WEST KALIMANTAN/SABAH – Wearing a traditional beaded headwrap adorned with feathers and bells, 77-year-old Dayak Hibun elder Maidin Kundom scattered yellow rice and recited a prayer to protect the forest where his indigenous community lives, and its visitors.

“You must seek permission from nature before clearing the land. The spirits of the forest need to grant their blessings; otherwise, conflicts will arise. When angered, these spirits can bring about destruction – fire, clashes, violence,” he warned.

Elders like Mr Maidin have become highly respected for preserving traditional practices and rituals on Borneo island, a vast, biodiverse paradise shared by Indonesia, Malaysia and Brunei, where indigenous communities have long known how to live off the land while also preserving it.

A three-hour drive from Mr Maidin’s forest is Indonesia’s Engkulong Forest, home to valuable meranti trees and vulnerable sambar deer. It displays a stern warning on a signboard at its entrance: No hunting, no tree cutting, no littering and no harmful activities.

“This forest is our ancestors’ legacy. Let’s preserve it for our children and grandchildren,” reads another banner in the 177ha forest in Sekadau regency, West Kalimantan province.

Armed with machetes, oil palm farmers (below) from the nearby Setawar village have been protecting the forest from hunters and illegal loggers since 2023, as part of a pilot project by the Palm Oil Farmers Union (SPKS), an Indonesian organisation which helps small-scale farmers use more sustainable practices and improve their yields by teaching them new skills and facilitating their access to the resources they need.

Patrol leader Isa Kennedy, emphasising the importance of preserving the forest, said: “If we lose this forest, that spells the end of our home, our identity.”

Another farmer, 43-year-old Seperianus Seka, said his fellow farmers were considering leaving their backyards untouched, even though they have the right to farm this part of the ancestral forest.

“It’s still a forest now. We want to conserve it and not grow oil palm on it, but we also need to earn a living and survive. That’s our dilemma,” he said.

Their dilemma is set to deepen once a new European Union regulation banning palm oil sourced from cleared forests kicks in at the end of the year. This move has been hailed by environmentalists as a significant step to slow climate change and biodiversity loss. But the associated red tape could trip up smallholders in the forests of Indonesia and Malaysia.

Leading global producers and importers of palm oil

Indonesia is the world’s largest producer of palm oil, churning out 47 million tonnes between 2023 and 2024, according to the US Department of Agriculture. The provinces of West Kalimantan, Central Kalimantan and East Kalimantan – all on the island of Borneo – as well as the provinces of Riau and North Sumatra, both on Sumatra island, have the largest oil palm areas in the country.

Malaysia is the second-biggest producer of palm oil in the world, after Indonesia. The two South-east Asian countries account for about 85 per cent of the world’s exports of palm oil, which can be found in everything from cookies and ice cream to lipstick and shampoo.

The EU is a major importer of palm oil, using it primarily for biodiesel production. Under the EU Deforestation Regulation passed on June 29, 2023, and set to kick in on Dec 30, 2024, traders must be able to trace commodities back to the exact farm where they were grown, using precise geographical coordinates, among other requirements. The import of commodities, including palm oil, is also restricted if they come from land deforested after Dec 31, 2020.

Indonesia and Malaysia have criticised the EU policy, calling it harmful to small farmers in their countries. “Highly detrimental discriminatory measures,” declared Indonesian President Joko Widodo and Malaysian Prime Minister Anwar Ibrahim in a joint statement after their meeting in June 2023. Both leaders have pledged to work together to fight the EU’s palm oil curbs.

One major concern is the policy’s impact on smallholders. In Indonesia, more than 2.6 million small-scale oil palm farmers managed about 40 per cent of plantation areas from 2019 to 2021, according to the country’s Agriculture Ministry.

In Malaysia, more than 300,000 farmers are smallholders, defined as those who own less than 40ha, according to the Malaysian Sustainable Palm Oil (MSPO) website.

Borneo lost 17.3 million ha of tree cover from 2002 to 2023

Verifying compliance is a major issue.

Indonesia’s Trade Minister Zulkifli Hasan has argued that small farmers face challenges in complying with the new rules, including a lack of funding and understanding of administrative procedures. This means they could potentially be excluded from the global supply chain.

