Archived News
23-10-2001
‘Tax perks won’t benefit plantation firms much’
23 October 2001 (Business Times) - THE tax incentives proposed forresource-based industries including rubber and oil palm in the Budget 2002are expected to cause little impact on local plantation companies as themove will only benefit firms that plan to reinvest for expansion.According to analysts, the incentives are also more directed towards firmsinvolved in the downstream activities, such as oil palm refiners andrubber glove manufacturers, rather than plantation companies per se(except for those that own such facilities).Most of the analysts, however, still maintain an overweight rating for thesector which they view as “defensive and stable†amid the present economicslowdown.They also expect prices of crude palm oil (CPO) to strengthen towards theend of 2001 and early next year as the fundamentals are still strong.“The incentives announced during the Budget will not really affectplantation companies that much as I do not foresee many of themreinvesting in Malaysia,†an analyst from Arab-Malaysian Securities toldBusiness Times yesterday.Though many firms are interested to invest further in the country, theirplans have been hampered by the lack of sufficient, fertile landbankdomestically, she said.“If you look at the recent acquisitions in the palm oil industry, theywere largely done overseas, particularly in Indonesia,†she added.An analyst from Salomon Smith Barney (SSB), Ahmad Shariff, said plantationcompanies with manufacturing and refining facilities would benefit fromthe tax incentives announced by the Government last Friday.“But the impact is not going to be immediate; it would only happen whenthe companies start to reinvest,†he said.On a more general view, Ahmad said plantation is still a “very good,defensive sector†although there were slight worries about the situationin Afghanistan that might disrupt CPO shipments to West Asia, particularlyto Pakistan and India.“The fundamentals still point out to better prices of CPO,†he said.Ahmad also said that some recovery in CPO prices are likely to be seentowards the end of this year and early 2002, with the commodity’s priceexpected to average at RM1,100 per tonne for the whole of next year.An analyst from a local research firm said their forecast CPO price for2001 is at RM868 per tonne, with IOI Corp Bhd and PPB Oil Palms Bhd beingtheir favoured counters.“We like them because of their (low) PE, good growth and stability inincome,†she said.SSB’s Ahmad said IOI Corp is still one of the better plantation companiesas the group has more young oil palm trees which could produce higheryields compared to the others.On the Kuala Lumpur Stock Exchange (KLSE) yesterday, IOI Corp closed foursen lower at RM3.08 while PPB Oil Palms eased four sen to RM1.80.The KLSE’s plantation sub-index also fell 8.56 points to 1,407.78, in linewith the lower Composite Index which dropped 5.93 points to 609.09.Out of the 39 companies which made up the plantation sub-index only threeended higher, while 17 closed softer and 19 ended unchanged.In the spot CPO market, Malaysia’s October South CPO closed unchanged atRM850 a tonne.In the Budget unveiled last week, the Government has proposed to grant taxincentives for companies in the rubber, oil palm and wood based industriesthat reinvest for expansion purposes in a move to increase domesticinvestment in resource based industries.Among others, relevant companies stand to enjoy pioneer status with taxexemption of up to 85 per cent of statutory income for a period of 5years, or an investment tax allowance of up to 80 per cent within a periodof 5 years.
23-10-2001
Crude palm oil price falls among stable demand
MEDAN, Indonesia, Oct 19 Asia Pulse - Demand for crude palm oil (CPO) ininternational markets is stable but the price is declining, producerssaid.Derom Bangun, chairman of the Indonesian palm oil producers (Gapki) saidCPO price declined from US$235 early October to US$226 per ton this week.Bangun said the price fall was caused not by the U.S.-Afghan conflict butby a larger supply of CPO from producers to the world market.In addition, the world's economic slowdown has dampened demand for CPO andits derivatives, he added.He said Indonesia's exports to India, the largest market for the country'sCPO, are stable.
