IB CASE 1: PRE-READING FOR FINAL EXAMINATION

Read the article below and answer the following questions.

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The economical and versatile, palm oil has become the world’s most widely used vegetable
oil. Oil palm can produce more vegetable oil per unit of land than any other crop. Due to this
comparative advantage, palm oil is now commonly used for direct human consumption, as
biofuel, and as an ingredient in many processed foods, cosmetics, pharmaceuticals, and
other industrial products. However, its production comes at a heavy environmental cost,
especially in Indonesia and Malaysia, the two main producers. The main concern is the
environmental impact and the social harm.
Recently, a major energy and food crisis is unfolding as a result of the war in Ukraine.
Russian President Vladimir Putin is forcing European nations to pay in roubles for Russian
gas. And the European Union is worried about the acute shortage of sunflower and
rapeseed oils that may cause a dent in the food industry. Many European nations are
considering reversing a ban on palm oil, not just because of the shortage of sunflower and
rapeseed oils, but also because Russia and Ukraine produce 70 per cent of the supplies.
It is a double blow to Europe after a series of economic and business sanctions imposed on
Russia for invading Ukraine. It looks like Russia has the upper hand, although Western
nations and companies have rejected the idea of being forced to pay for gas in roubles,
claiming it is a breach of the contract, which is set in euro. Russia supplies about a third of
Europe's gas. Hence energy is the most powerful lever at Putin's disposal as he tries to hit
back against sweeping Western sanctions over his invasion of Ukraine.
France and Germany, for instance, are preparing for a possible halt to Russian gas flow. It is
a blessing in disguise for Malaysia when it comes to palm oil.
Many political and economic pundits are saying that European nations did not expect that
they may have to reverse the ban on palm oil after all the allegations that Malaysia is one of
the palm oil-producing countries that indulged in deforestation. European countries and
foreign non-governmental organisations alleged that large areas of rainforest were often
cleared to make way for palm plantations, resulting in greenhouse gas emissions.
They mercilessly attacked Malaysia and Indonesia, which produce about 85 per cent of the
world's palm oil. Over the years, foreign critics assailed the Malaysian palm oil industry with
allegations of child labour, forced labour and ill-treatment of foreign workers. As a result of
these baseless reports, two leading Malaysian firms were banned from exporting products
to the United States and certain European countries.
The setting up of the Malaysian Palm Oil Board and Malaysian Palm Oil Council, together
with Malaysian Palm Oil Certification Council, was not only meant to address anti-palm oil
propaganda by Western countries. As much as we understood the politics behind the anti-
palm oil propaganda, we also knew that we must accede to the demands to reduce forest
clearing and address the so-called human abuse issues.
It is good that the country has been working hard on producing a Malaysian Sustainable
Palm Oil certification that provides credible, sustainable and responsible management. It
will bring about positive social, environmental and economic impact, and minimise the
negative impact on the people and the environment. The World Wildlife Fund said the best
thing European manufacturers could do is support sustainable palm oil and avoid boycotts,
"since we know substitutions with other vegetable oils can lead to even further
environmental and social harm".
The government and local palm oil industry players should take advantage of this with
potential demand from Europe in the near future. For the first time in the history of the
national palm oil industry, crude palm oil prices hit an all-time-high of RM6,395 per tonne
on 31 March, 2022, bringing huge profits to palm oil industry players, including the 400,000
smallholders nationwide.
As the palm oil industry landscape is about to change due to the crisis in Ukraine, it is crucial
to make sure the country's palm oil industry continues to be among the largest contributors
to the national economy.
Meanwhile, the European Union's foreign ministers are also in another dilemma which is on
whether and how to slap sanctions on Russia's lucrative energy sector over its invasion of
Ukraine, with Germany saying the bloc was too dependent on Russian oil to decide an
embargo. The EU and allies have already imposed a panoply of measures against Russia,
including freezing its central bank's assets due to Russia’s war on Ukraine.

Russia's siege and bombardment of Mariupol port, which EU foreign policy chief Josep
Borrell called "a massive war crime," is increasing pressure for action. But targeting Russian
oil, as the United States and Britain have done, is a divisive choice for the 27-nation EU,
which relies on Russia for 40% of its gas. Some argued on Monday that the EU could no
longer avoid such a step. But Germany and the Netherlands said the EU was dependent on
Russian oil and gas and could not cut itself off tomorrow. "The question of an oil embargo is
not a question of whether we want or don't want (it) but a question of how much we
depend on oil," German Foreign Minister Annalena Baerbock told reporters.

