Indonesia concerned EU’s new deforestation rules will hurt millions of smallholders

The European Union's Deforestation Regulation will impact Indonesia significantly. Dr Musdalifah Machmud is former Indonesian Deputy Minister at the Coordinating Ministry for the Economy, and currently serves as Expert Staff for Connectivity, Service Development, and Natural Resources. She spoke with Euractiv about her concerns.

What are the main concerns of Indonesian businesses regarding the EUDR?

Musdalifah Machmud: With less than three months before the EUDR’s entry into force, businesses in Indonesia and the EU are increasingly worried. Some EU operators are pushing their Indonesian counterparts to provide geolocation coordinates ahead of schedule, despite the lack of clear guidelines.

For Indonesia, the unclear technical aspects mean the actual compliance timeframe is much shorter than the original 18-month period. We continue to stress that the EUDR is a unilateral trade measure framed, disguised as environmental policy.

Indonesia has made significant progress in reducing deforestation over the past decade. Can you elaborate on the policies or initiatives that have contributed to these reductions?

Musdalifah Machmud: Indonesia’s deforestation rates hit a record low in 2022, validated by our Ministry of Environment and Forests, the UN FAO, and Global Forest Watch. This success is due to two key iniatives: the 2011 forest moratorium, which protects primary forests and peatlands through policy reforms, and the 2018 palm oil moratorium, which bans new permits for plantations on state and peatlands.

Initially temporary, both have been extended multiple times, with the forest moratorium now an indefinite policy under President Joko Widodo, reflecting its critical role in our environmental strategy.

The EUDR has faced criticism for potentially excluding smallholders from supply chains due to its compliance requirements. How do you see this affecting Indonesia’s 2.6 million smallholders in the palm oil sector?

Musdalifah Machmud: It’s not just palm smallholders at risk—Indonesia has 8 million smallholders across palm, cocoa, coffee, and rubber, and timber. A recent study found that around 97.5% of Indonesia’s palm smallholders—over 2.5 million people—cannot meet the EUDR’s documentation requirements.

Many already comply with zero-deforestation and legality standards, but face challenges in proving it due to resource constraints and the complexity of the supply chain, where compliance must be documented at every stage.

An exporter estimates six million data points are needed per shipment. This complexity leads large exporters to exclude smallholders, a trend we’re already seeing across multiple commodities. This isn’t the outcome the EU intended with the regulation.

Indonesia’s national palm oil certification scheme, ISPO, is the largest in the world. How can the EU better recognize or collaborate with such national schemes under the EUDR?

Musdalifah Machmud: ISPO is just one part of our palm oil sustainability strategy. We’ve also developed a National Dashboard to provide importers with accessible geolocation and other data on smallholder farmers.

We want the EU to support and build on these existing systems, rather than creating new ones. The Dashboard addresses privacy law constraints, as Indonesian regulations prevent sharing geolocation data without mutual consent.

However, the EU hasn’t recognized it as a solution for data ownership issues and still requires all geolocation data to be handed over to authorities. This means farmers would have to break Indonesian law to comply with EU regulations—an impasse that could have been avoided with better consultation.

What are Indonesia’s key demands or suggestions for improving the EUDR to make it more workable for countries like Indonesia, especially regarding deforestation benchmarking and certification standards?

Musdalifah Machmud: We’ve identified five areas needing adjustment. First, the cost and timeline of imposing strict trade requirements on over 8 million smallholders (palm oil, cocoa, coffee, and rubber). We urge the EU to review its approach to ensure smallholder inclusivity.

Second, the EU should recognize improvements in our certification schemes, such as ISPO and SVLK, instead of pushing for changes that disregard endorsements from the FAO and UNFCCC.

Third, we’re concerned by the EU’s unilateral development of a global forest map without consulting producing countries. We support ongoing technical discussions and stress the need for on-site verification.

Fourth, it’s crucial we maintain control over our data. The EU should collaborate on a due diligence system that integrates with Indonesia’s National Dashboard.

Finally, we need clarity on the roadmap post-Ad Hoc Joint Task Force, to prevent confusion for traders and operators and ensure a stable environment for global value chains.

Fifth, we ask what the roadmap ahead to be done after this Ad Hoc Joint Task Force concludes? We should not let our traders and operators leave in confusion. At some point, government has to provide an enabling and resilient environment for global value chains.

In light of concerns from countries like Brazil, Nigeria, and Malaysia, do you believe the EUDR needs a global consultative process? How could Indonesia contribute to shaping this dialogue?

Musdalifah Machmud: It's not just non-EU countries objecting - 45 countries have raised concerns, and even EU Member States are considering a delay and review of the regulations. We urge Commissioner nominee Jessika Roswall to evaluate whether the rules are fit for purpose or need to be streamlined.

If a review happens, there must be meaningful consultations with the EU’s trading partners, going beyond outreach to truly understand supply chains and the impact of these regulations. The widespread objections suggest a clear gap in the initial drafting and consultation process.

[By Nicole Verbeeck I Edited by Brian Maguire | Euractiv's Advocacy Lab ]