17 February 2020 (closed)
USD/IDR (13,777) +42.00 +0.31%
EUR/IDR (14,865) +32.28 +0.22%
Jakarta Composite Index (5,867.52) +0.58 +0.01%
In local media in Indonesia it is reported that the Indonesian government, in this case the Trade Ministry of Indonesia, claims that Norway is on the brink of provoking a trade war against Indonesia. Indonesian Trade Minister Enggartiasto Lukita threatens Norway with retaliation if the Norwegian government goes ahead with parliament's vote to ban the public procurement and use of palm oil-based biofuel.
Back in June 2017, a majority in Norwegian parliament voted to ban domestic use of palm oil-based biodiesel in a bid to protect the climate and rain-forests. Instead, parliament urges the government of Norway to seek environmentally friendly alternatives to fossil fuels. This urge came after a report, released by Rainforest Foundation Norway, showed that palm oil-based biofuel is actually worse for the global climate than the use of fossil fuels, perhaps even several times worse.
One year earlier, Norway pledged that the government's public procurement policy would become fully deforestation-free to ensure that the nation does not contribute to deforestation.
Meanwhile, for Indonesia the crude palm oil industry and biodiesel industry are key foreign exchange earners. Both industries provide employment opportunities to millions of Indonesians who live not far from the poverty line. Hence, if palm oil or biodiesel shipments from Indonesia decline, it will have a negative effect on the country's and people's earnings.
The government of Norway is yet to agree on parliament's request to ban the public procurement and use of palm oil-based biofuel. However, Indonesian Trade Minister Lukita already threatened to block fish imports from Norway if the latter approves the ban. Lukita has already met Vegard Kaale, Ambassador of Norway to Indonesia, to request clarification on the Norwegian government's stance on the ban. In this meeting Lukita also emphasized the importance of fair and free trade. Currently, however, biodiesel shipments from Indonesia to Norway have not been affected.
Based on data from Indonesia's Trade Ministry, imports from Norway have been on the decline since 2012. In 2017 Indonesia only imported USD $136 million worth of Norwegian products, gradually declining from USD $234 million in 2012. Meanwhile, Norway is not ranked within the top 50 export destinations of Indonesia. Hence, it may seem like a storm in a teacup. However, the Indonesian government is always concerned that new anti-palm oil policies in foreign countries, especially in the West, will encourage other western countries to follow suit.