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Washington DC, July 26, 2010
– IFC and the World Bank released
a draft framework for engagement in the palm oil sector
, detailing an approach that aligns with the World Bank Group mission to fight poverty without compromising economic, environmental or social sustainability, and inviting further public comment.
Sustainable palm oil production offers significant development benefits in many developing countries. Yet the sector has been associated with negative environmental and social impacts, including deforestation, biodiversity loss, greenhouse gas emissions, land use conflicts, and questions over land tenure and human rights.
The World Bank Group, in partnership with other stakeholders, can play a strong role in bringing about positive change at the national and industry levels, with the goal of deepening development impacts, encouraging sustainable practices and limiting further deforestation. The draft framework articulates specific actions the World Bank Group proposes to take to fulfill this role.
The development of the draft framework was guided by the input of industry, governments, civil society organizations, banks, small farmers, indigenous communities, and researchers in a series of global consultations on the sector’s key sustainability issues. These initial consultations took place in Accra, Amsterdam, Jakarta, Medan, Pontianak, San Jose, and Washington, D.C. between April 23 and June 4, 2010. Four key themes emerged from the consultations: policy and regulatory environment; responsible private sector investments; benefit sharing with small farmers and communities; and sustainability codes of practice. These themes underpin the World Bank Group’s proposed future engagement in the sector.
The release of the draft framework for further public comment is part of the World Bank Group’s commitment to develop a common approach to its engagement in the palm oil sector in consultation with multiple stakeholders. The consultation round on the draft framework starts in late July and runs through September 1, 2010. It includes moderated electronic discussions and a multi-stakeholder meeting in Frankfurt, Germany. The World Bank Group has temporary suspended its new investments in the palm oil sector until it finalizes its common approach in the sector. For further information, please visit:
www.ifc.org/palmoilstrategy.
About the World Bank Group
The World Bank Group is one of the world’s largest sources of funding and knowledge for developing countries. It comprises five closely associated institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a distinct role in the mission to fight poverty and improve living standards for people in the developing world. For more information, please visit
www.worldbank.org
,
www.miga.org
, and
www.ifc.org
.
Facts about Palm Oil
Uses of Palm Oil
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Palm oil in its various forms has become the leading vegetable oil produced globally, accounting for one quarter of global consumption and nearly 60 percent of international trade in vegetable oils.
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Over 85 percent of global palm oil production is used for cooking oil and in processed foods.
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Over 70 percent of global palm oil production is consumed in Asia as staple cooking oil.
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Palm oil is used in soaps, detergents, cosmetics, oleo chemicals, and—more recently—as a feedstock for the production of biodiesel.
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50 percent of all goods found on supermarket shelves contain palm oil as an ingredient.
Production and Consumption of Palm Oil
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Palm oil is cultivated commercially on about 12 million ha in the humid tropics.
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Major producers are Malaysia and Indonesia, which produce 85 percent of global output.
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Smaller but significant producers include Nigeria, Colombia, Costa Rica, Ecuador, Honduras, Cote d’Ivoire, Ghana, Cameroon, Papua New Guinea, and Thailand.
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Major importers include China, EU, India, and Pakistan.
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Currently, about 4 percent of global palm oil supply has achieved sustainable certification by the multi-stakeholder Roundtable on Sustainable Palm Oil.
Development Benefits of Palm Oil
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The sector directly employs nearly 3 million people in Indonesia and approximately 6 million worldwide.
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Small farmers manage about 40 percent of Southeast Asia’s palm oil area in and 80 percent of Africa’s palm oil regions.
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Palm oil is an important source of export and tax revenues: In Indonesia it generated $7.9 billion in exports in 2007, accounting for 13 percent of agricultural output. Palm oil exports in Malaysia accounted for $19.6 billion in 2008.
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Palm oil is a high yield crop. Well managed plantations can yield 10 times the oil per hectare of other oil crops, such as soy.
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Palm oil is generally 30 percent cheaper than alternative vegetable oils.
Sustainability Challenges
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The process of land acquisition for large-scale oil palm development can generate negative impacts on communities including small farmers and indigenous groups, particularly when land titles are unclear or unrecognized.
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Conflict from unclear or overlapping land claims has been widely reported in Indonesia and to some extent in Colombia.
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About 70 percent (4.2 million ha) of Indonesia’s palm oil plantations are on land that was at one time forested; more than 56 percent of the expansion between 1990 and 2005 occurred at the expense of natural forest cover.
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Some 12 percent of Indonesia’s land area (21 million ha) is classified as peat land. It is estimated that approximately 25 percent of palm oil production was established on peat of varying depths. Development of palm oil on deep peat land causes high levels of carbon emissions and irreversible damage to fragile ecosystems.
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There is a significant yield gap between producers, ranging from 7 tons per ha to less than half a ton.
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