Malaysian Foreign Minister Mohamad Hasan has claimed that the anti-deforestation regulation promotes alternative oils, contradicting fair trade principles.

“We have to voice this because it is clear that this regulation is not established in good faith but simply just to support the other (oil) products,” he told reporters in Jakarta in February 2024. Soya bean and rapeseed, for instance, are largely grown in the EU.

Mr Sabinus Sabin (below, with his wife Julyana, 65), a 68-year-old oil palm farmer in Sanggau regency, West Kalimantan, was surprised by news of the EU anti-deforestation law. “What’s that? Never heard of it,” he said.

His remark mirrored those of other farmers interviewed by The Straits Times, which visited oil palm plantations in Indonesia’s West Kalimantan and Malaysia’s Sabah – both on Borneo island – in June to speak to smallholders.

His biggest worry is falling prices of palm oil if the EU sharply curtails imports of the oil and its products.

Mr Sabinus recalled how his earnings tumbled and how some neighbours were forced to borrow from moneylenders and abandon their farms when a campaign against the use of palm oil in Europe took place in 2019.

He said his 10ha farm is on customary land and has never encroached on forests.

His reaction was similar to that of other farmers interviewed. Non-governmental groups and social enterprises also expressed concern that complying with the policy would be too expensive and complex for many farmers and small suppliers.

For example, the regulation demands, among other things, that farms more than 4ha in size provide their geo-locations using polygon mapping. This method requires farmers to walk around to map their land boundaries with a smartphone equipped with apps like Google Maps, which can be an onerous task in practice.

Mr Valens Andi – head of SPKS in Sanggau – and his team have been helping farmers map and evaluate their villages’ land and natural resources to comply with the policy. “Quite frankly, farmers can’t manage this alone. SPKS can send people to provide technical support, but funding is a challenge for us,” he told ST.

Sustainable farming practices could help farmers boost yields and avoid clearing forests to replant. But they still need to prove to the EU that they are compliant with its rules, no easy task when farmers lack the technical knowledge, funds and audit mechanisms to do so.

In Indonesia and Malaysia, several organisations and government initiatives have been training small farmers to improve their farming practices and meet international standards such as those of the Roundtable on Sustainable Palm Oil (RSPO). These programmes often focus on sustainable agriculture, financial management and compliance with international regulations.

Some, such as Kuala Lumpur-based social enterprise Wild Asia, which arranged ST’s visit to Sabah, are going beyond certification by embracing regenerative farming and organic practices. These prioritise soil health, promote diverse farming systems with intercropping and the use of organic waste as fertiliser.

“For the big boys, they can afford extras such as fertiliser and manpower so that the next cycle of crops will be OK. But for smallholders, after 25 years when they need to replant, how will they sustain their crops?” said Wild Asia’s director and adviser Peter Chang.

“Therefore, regenerative farming practices help to ensure the soil is healthy and productive in the long run so that small farmers will not need to clear forests to plant oil palm,” he added.

Since 2019, with help from Wild Asia, Malaysian farmer Muharram Sompo (below), 43, has been enhancing soil fertility and carbon sinking with homemade organic fertiliser and biochar (a form of charcoal). He also supplements his income by growing ginger and fruit trees on his 1.21ha farm in Kinabatangan, a district in Sabah.

One major benefit of going organic, he said, is needing to fertilise his trees only once every three years instead of annually if he uses chemicals. However, if more demands are placed on him, the government needs to step in, he added.

“The Malaysian government should establish local bio-factories that practise organic or ecological agriculture, using materials available in the community promptly. The government has supported us a lot, but sustainable farm produce still gets mixed with non-sustainable produce,” Mr Muharram said.

Some farmers say the EU should incentivise good practices to protect their livelihoods and keep their farms sustainable instead of imposing a blanket ban.

Indonesian farmer Pilen Bujang, 61, who has farmed oil palm in West Kalimantan for 30 years, switched to organic fertilisers in 2023 after seeing positive results.

“I’m just a simple farmer, doing my best with the knowledge I have. Instead of penalising all small farmers, why not support good ones like me?” he said.

