Reading into palms: a bleak future 

  • Can local industries survive the oil palm ban?


The Sinhala and Tamil New Year is just around the corner, and Sri Lankans are getting ready to celebrate the occasion after two years. The 2019 New Year was a dull affair, due to the Covid-19 pandemic and the related travel restrictions that prevented any gatherings. This year’s celebrations too will have to adhere to safety guidelines, limiting festivities to family gatherings and simple New Year meals.

However, ahead of this New Year, citizens had to come to terms with a different health crisis – it was reported that Sri Lanka had imported coconut oil containing carcinogenic substances known as aflatoxins. Even though authorities have confirmed that aflatoxins are not contained in the coconut oil currently available in the market, people seem reluctant in accepting that assurance, mainly due to certain statements made by the authorities tasked with ensuring standards of food items. 

However, in a context where a large number of food items for the New Year are made using coconut oil, the people have no choice but to purchase whatever is available in the market.

In that backdrop, another instance of oil-related news was announced recently – President Gotabaya Rajapaksa last week announced that the decision has been taken to ban the import of palm oil with effect from last Monday (5), and that the cultivation of oil palm would also be replaced with various eco-friendly crops such as rubber, while oil palm crops would be uprooted at the rate of 10% at a time.

The Government also said that this decision was made taking into account the fact that the consumption of crude palm oil has adverse effects on the public’s health, and that medical experts and dieticians have pointed out that the consumption of food processed using crude palm oil is a major cause for health issues. It was also stated, however, that standard palm oil varieties used in the production of biscuits, confectioneries, and some bakery products, would not be prohibited for the time being, and that controlled importation would be allowed for such purposes.

The President’s Media Division (PMD) said that research has revealed that oil palm cultivation can lead to long-term adverse environmental effects, such as depletion of water resources and soil infertility, and that therefore, about six months ago, the President had instructed that the cultivation of oil palm trees be halted.

Also, the Import and Export Control Department Controller General had been instructed by Secretary to the President P.B. Jayasundera to issue the relevant gazette notification in this regard. In addition, the Customs Director General had been instructed to refrain from clearing palm oil containers at the Department of Customs.

The Morning tried to look into what would be the next course of action by the authorities, as well as those engaged in industries that depend largely on palm oil imports and oil palm cultivation, in light of the Government’s decision.


Palm oil use in bakery products, confectionaries

Following the ban, those engaged in the bakery and confectionary industries expressed concerns, saying that palm oil was an essential ingredient required to make certain bakery products and confectionaries. They said that the Government’s decision would lead to the collapse of the industries.

Although The Morning tried to contact the All Ceylon Bakery Owners’ Association (ACBOA) and Lanka Confectionery Manufacturers’ Association (LCMA), which represent Sri Lanka’s bakery and confessionary industries, they were unavailable for comment.

However, ACBOA President, N.K. Jayawardena, told The Morning last week that the daily consumption of palm oil in Sri Lanka is around 550 metric tonnes (MTs), which includes palm oil used for bakery products as well as biscuits. Also, he noted that while palm oil is directly used to make bakery products in some cases, certain bakery products are made from margarine – and palm oil is the main ingredient used in making margarine in the country.

He also raised concerns about the practicality of using coconut oil to manufacture margarine, in a context where the country does not produce adequate coconut oil even for people’s daily consumption. He also noted that even though the ACBOA does not oppose the President’s decision, the Government should have thought about an alternative solution before imposing the ban.

Earlier, the ACBOC had requested the Government to grant a tax relief for palm oil. They had said that a MT of palm oil, which cost around $ 450 in July 2020, now costs around $ 1,050, which is an increase of 150%.

Furthermore, speaking to The Morning last week, LCMA Chairman S.M.D. Suriyakumara said that the confectionary industry would also face a very difficult time due to the said ban, and requested the Government to issue licenses to import the palm oil required to continue their production activities. He said that the ban would start affecting the confectionary industry very soon, as they had stocks to last only a couple of days.

