oil trade. The World Bank is the largest single donor to sub-Saharan Africa’s agriculture sector, providing US$1 billion in assistance this year. With at least two-thirds of African engaged in the agriculture sector, any product abandonment could be disastrous at a time when African countries are struggling to weather the global downturn that has hit commodities particularly hard.

Several African countries currently produce palm oil on a commercial scale. Nigeria is the largest African producer of palm oil and the world’s third leading palm oil producer behind only Indonesia and Malaysia. Even so, Nigeria is still a net importer of palm oil, which is a common cooking ingredient in much of tropical Africa.

Early on in the colonial era, palm oil was considered of lower quality than olive oil, which was available from European sources. Consequently, its use remained largely confined to West Africa. However, the Industrial Revolution led British traders to seek out palm oil as an industrial lubricant. Palm oil later came to be used as an ingredient in soap, such as Unilever’s “Sunlight Soap” and American brand Palmolive soaps.

As one of the few highly saturated vegetable fats, palm oil has increasingly been used in food products outside Africa, including not only cooking oil, but also mayonnaise and salad oil. That attractive color in your French fries likely is due to the use of palm oil. The debate about its health implications is pretty much a wash.

A 2009 study at Universiti Sains Malaysia indicated that of all vegetable oils, palm oil is “a healthy source of edible oil.” The World Health Organization and other health groups have alleged that palm oil contributes to an increased risk of developing cardiovascular disease, but a joint University of California-NestlĂ© Research Center study concludes that research on how specific saturated fats contribute to coronary artery disease is inconclusive.

Palm oil has been found to have the lowest production cost of the major oils. It is estimated that by 2050, the global demand for edible oils will be about 240 million tons – nearly twice the 2008 level of consumption. Palm oil has the added benefit of being useful in the creation of biodiesel fuel. Heightened production of palm oil in Africa could satisfy both food and fuel demands.

Thus, the benefit of palm oil as a job producer in Africa is enormous.
Unfortunately, at a time when African countries, such as Uganda and Liberia, are expanding cultivation of palm trees for palm oil production, support for such projects may dry up (so to speak) due to decisions made for reasons not fully borne out by the facts. In Benin, the non-governmental organization Nature Tropicale continues to make the claim that biofuels will compete with food production and contribute to drainage problems in sensitive lands without convincing proof of either allegation. Programs such as Sierra Leone’s use of palm oil profits to finance Magbenteh Hospital in Makeni are ignored or downplayed.

The Institute for Public Policy Analysis (IPPA), a Nigerian think tank, has done a report calling on the World Bank to come down on the side of increased African palm oil production for both food production and job creation. IPPA organized a letter to World Bank President Robert Zoellick urging the Bank not to abandon support for palm oil production.

“We believe the surest way to cut poverty and protect our natural environment is by raising living standards and creating economic prosperity in poor countries. By cutting off much needed funding for palm oil producers, the World Bank threatens to generate poverty and economic dependency, instead of reducing it, a strategy that goes against the very ideals of the institution,” the letter states.

One hopes the Bank will listen to reasoned appeals from the continent and make the distinction between documented problems in Asian palm oil production and mere speculation about what increased African palm oil production could cause. Reality should trump possibilities for the sake of African people and global consumers.

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