However, not every farmer is enthusiastic about participating in upskilling programmes.

Mr Vinsensius, a village official in Sanggau, who goes by one name, said support is given to farmers to prepare for the EU ban, but convincing them takes time.

“When we suggest avoiding pesticides or using masks and gloves for safety, they find it bothersome and question our motives,” he told ST.

The EU’s main goal is to stop the sale of commodities linked to deforestation and forest damage in its member countries. Its new rules cover seven key commodities: palm oil, soya, beef, wood, cocoa, coffee and rubber, along with products made from them.

Global demand for palm oil has often been blamed for driving deforestation and harming wildlife habitats in producer countries, and contributing to health and human rights issues. While environmentalists view the EU regulation as a crucial step in combating climate change and protecting biodiversity, there is ongoing debate about whether palm oil is truly the main cause of deforestation.

While oil palm plantations have expanded in Indonesia and Malaysia in past decades, recent studies show that deforestation rates have slowed.

For example, a 2018 study by the Centre for International Forestry Research found that forest areas in Indonesian and Malaysian Borneo decreased by 14 per cent, or 6.04 million ha, over the 17 years up to 2017, with 3.06 million ha converted to industrial plantations, mostly for oil palm.

The study also noted that annual forest loss peaked in 2016 and sharply declined in 2017 because of factors such as lower palm oil prices, wet conditions and better fire prevention. Plantation expansion, which initially increased, has been slowing down in Indonesia and Malaysia since peaks in 2009 and 2012.

From 2002 to 2023, Indonesia and Sabah together lost nearly 11 million ha of humid primary forest

The Indonesian government has taken steps to address deforestation. A 2011 moratorium on new oil palm and pulpwood plantations in primary forests has been extended several times. In 2018, President Widodo imposed a three-year freeze on new permits for oil palm plantations, contributing to reduced deforestation rates. He reported a 5 per cent drop in deforestation to 115,000ha between 2019 and 2020, the lowest rate since 1990, based on government records.

In Malaysia, Mr Chang said Wild Asia has observed some encroachment on forest areas in Sabah in the past, but local residents denied this, saying they have rights for farming on customary land.

However, the Malaysian state currently enjoys a “net negative” deforestation rate, with more forest restored than lost through replanting and natural regeneration efforts, he added.

Farmer groups argue that environmental issues like water pollution and unfair trade practices are just as important as deforestation in the EU regulation, but do not receive the same level of attention.

Indonesian oil palm farmer Lomenius (below), 45, was upset to find dead fish floating in a river in Sanggau in late May 2024.

He and other residents of Buak village suspected that a nearby fertiliser factory owned by palm oil company Agro Palindo Sakti was polluting the water.

“This is the third case since 2017. I use water from the river to wash clothes and dishes, and to shower. For cooking, I rely on rainwater. These incidents are clear violations of our rights,” he said.

His neighbour, 40-year-old housewife Maria Puspawati, said her body itched after she bathed in the river. Days later, she developed painful boils, and so did some of her neighbours. Calling for action to be taken against the company, she said: “We can’t do much on our own. I hope the factory channels the dirty water elsewhere.”

Singapore-based Wilmar, one of the world’s largest palm oil producers and parent of Agro Palindo Sakti, told ST in an e-mail that it was “not aware of any complaints on fertiliser leakage”.

Some farmer groups and village cooperatives allege that the large palm oil companies which are exporting to the EU have also not complied with its rules, which mandate adherence to local laws governing the environment, labour and land rights.

Mr Eep Saepulloh, a researcher at Sawit Watch, a non-governmental organisation that monitors the palm oil industry in Indonesia, highlighted the fact that under EU laws, deforestation is not the sole concern.

Ensuring fair land rights and equitable partnerships between plantation companies and local communities is also crucial, he stressed, saying: “Both government and corporations need to empower farmers and ensure fairness in these arrangements.”

Indonesia’s “plasma scheme”, for one, has been a major cause of conflict. The government initiative dating back to 1986 mandates palm oil companies in Indonesia to allocate land or production to smallholders or local communities to boost local economies and alleviate rural poverty.