Also, he warned that the industry would not be able to meet the demand for the Sinhala and Tamil New Year season. According to Suriyakumara, the entire industry requires about 2,500 MTs of palm oil a month, and the import ban would also negatively affect the export of confectionaries.

In addition, he said that the confectionary industry is in step with the health concerns pertaining to the use of palm oil, and that it only uses palm oil that meets the standards set by the Sri Lanka Standards Institute (SLSI). In a context where the exportation of confectionaries is also a relevant factor, Suriyakumara said that palm oil is essential to ensure that their products meet the said standards.

Adding that the confectionary industry has been trying to use coconut oil as a substitute for months in collaboration with the Coconut Development Board and the Coconut Research Institute, he added that more research needs to be done to use coconut oil as a suitable substitute. However, coconut oil cannot currently be used to manufacture products like chocolates, while the industry is also challenged by the inadequate supply and high price of coconut oil.

Addressing Parliament on Wednesday (7), Minister of Trade Bandula Gunawardana said that the confectionary and bakery industries would not have cause to shut down, as they would be issued with a special licence to import the necessary stocks of palm oil. However, speaking to The Morning on Monday (11), Suriyakumara said that the Government’s proposal to provide the industry with a licence to import the palm oil required has not been finalised yet.

“Up to now, the proposal to permit us a palm oil import quota needed for the industry has not been finalised. We have been asked to submit a proposal with our suggestions and recommendations to the Treasury Secretary, which we will be handing over to the Ministry of Finance with the All Ceylon Bakery Owners’ Association (ACBOA),” he had said.

When asked about the proposals, Suriyakumara said that they would be made public only after being handed over to the Ministry.

Issuing a statement on Thursday (8), the President’s Media Division (PMD) stated that standard palm oil varieties are used in the production of biscuits, confectioneries, and some bakery products.

“The variant-bearing harmonised system (HS) code 1511.90.10 is an example. It is commonly known as palm stearin. There is no prohibition to the importation of this variety for use in the production of relevant food items,” the statement said.

However, Suriyakumara said that palm stearin is only used in the production of margarine and soaps in small quantities.

“This has been a miscommunication; that palm stearin is used in the production of confectionaries. We have clarified this,” he said.

The confectionary industry uses palm olein, a refined product of crude palm oil that is also affected by the present ban, Suriyakumara explained, adding that palm olein is directly imported in that state as the industry is not in possession of the technology to import crude palm oil and refine it inside the country. The confectionary industry requires about 2,500 MTs of palm oil per month.

However, expressing contradictory opinions, All Ceylon Traditional Coconut Oil Producers’ Association (ACTCOPA) Chief Convener Buddhika de Silva said that bakery products were manufactured without an issue before Sri Lanka began importing palm oil.

Speaking further, de Silva told The Morning: “It is not consumers who oppose the ban on palm oil imports, but the businessmen, because they lose profit. Before the 1980s, almost all products for which palm oil is being used existed in Sri Lanka, but palm oil was not used. Even though diseases caused by consumption of food made using palm oil were less before, after the 1985-1986 era, such diseases became more prevalent. We can use coconut oil instead of palm oil.”

He alleged that food manufacturers claim that they cannot manufacture certain food items without palm oil because of the huge profits they make through using palm oil. He noted that using palm oil (for manufacture of food) is cheaper than using coconut oil, and that therefore, businessmen can rake in a huge profit. “The claim that palm oil is necessary to make certain food items is essentially a profit-driven claim,” he added.


Palm oil in the market

Speaking further, de Silva said that traditional coconut oil producers would not sell coconut oil to wholesalers that sell palm oil, mainly due to the likelihood of pure coconut oil being spoiled due to the manner these wholesalers store and handle coconut oil.

“Due to the manner they store and handle coconut oil, by the time it reaches the consumers, it is spoiled and not very different from palm oil. Therefore, unless they assure that coconut oil will not be mixed with other substances, and will be stored and handled in a way that protects its quality, traditional coconut oil producers will not issue them coconut oil.”