"Germany is importing a lot (of Russian oil) but there are also other member states who
can't stop the oil imports from one day to the other. If we could we would do it
automatically," she said, adding that the bloc should instead work on reducing its reliance
on Moscow for its energy needs. Diplomats cautioned that energy was one of the most
complex sectors to sanction because each EU country has its own red lines. "Sanctions are
exponential," one diplomat said. "The further you go, the more difficult it is to adopt them."

They said that while some countries want an oil embargo, Germany and Italy, which depend
on Russian gas, are pushing back because of already high energy prices. Sanctions on coal
are a red line for some, including Germany, Poland and Denmark, while for others, such as
the Netherlands, oil is untouchable. Moscow itself has warned that such sanctions could
prompt it to close a gas pipeline to Europe - another potential deterrent.

At the time of writing, No decision on potential energy sanctions was expected at the
foreign ministers' meeting, the first of a busy week of talks in Brussels. However, a growing
number of international companies including McDonald's, Coca-Cola and Starbucks have
suspended trading in Russia. After facing fierce criticism for continuing to operate in Russia,
Nestle has withdrawn some of its brands including KitKat and Nesquik, but will still sell
"essential foods". But, a number of other Western brands including Marks and Spencer,
Burger King, and hotel groups Marriott and Accor say they can't pull out from
Russia because their businesses there operate under complex franchise deals.
The European Union, later, on Friday formally adopted its fifth package of sanctions against
Russia, including bans on the import of coal, wood, chemicals and other products.
The measures also prevent many Russian vessels and trucks from accessing the EU, further
crippling trade, and will ban all transactions with four Russian banks, including VTB (Russia's
second-biggest bank VTB).
The ban on coal imports will be fully effective from the second week of August. No new
contracts can be signed from Friday, when sanctions are to be published in the EU's official
journal.
Existing contracts will have to be terminated by the second week of August, 2022, meaning
that Russia can continue to receive payments from the EU on coal exports until then.
"These latest sanctions were adopted following the atrocities committed by Russian armed
forces in Bucha and other places under Russian occupation," EU's top diplomat, Josep
Borrell, said in a statement.
The Kremlin has said that Western allegations Russian forces committed war crimes by
executing civilians in the Ukrainian town of Bucha were a "monstrous forgery" aimed at
denigrating the Russian army.
In addition to coal, the new EU sanctions ban imports from Russia of many other
commodities and products, including wood, cement, fertilisers, seafood and liquor, for a
total value estimated in 5.5 billion euros ($5.9 billion) a year.
The EU also restricted export to Russia of a number of products, including jet fuel, quantum
computers, advanced semiconductors, high-end electronics, software, sensitive machinery
and transportation equipment, for a total value of 10 billion euros a year.
Source:
https://www.nst.com.my/opinion/columnists/2022/04/785491/europe-may-be-forced-
turn-malaysian-palm-oil
Reuters

IB CASE 2: PRE-READING FOR FINAL EXAMINATION

The speed of new products and their technological sophistication increases, so do risks.  One
way to mitigate this risk is via alliances. This is exactly what General Motors (GM) and Honda
are doing as they invest billions in an “automotive alliance” in the North American market,
including plans to co-develop a range of vehicles to be individually branded by each partner.

GM and Honda plan to share vehicle platforms, including both electric and internal
combustion propulsion systems. Earlier this year they agreed to jointly develop two EVs to
be branded by Honda, based on the General Motors’ EV platform and powered by its Ultium
battery technology.

The two automakers have been partners in selected projects over more than 20 years,
including their recent collaboration fuel cell and battery technologies and production, and
the Cruise Origin autonomous vehicle.  Beyond the new vehicle technologies, GM and
Honda will work to coordinate materials purchasing, logistics services, and localization
activities, to create cost efficiencies by leveraging respective scale, insights, and best
practices.rts American Machinist (Sept. 3, 2020). And, the two organizations will explore
combining R&D related to advanced technology areas, including electrical architecture,
advanced driver assist systems, infotainment, connectivity and vehicle-to-everything
communication.
“Combining the strengths of each company, and by carefully determining what we will do
on our own and what we will do in collaboration, we will strive to build a win-win
relationship to create new value for our customers,” said Honda’s VP.

Source:
American Machinist (3 September, 2020)