Indonesia's Palm Oil Industry Rife With Human-Rights Abuses

Photograph by Kumal Jufri

By E. Benjamin Skinner
“What kind of oil should we buy?” Luo Xiaohua shouts to her cousin from the cooking oil aisle in Yonghui Supermarket in the heart of Chongqing, a rising Chinese megacity. Luo, 50, is the quintessential Chinese shopper. She earns $3,250 a year and has an elementary education. She’s fiercely opinionated about her purchases.

Luo stands before amber-hued bottles loaded with a commodity that fuels China’s and India’s growing consumer classes. “From what I understand, all of these brands contain palm oil,” she says. “But they just don’t say it on the label.” She says she’d prefer to use olive oil but can’t afford it. “Corporations have the power in this country, and consumers have to make decisions based on limited options.”

Palm oil and its derivatives are found in thousands of products worldwide, from doughnuts to soap, lipstick to biodiesel. Globally, palm oil consumption has quintupled since 1990. Demand in Asia, where palm oil is widely used in cooking oil and noodles, has driven the growth of a $44 billion industry. In February, exports from Indonesia, the world’s largest producer of palm oil, hit a five-year high.

Shoppers such as Luo are at the heart of that boom. China is the world’s largest consumer of vegetable oil, of which palm oil is the world’s most-produced variety. Since the late 1970s, as the Chinese shifted away from traditional staples such as rice and grains and toward a higher-fat diet, palm oil imports have grown 150-fold.



As it’s grown, the palm oil industry has drawn scrutiny from environmental activists in Europe and the U.S. They decry the destruction of rainforests in Indonesia and Malaysia to support oil palm expansion, which threatens the natural habitats of endangered species such as pygmy elephants and Sumatran tigers. The human costs of the palm oil boom, however, have been largely overlooked. A nine-month investigation of the industry, including interviews with workers at or near 12 plantations on Borneo and Sumatra—two islands that hold 96 percent of Indonesia’s palm oil operations—revealed widespread abuses of basic human rights. Among the estimated 3.7 million workers in the industry are thousands of child laborers and workers who face dangerous and abusive conditions. Debt bondage is common, and traffickers who prey on victims face few, if any, sanctions from business or government officials.

The U.S. government has highlighted the prevalence of human-rights abuses in the palm oil trade: A 2012 U.S. Department of Labor report found that among the industries most notorious for forced and child labor were apparel, seafood, gold, and palm oil. But because palm oil companies face little pressure from consumers to change, they continue to rely on largely unregulated contractors, who often use unscrupulous practices. The impact of any reform efforts will be limited unless the new consumer giants—China and India, which account for more than a third of global palm oil imports—are brought into the debate. “We have a Western-facing strategy on an Eastern-facing problem,” says Dave McLaughlin, who oversees agriculture issues for the World Wildlife Fund.

Among the world’s most significant palm oil suppliers is Kuala Lumpur Kepong, a 107-year-old Malaysian corporation. KLK, with revenue in 2012 of $3.2 billion, is by area the world’s fifth-largest palm oil plantation company. Its principal shareholder, a holding company called Batu Kawan, is controlled by KLK’s chief executive and his brother, both among Malaysia’s richest citizens.

In labor-intensive cycles repeated across most of its 73 plantation estates, KLK relies on contractors who in turn enlist thousands of low-wage workers. Those workers first prepare land for the palm groves. After three years, they manually harvest the palm bunches, which can each weigh up to 55 pounds and yield 3,000 fruitlets. Within 48 hours of harvest, trucks carry those bunches, which last year amounted to 3.3 million metric tons, to KLK’s nearby mills. From there, crude palm oil is shipped for further processing at two KLK-owned oleochemical plants in Shanghai and Zhangjiagang, China, or elsewhere, before the refined palm oil or derivatives are sold into the commodity and consumer markets.

Interviews with former workers as well as statements recorded by local nongovernmental organizations reveal a tragic underside of KLK’s supply chain. These workers tell of being defrauded, abused, and held captive by representatives of a labor management firm called CV Sinar Kalimantan. Their claims of fraud are substantiated by affiliates of the contractors, as well as by the labor contracts themselves, copies of which were obtained by Bloomberg Businessweek.

http://www.businessweek.com/articles/2013-07-18/indonesias-palm-oil-industry-rife-with-human-rights-abuses