24/01/2013 (Borneo Post)  - Following Indonesia’s move back in October 2011 to cut export duties on palm oil products, the Malaysian oil palm industry saw exports fall slightly in years 2011 and 2012.

The move taken by Indonesia to boost its exports of processed oil significantly undercut Malaysia’s tax structure, according to the Oxford Business Group’s (OBG) Malaysia Report 2012.

“The lower taxes in Indonesia make it harder for us to compete. It has the potential to result in total or partial movement of the Malaysian oleochemical industry to Indonesia,” Southern Acids (M) Bhd chief executive officer, Leon Kian Ming told OBG.

However, the Ministry of Plantation Industries and Commodities (MPIC) announced in October last year that there would be a new tax structure come January 2013 which would reduce the export duty on crude palm oil and abolish a duty-free shipment quota.

According to OBG, the new rates were expected to range from 4.5 per cent to 8.5 per cent where as the existing rate was 23 per cent.

Among other challenges faced by the palm oil producers in Malaysia included environmental issues, a lack of land for new plantings and a shortage of labour.

CB Industrial Product Holding Bhd managing director, Chai Beng Lim explained to OBG that zero-emissions processing facilities could become a major opportunity in the coming years as environmental regulations tighten up.

“The recent boom in the palm oil industrial has translated into increased spending by existing plantations for technological upgrades of their processes to make them more efficient and environmentally friendly,” Chai explained further in the report.

OBG further highlighted that all of Malaysia’s large-scale economic development plans included palm oil-related initiatives.

“The industry is the subject of one of the National Key Economic Areas (NKEA’s), which itself is made up of eight entry-point projects, including those aimed at accelerating the replanting of oil palm, improving fresh fruit bunch yield, boosting worker productivity and increasing oil extraction rate, among others,” it explained.

It remarked that the palm oil NKEA aimed to boost the segment’s contribution to gross national income (GNI) to RM178 billion by 2020, in addition to creating 41,000 new jobs, some 40 per cent of which would require highly skilled employees.

“According to the Economic Transformation Programme (ETP) planning documents, reaching this goal will require around RM124 billion worth of investment through the year 2020, 98 per cent of which is expected to come from the private sector,” the business group noted.

The government also made plans to support the palm oil NKEA with RM2.9 billion in capital expenditure along with an additional RM2.7 billion in tax and cash initiatives and soft loans in its effort to help the industry achieve the aforementioned goal.