Palm Oil :" with the increased global interactions comes the growth of international trade, ideas and culture" with reference to this statement, critically analyse the challenges of globalisation that Indonesia will have to face from a strategic point of view. (20 marks)

Answer 1

Globalisation has undoubtedly brought numerous benefits to Indonesia, particularly in terms of increased international trade and the exchange of ideas and culture. However, along with these advantages, Indonesia also faces several strategic challenges in relation to the production and export of palm oil, one of its primary commodities. This essay critically analyses the challenges Indonesia is likely to face as a result of globalisation, focusing on environmental degradation, international trade barriers, and economic vulnerability.

Firstly, one of the significant challenges for Indonesia regarding palm oil production is environmental degradation. In order to meet the growing global demand for palm oil, Indonesia has rapidly expanded its palm oil plantations, leading to deforestation and loss of biodiversity. This has caused negative environmental consequences such as increased greenhouse gas emissions, soil erosion, and the loss of habitat for endangered species like orangutans. As globalisation encourages the intensification of trade, Indonesia is faced with balancing the need for economic growth with the preservation of its natural resources and ecological balance. Failure to address these environmental concerns can lead to negative publicity, consumer boycotts, and trade restrictions in key export markets.

Secondly, globalisation also poses challenges for Indonesia in terms of international trade barriers. Despite being the largest producer and exporter of palm oil, Indonesia faces constant scrutiny and criticisms from key importers, such as the European Union (EU), due to concerns about deforestation and sustainability practices. The EU has implemented regulations and certifications to ensure that imported palm oil meets certain environmental standards. This presents a challenge for Indonesian exporters as they have to comply with these stringent requirements, which often require substantial investments in sustainable practices and traceability systems. In addition, trade protectionism measures by certain countries can hinder Indonesia's access to foreign markets, potentially limiting its export opportunities and economic growth.

Lastly, globalisation has exposed Indonesia to economic vulnerability, particularly in the palm oil industry. Despite being a major global exporter, Indonesia heavily relies on international palm oil prices, which are subject to fluctuations caused by global market dynamics. This dependency makes Indonesia vulnerable to external shocks, such as changes in consumer preferences, political instability in major import markets, or the imposition of trade barriers. For instance, shifts towards healthier and environmentally sustainable alternatives to palm oil in Western countries can significantly affect Indonesia's export revenues. Moreover, the nation's reliance on a single commodity for export exposes it to price volatility and limits diversification of its economy, which may hinder its long-term resilience and development.

In conclusion, while globalisation has brought numerous benefits to Indonesia, it also poses several strategic challenges in the palm oil industry. These challenges include environmental degradation, international trade barriers, and economic vulnerability. Addressing these challenges requires a strategic approach that balances economic growth with sustainability, promotes compliance with international standards and certifications, and encourages diversification in the Indonesian economy. By doing so, Indonesia can maximize the advantages of globalisation while mitigating its negative impacts.