Does the rise of transnational governance ‘hollow-out’ the state? Discourse analysis of the mandatory Indonesian sustainable palm oil policy

Rise of transnational business governance has been used to argue that state control has declined, giving rise to the metaphor of a ‘hollowed-out state’. However, an alternative hypothesis is that, instead of a weakening of the state, a transformation occurs. This study uses interviews and discourse analysis to explore the main factors that trigger initiation of a new government policy following extra-territorial transnational negotiations. The Indonesian palm oil sector, specifically publication of the mandatory certification for Indonesian Sustainable Palm Oil (ISPO) policy, is used as a case study. We also explore aspects of the ISPO and oil palm sector that need focusing in order to improve sustainable palm oil sector governance. Q methodology was used to reveal different discourses on the formation and implementation of ISPO policy. We interviewed 36 stakeholders to gather the qualitative data used for the Q concourse; and engaged 27 stakeholders in the Q sorting process. Five distinct discourses were revealed. Two discourses include state sovereignty and the need to strengthen the local sector as triggering factors for ISPO initiation. The other three discourses highlight scepticism about the ISPO, covering financial aspects and conservation value debates; and contain challenges and suggestions for ISPO implementation. The study concludes that, in the Indonesian palm oil sector at least, ‘the hollow-state’ hypothesis is not wholly correct. Instead, the government is undergoing a transformation and is enhancing national institutional capacity through the ISPO. However, there are some major concerns. To better shape the governance of sustainability in this sector the government needs to focus on aspects of policy implementation related to biodiversity conservation values and benefits for the producers when being certified, as well as improving engagement with stakeholders.