The RM42bil oil palm replanting conundrum
08/04/2025 (The Star Online) - NATURE ages, and so do palms. Oil palm trees thrive in their prime years, but after 25 years, they start showing their age – growing too tall for efficient harvesting.
Once trees exceed 12 metres, even skilled harvesters struggle.
With a shrinking workforce and ageing harvesters, manual harvesting becomes an uphill battle. The job gets tougher, yields decline and costs creep up.
Despite these glaring red flags, replanting is often delayed. Carbon-fibre harvesting tools offer a temporary fix, extending productivity by another three years.
South American harvesters have mastered techniques for taller palms, recovering impressive yields. This extension can generate revenue to build replanting funds – if used wisely.
But let’s not kid ourselves. This is a stop-gap, not a long-term solution. Pushing the limits of tall palm harvesting buys time, but it doesn’t solve the problem.
The message is loud and clear: replanting isn’t a choice – it’s survival.
Data speaks for itself
In Malaysia, 1.4 million hectares (ha) – 25% of total planted area – are nearing the end of their productive life. In Sabah alone, one in three trees is over 20 years old.
Without aggressive replanting, yields will plummet, costs will surge and the industry risks stagnation.
Replanting is costly. A well-executed programme costs around RM30,000 per ha, covering land clearing to maturity in three years.
Multiply that by 1.4 million ha, and the total national reinvestment needed over next few years skyrockets to RM42bil.
For smallholders – who manage 26% of Malaysia’s planted area – it’s a financial burden many can’t afford, trapping them in a cycle of ageing plantations and declining yields.
For large plantations, replanting is a calculated investment but a tough sell in the boardroom.
The sheer cost forces difficult trade-offs between short-term profits and long-term sustainability. Many decision-makers hesitate, weighing whether to replant, diversify, or redirect funds elsewhere.
Some find property development or other ventures more attractive – why reinvest in trees when prime land can offer better real estate returns?
But kicking the can down the road only sets the industry up for a reckoning.
Replanting isn’t just about replacing old trees – it’s a commitment to the industry’s future. The real question is: Do we truly believe in the long-term viability of this edible oil sector?
The case for replanting
First off, let’s talk about yield restoration and productivity.
As oil palm trees age, yields drop sharply. Tall trees make harvesting harder, leading to crop losses and higher labour costs.
Mechanised solutions for tall palms remain elusive. Replanting is the only proven way to restore productivity.
Then there’s the financial aspect. RM30,000 per ha is steep, but think of it as the industry’s gym membership – painful now but worth it in the long run.
Replanting allows growers to adopt superior planting materials, precision agriculture and modern techniques that boost yields and reduce labour dependency.
It’s a long-term investment that pays recurring dividends.
Beyond yields, replanting benefits the environment. Optimised plantation layouts improve mechanisation, boosting productivity without expanding into green-fields.
Smarter replanting means doing more with less land – a win for both growers and sustainability.
A crisis in motion
Despite its advantages, replanting is lagging. In Malaysia, only 132,000ha were replanted in 2023, shrinking further to 114,000ha in 2024.
At this rate, we’re not just dragging our feet; we’re moving in reverse gear.
To sustain a healthy oil palm age profile, the industry should replant 4% to 5% of its planted area annually. However, with a growing number of ageing trees, this rate must double.
While it may tighten short-term supply and affect prices, it’s a crucial step for long-term stability and resilience.
Financial roadblock
Pragmatic replanting demands hefty investment, and that’s the biggest hurdle. Cash-strapped growers delay replanting.
The paradox? When palm oil prices soar, companies hold off to maximise short-term profits. When prices fall, replanting is unaffordable.
It’s a feast-or-famine cycle, and those with ageing trees will feel the pinch hardest when prices dip.
The government offers incentives, but they fall short. Malaysia’s 2024 budget allocated RM100mil for smallholder replanting – enough for just 5,000ha to 6,000ha.
A similar sum is expected in 2025. Compare this to the total RM42bil needed for large-scale replanting, and it’s clear the current allocation is unfortunately a drop in the ocean.
Meanwhile, Indonesia’s Palm Oil Fund, financed through crude palm oil export levies, supports both biodiesel and replanting.
Time for bold solutions
If we’re serious about tackling the replanting crisis, the usual half-measures won’t cut it.
Industry and government must adopt bolder financial strategies to break the funding deadlock.
> Windfall profit tax reallocation.
Instead of funnelling windfall tax revenues only collected from the oil palm sector into consolidated kitty, a portion should be reinvested into replanting oil palm.
Growers pay this tax – shouldn’t some of it go back into securing their future?
The lobby to make this happen must go into overdrive.
> Reinvestment allowance for replanting.
The existing reinvestment allowance benefits other sectors – so why not extend it to oil palm replanting? After all, replanting is essentially a reinvestment.
Allowing companies to offset 100% against statutory income would unlock more funds for replanting, driving the industry’s long-term sustainability.
Unlike smallholders, plantation companies aren’t asking for handouts – just a smarter tax incentive.
This can also be targeted. For example, a plantation group managing 10,000ha typically replants 4% (400ha) annually. If they push it to 6% (600ha), they should qualify for a full allowance on the extra 200ha.
This targeted incentive would encourage proactive growers and drive industry-wide replanting.
> Long-term supply chain partnerships.
Supply chain stakeholders must join forces to establish dedicated and shared replanting funds, bringing together buyers, financiers and sustainability-focused investors.
This isn’t just about cost-sharing, it’s about securing a stable, long-term palm oil supply for both buyers and producers.
It may seem ambitious, but the conversation needs to start now.
The clock is ticking
If we believe in a future with a thriving palm oil industry, replanting must become a top priority. It may feel like short-term pain for long-term gain, but ignoring the issue is no longer an option.
The time for half-hearted solutions is over. What’s needed is a clear, bold and strategically financed replanting plan.
The industry must confront this challenge head-on.
Without bold financial strategies to accelerate replanting, we risk being caught between a rock and an ageing palm tree.
Joseph Tek Choon Yee is the past president of the Malaysian Estate Owners Association and former chief executive of the Malaysian Palm Oil Association. The views expressed here are the writer’s own.