23-10-2001
Low copra prices driving oil firm to lay off worke
MATI, Davao Oriental-10/13/2001 (Philippine Daily) - The InternationalCopra Export Corp., which is one of the country's biggest coconut crudeoil exporters, said it is considering a mass layoff of its workers unlessthe price of copra, which has been falling in the last few years, does notimprove.Interco, which maintains three plants in Mindanao including one here, saidit is losing an average of P500 million a year since the crisis in thecoconut industry started."Definitely, we will be forced to cut significantly our workforce shouldthe downtrend continue in the next two years," Michael Ling, Intercopurchasing manager, said.Interco, he said, used to earn P1 billion per year.Ling said the crisis gripping the coconut industry is hardly addressedbecause "the government's intervention (to solve the crisis) is notenough."Interco is Davao Oriental's remaining big private employer after the DavaoTimber Corp. shut down its operations in the early 1980s. It currentlyemploys at least 150 people here.Another reason cited by Interco for the layoff is the unabated cutting ofcoconut trees, which resulted in a reduced supply of nuts."The government is helpless in stopping the massive cutting of coconuttrees. If this trend will continue in the next two years, we will reallybe forced to retrench our workers," Ling said.But coconut producers said they have no more choice left but to converttheir farms either into ricefields or mango plantations because of thevery low prices of copra.Even Mayor Francisco Rabat admitted he is diversifying his 400-hectarefarm while waiting for the coconut industry to recover."Diversify (the farm) so you can be helped. If the coconut will not helpyou, the other (crops) will. I am now very lucky with my pomelo," Rabatsaid.On the claims of Interco, Rabat said that "the oil mills are neveraffected (by the crisis) because they just buy copra, process it and sellit.""They always make money. It is the coconut producers who lose moneybecause right now the income of copra just goes to the laborers," he said.From a high of P20 per kilo until 1998, prices of copra plummeted to a lowof P4 per kilo. The reason cited for the sharp decrease was the worldmarket's shift to the use of palm oil."The world market prices of copra is very low because the other oilvegetable products are very substantial in production like the palm oil inMalaysia. They released an average of 8 million tons a year to the worldmarket and Indonesia, 5 million tons. How do you expect the coconutindustry to compete with that," Rabat said.Jonelito Vicente, officer in charge of the Philippine Coconut Authorityhere, said he expected the annual output of the coconut industry tofurther decrease in the coming years because the PCA is poised to stop itsfree fertilizers program because of lack of funds.He, however, denied there was massive cutting of coconut trees here.Vicente said there was even an increase in the area planted to coconut.Davao Oriental became the country's largest coconut producer when itsannual output reached 216,710 metric tons last year. But the PCA here saidthe figure is 40 percent lower than the same period in 1999. FerdinandZuasola, PDI Mindanao Bureau
23-10-2001
Malaysia Must Utilise All Fertile Land For Crop Cu
KUALA LUMPUR, Oct 19 (Bernama) -- Prime Minister, Datuk Seri Dr MahathirMohamed said when presenting Budget 2002 at the Dewan Rakyat that thenation is endowed with fertile land can be utilised for the cultivation ofcrops and the rearing of livestock.
23-10-2001
Ministry may buy battle tanks under countertrade i
23 October 2001 (Business Times) - MALAYSIA’S purchase of several mainbattle tanks (MBT) may come under a countertrade arrangement in which partof the payment may be made in the form of palm oil and palm oil products.Industry sources say the countertrade initiative is being looked into asone of the options available besides cash payments to help promote thecommodity’s standing overseas.“The countertrade can help promote palm oil in arms and weaponry-producingcountries such as Russia, Turkey, the UK, Italy, France and the US,†anindustry source told Business Times in Kuala Lumpur yesterday.“However, it is too soon to say. The agreement will be conducted ongovernment-to-government basis,†he said.He said, the purchase would also look at long term development programmessuch as transfer of technology, mutual maintenance programmes and otherdevelopment programmes rather than a one-off deal.Defence Minister Datuk Seri Najib Abdul Razak said Malaysia would buy theMBT as part of its efforts to boost the firepower of the Royal MalaysianArmy and beef up national security and defence.The purchase has been approved by the Government under the Eighth MalaysiaPlan (8MP) 2000-2005. Under the 8MP RM2.5 billion has been allocated forvarious development programmes for the Malaysian Armed Forces.He, however, refused to give details of the cost and other information,but it was learnt that the MBT would replace the Scorpions, the first