A joint investigation by news organisations Mongabay and BBC News and journalism organisation The Gecko Project in May 2022 revealed that Indonesian communities are losing hundreds of millions of dollars each year because palm oil producers fail to comply with plasma scheme regulations.

Oil palm farmer Hadi (below), 42, from West Kalimantan, was hoping to improve his fortunes when he agreed to lease 15ha of ancestral land to a palm oil company under the plasma scheme in 2006. In return, he was given 3ha of the company’s plantation to farm.

But Mr Hadi, who goes by one name, later realised he was racking up losses, receiving from the company only 300,000 rupiah (S$25) to one million rupiah monthly after paying for fertiliser. If he had stayed and worked on his own farm, he believes he would have been able to earn as much as 4.5 million rupiah for a similar 3ha lot, like some of his neighbours who did not join the scheme.

“Just think how much more I could have earned if I managed not just 3ha, but the entire 15ha of my own land myself. This is the meagre sum I’ve been receiving for years,” he said, adding that he wants to pull out of the contract, which ends in 2031.

Back in 2004, environmental groups and industry players came together to create the RSPO – whose requirements are the global “gold standard” for ethical palm oil production. RSPO certification ensures compliance with the EU’s commitment to no deforestation, environmental protection and no labour rights violations in the supply chain.

Indonesia has its own certification scheme known as Indonesia Sustainable Palm Oil (ISPO). Likewise, Malaysia has its mandatory MSPO. In 2020, Malaysia’s MSPO was adopted by about 88 per cent of its oil palm-growing areas, much higher than the 35 per cent covered by Indonesia’s ISPO, according to World Resources Institute Indonesia.

Indonesian farmers cited the need to join farmer unions, such as village unit cooperatives or farmer group associations, to have access to certification. But a presidential regulation issued in 2020 has made the ISPO certification mandatory, with a five-year grace period until 2025 for smallholders.

Meanwhile, the Indonesian and Malaysian governments are trying to persuade the EU to recognise ISPO and MSPO alongside the RSPO, to avoid creating new compliance standards. A task force, formed between the three, aims to conclude discussions by the end of 2024.

Indonesia’s representative on the task force, Ms Musdalifah Mahmud, said the ISPO should be enough to prove that Indonesian palm oil is sustainable and does not contribute to deforestation. The Malaysian Palm Oil Council expressed confidence that Malaysia would be able to fulfil many of the EU requirements by year end.

The success of EU rules relies on stakeholders collaborating to balance the interests of major corporations, environmental advocates and oil palm farmers, observers in Indonesia and Malaysia say.

Since 2013, even before the EU regulation was introduced, major companies involved in the global palm oil supply chain – from growers and traders to consumer goods companies and financial institutions – have increasingly adopted “no deforestation, no peat, no exploitation” policies to make palm oil more sustainable.

However, these policies are mainly driven by individual companies as part of their broader commitments to sustainability certifications, and their impact remains difficult to measure.

“It was evident for a long time that smallholders’ invisibility in the supply chain would lead to their exclusion. Consequently, our efforts over the past few years have focused on supporting small producers, local small palm oil enterprises, dealers and independent mills,” said Dr Reza Azmi, Wild Asia’s founder and executive director.

“We embarked on a digitalisation journey early on and are now equipped to meet EU requirements by packaging the relevant data for palm oil importers. This ensures that EU-compliant supply chains can be built not only around large corporate businesses but also include smaller players,” he added.

Oil palm farmers, landowners and groups in Indonesia and Malaysia say the palm oil sector has made progress in addressing deforestation. In fact, UK-based think-tank Global Canopy’s Forest 500 annual report in 2024 found that 76 per cent of the world’s most influential companies in palm oil supply chains had deforestation commitments in 2023, up from 52 per cent in 2014.

Mr F.X. Damsuki (above, in red shirt), 65, who owns more than 100ha of oil palm land in West Kalimantan, expressed his frustration, saying: “How dare EU countries dictate to us when they were the first to destroy their own forests?”

He added: “These smear campaigns against palm oil are extremely irritating. If the EU chooses not to buy, no problem. There are many other countries that will. A ban would only hurt them and the businesses in their countries.”