He added that imposing a ban on palm oil, or regulations on oil palm cultivations, is inadequate, as palm oil is an ingredient used in a large number of products; and said that a social discourse should also be initiated in line with the ban, to raise awareness.

He added: “Palm oil is being used to manufacture a large number of food and non-food items, and these products are a threat. How it is advertised is also an issue. When the people want to buy vegetable oil, due to misleading promotional tactics, they end up buying palm oil, or an oil mix that contains palm oil. Even though the labels on these oil bottles mention that it consists of palm oil, these labels are usually in very small fonts, rendering the consumers unable to read it. Due to such unfair tactics, people are easily misused.”


Implementation of import ban, cultivation regulations

When contacted by The Morning on Saturday (11) to get more information as to how the ban would be implemented, Ministry of Plantation Secretary Ravindra Hewavitharana said that the Ministry, in collaboration with the relevant institutions, is looking into the practical and legal aspects of it.  

He explained that the various institutions involved in the implementation of the ban and related regulations have been instructed to look into their individual roles and responsibilities in this connection. After taking into consideration the roles and responsibilities of each institution, the exact nature of the future course of action would be determined, according to Hewavitharana.

Even though this process is still in the planning phase, he noted that Sri Lanka has now adopted a national policy to stop the importation of palm oil and implement the regulations imposed on oil palm cultivation. 

Although The Morning attempted to contact palm oil cultivators to obtain information as to what would be their future actions following the regulations imposed by the Government, they were unavailable for comment.


Palm oil in the world

Palm oil is made from the fruits of the oil palm tree, which grows in tropical environments. At present, Indonesia and Malaysia are the two biggest palm oil producers and exporters in the world, and they produce close to 85% of the world’s palm oil supply. By 2022, the global market is expected to more than double in value to $ 88 billion, according to some researchers.

However, many countries/regions including the EU have considered banning the importation of palm oil, mainly due to the environmental destruction, mainly tropical deforestation, caused by the cultivation of palm oil. The world’s largest palm oil trader signed a 100% zero-deforestation agreement in 2013, and due to public opposition, the EU changed its labelling laws in 2014, making it easier to spot palm oil on ingredient lists.

According to the World Wide Fund for Nature (WWF), palm oil is in nearly everything, and is in close to 50% of the packaged products found in supermarkets, from pizza, doughnuts, and chocolate, to deodorant, shampoo, toothpaste, and lipstick. It is also used in animal feed and as a biofuel in many parts of the world.

In addition to health issues caused by consumption of palm oil, a number of other reasons have led countries around the world to ban and/or regulate cultivation of oil palm. Among these reasons are deforestation, destruction of the habitats of animals and native communities, damage caused to biodiversity, climate change, imbalance of ecosystems, and the unfavourable conditions under which labourers work.  

The cultivation of oil palm also comes with several advantages, such as its high yields, high profits, job creation for unskilled workers, and energy generation through biofuel production. Additionally, according to some international researchers, banning palm oil would create increased demand for other types of oil, especially vegetable oil, and consequently, their production would also have to be increased. This, however, would require more land than oil palm requires, as oil palm produces three to four times more oil per hectare than any other oil crop.

According to the University of Goettingen’s Professor of Agricultural Economics and Rural Development Matin Qaim, this means that replacing palm oil with other vegetable oil would not decrease, but instead increase, the land used to cultivate oil crops. In this context, he says that a ban would not improve sustainability – neither from an environmental nor from a socioeconomic perspective – but improved sustainability policies are required to decrease the size of lands needed by increasing the yields per hectare, among others. 

Getting rid of harmful food items is an admirable act, especially when consumers’ right to safe and clean food has been challenged in the existing market environment. However, practical aspects, especially the need of alternative solutions when banning a product and an industry, should also receive adequate attention.

Also, a mere ban is not sufficient to save the people from harmful substances, especially when it comes to palm oil, which is in a large number of food and non-food items. Raising awareness should also be part of these efforts.