tankbought by the Armed Forces more than 20 years ago.It is also understood that arms producers from countries such as Russia,Turkey, the UK, Italy, France and the US are being shortlisted.However, it is not immediately known whether the countertrade arrangementalso involves other purchases of defence equipment and weaponry.Najib said the arms purchase that had been approved included the 155mmtowed Howitzer G5 cannons from South Africa to be delivered by December,and multiple rocket launcher system from Brazil by early next year.Others include submarine, an air defence system and helicopters for thearmed forces under the 8MP.Najib said the order for the Howitzer G5 cannons and multiple rocketlaunch system were made early this year, while orders for the newsubmarine and air defence system would be made next year.The countertrade arrangement is not new for Malaysia.In 1994, Malaysia bought 18 MiG-29 Fulcrum fighter jets for a total ofUS$600 billion (US$1 = RM3.80)under an offset programme. It involved acash payment of US$450 million,palm oil and palm oil products (US$95million) and supply of other Malaysian products (US$55 million).The palm oil was to be delivered to Russia over a period of five yearswhich incidentally ends this year.Last month, US multinational, General Electric International signed aUS$60 million agreement with Keretapi Tanah Melayu Bhd involving thepurchase of 20 high-powered “Blue Tigerâ€.Under the deal, the locomotives are to be delivered beginning April 2003in exchange for 200,000 tonnes of palm oil and palm oil products valued atUS$60 million, to be delivered by the Pasir Gudang Edible Oils Group.The Government is also eyeing fighter jets from both the US and Russia.The Royal Malaysian Air Force is evaluating two multi-role combataircraft, Boeing Military and Missile Systems’ F/A-18E/F strike fightersdubbed the Super Hornets.The Russian-made Sukhoi Su-30MK multi-role long-range twin-seater fighterbomber which is priced at about US$35 million a piece is also underevaluation.Primary Industries Minister Datuk Seri Dr Lim Keng Yaik had said earlythis month his ministry was attempting to squeeze palm oil into 20 percent of the payment in Malaysia’s proposed purchase of the figher jets.
23-10-2001
The positive side to petrol price hike
23 October 2001 (Business Times) - THE 10 sen per litre increase in petroland diesel prices will have a chain reaction in terms of higher costs oftransport which will lead to an increase in the price of goods andservices. Inflationary pressures with the usual ramifications on wageswill follow.
22-10-2001
A shot in the arm for low-profile agriculture sect
Monday, October 22, 2001 (The Star ) -THE low-profile agriculture sectorhas received a breath of life from the budget, which has directed itsattention to encouraging the development of new areas in the food andresource-based industry as well as fully exploiting downstream activitiesin existing commodity-based industries.In presenting the Budget 2002, the Prime Minister, who is also FinanceMinister, had called for the development of new areas in agriculture asthe growth of the sector had previously been largely dependent on theoutput of commodities, namely oil palm, rubber and timber.He said that as Malaysia was a major producer of rubber, timber and oilpalm the country must fully exploit downstream resource-based activitiessuch as vulcanised rubber and furniture, which had the potential tocontribute towards economic growth.According to the Prime Minister, downstream activities based on rubber,rubber wood and oil palm, which had export potential, could bringtremendous benefits if fully exploited.The budget has proposed that companies which reinvest in the production ofsuch resource-based products be granted income tax exemption of 70%, orgiven investment tax allowance of 60%, for a period of five years.The proposal is effective for applications received by the MalaysianIndustrial Development Authority (Mida) beginning Saturday.Dr Mahathir added that the government would be giving 100% tax allowanceon capital expenditure to encourage food production on a large scale forexport and import substitution purposes.This incentive was previously provided for prawn farming, floriculture andplanting of approved fruits such as papaya, banana, passion fruit, starfruit, guava and mangosteen.Also proposed was the extension of the scope of the 100% tax allowance oncapital expenditure for large-scale export and import food forsubstitution purposes to vegetable and herb farming, breeding of fish,including ornamental fish, cockles and oysters and planting of flowers.This proposal is effective from the year of assessment 2002.Dr Mahathir said food products would also provide the stimulus to the foodprocessing industry, in which Malaysia had the expertise and credibilityto develop halal food.He said this industry had the potential to penetrate internationalmarkets.To further strengthen the agriculture sector’s contribution to growth,also proposed was that reinvestment undertaken by existing agriculturecompanies be granted 100% income tax exemption against the statutoryincome for a period of five years.To ensure self-sufficiency in poultry farming, the budget has proposed forthe rearing of chicken and ducks in the eastern corridor of peninsularMalaysia, Sabah and Sarawak to be granted pioneer status with income taxexemption of 85% or investment tax allowance of 80% for a period of fiveyears.This proposal is effective for applications received by the Mida fromtoday.Another significant proposal was the provision of price support assistanceto the Federal Land and De-|velopment Authority (Felda) palm oil andrubber settlers faced with declining prices.Palm oil settlers would be given RM12 per tonne if prices go below RM900while rubber settlers would get 15 sen per kg if rubber prices fall belowRM2.50
22-10-2001
CPO output seen declining by 2.1pc
19 October 2001 (Business Times) - CRUDE palm oil production is expectedto decline by 2.1 per cent next year on account of low biological yieldcycle of the crop and the large hectarage which has been taken out ofproduction due to replanting.At the same time, crude and processed palm oil exports are expected toincrease by 11.5 per cent in 2002 to RM11.8 billion from RM10.6 billionestimated this year.Palm oil production in 2001 is anticipated to increase by an estimated onemillion tonnes or 8.9 per cent to reach 11.8 million tonnes.The higher output is on account of a 6.4 per cent increase in yield to19.5 tonnes per ha and the addition of another 158,200ha of planted areacoming into maturity in East Malaysia.As such, total matured hectarage will increase to 3.1 million ha with theproduction bulk or 67.5 per cent coming in from West Malaysia.In 2001, total hectarage planted is estimated to increase by 3.7 per centto 3.5 million ha.Meanwhile, the Government has introduced a replanting programme of200,000ha of oil palm by 2001 to reduce stocks and for use as palm oilfuel.Some RM300 million will be given out as grants to encourage replanting.
22-10-2001
Government taking over CPO shipping insurance cove
20 October 2001 (Business Times) - Following insurers' refusal to coverships chartered by crude palm oil exporters to transport the commodity toPakistan and the Middle East, the Government has intervened by absorbingthe ships' insurance coverage.
22-10-2001
Indonesia sends mission to China to boost CPO
JAKARTA, Oct 17 Asia Pulse - Indonesia will send a trade mission to theChina in November as part of efforts to boost exports of crude palm oil(CPO) to that country, The Jakarta Post reported.The paper quoted chairman of the Indonesian Palm Oil Producers'Association (Gapki) Derom Bangun as saying the trade delegation will meetwith about 250 Chinese businessmen on Nov 9 to woo them to buy more CPOfrom Indonesia.China as one of the world's largest palm oil importers will raise its palmoil imports to 1.4 million tons this year from 1.1 million tons last year,Derom said.He added that Indonesia hoped to gain at least 40 per cent of theadditional palm oil imports.Indonesia had accounted for 330,000 tons, or about 30 per cent of China'stotal 1.1 million tons of imports.Indonesia's CPO production is expected to reach 7.2 million tons thisyear, compared with 6.5 million tons last year.
22-10-2001
Insurance for palm oil carriers
KUALA LUMPUR, Sat. 21 October 2001 (Business Times) — The Government willprovide insurance coverage for ships chartered by crude palm oil exportersto transport the commodity to Pakistan and the Middle East following therefusal of insurers to cover the vessels.
22-10-2001
Palm oil growers happy with generous incentives
October 20, 2001 (The Star ) - WEST Malaysian Oil Palm Growers’Association president Tan Sri Dr Jesse J.C. Chang has been taken bysurprise by the generous incentives proposed in the Budget 2002 foragriculture companies, especially those in the plantation sector.“We have never been treated this way before. This is wonderful. The waythe government is beefing up the agriculture sector is better than what iscurrently taking place in the US,’’ he said.Chang said that he described the proposed 5-year income tax exemptioncould act as a “buffer†for agriculture players to improve theirproductivity, which would enable them to compete with producers from othercountries in the region.He said the oil palm sector had been experiencing rising costs offertilisers as well as machinery. In the past 10 years, machinery cost hadrisen by 100% and agriculture firms did not receive subsidy, as companiesin the US did, Chang said.He added the tax exemption would help players replace old machinery andbuy more fertilisers.On the RM10mil aid for promoting training of modern agriculture workers,Chang said this would help promote cost-efficiency in plantationoperations.On the 70% tax exemption for companies reinvesting on product-basedresources, Chang said the incentive would encourage players to put theirmoney back into their core operations and support their move to ventureinto downstream activities and the production of value-added foodproducts.