Budget 2025: Ensuring The Sustainability Of The Palm Oil Industry
10/10/2024 (Business Today) - With the third Budget announcement by Prime Minister Datuk Seri Anwar Ibrahim since taking office is just a week away, palm oil industry player Pacific Inter-Link Sdn Bhd has listed out its wishlist hoping for crucial measures tabled during the session that could strengthen the sector, ensure its sustainability and continue to be globally competitive.
Dato’ (Dr) Fouad Hayel Saeed Chairman & Regional Managing Director said Prime Minister Datuk Seri Anwar Ibrahim has announced on 6 October 2024, that the Government is committed to empowering the palm oil industry addressing several important issues, including concerns related to foreign labour, low palm oil production rates and efforts to enhance downstream activities in the palm oil sector, aimed at ensuring the sustainability of the country’s palm oil industry.
The wishlist includes:
Strengthening Sustainability Initiatives– Pacific Inter-Link urges the government to allocate funding for initiatives that promote environmentally friendly practices within the industry. This includes investment in research and development for sustainable farming techniques and technologies that reduce environmental impact. Prioritising sustainable palm oil production to meet global demand for environmentally responsible products, implementing certification schemes and promoting best practices will enhance the industry’s reputation.
Value Addition– Investing in processing facilities to increase the value of palm oil products. Diversifying into high-value products, such as specialty oils and biofuels, can boost revenue.
Innovation and Technology -In an era where technology plays a pivotal role in industry advancement, Pacific Inter-Link recommends increased investment in innovation. The budget should support the adoption of precision agriculture, digital tools for supply chain management, and traceability systems that can enhance productivity and transparency. These innovation and technology will improve efficiency and competitiveness.
Market Diversification & Access To further position Malaysia as a leader in the palm oil market, it is essential to enhance market access. Pacific Inter-Link calls for the establishment of trade agreements that prioritise Malaysian palm oil and support our exporters in overcoming trade barriers in key markets, especially in Europe and North America. Expanding market access by exploring new international markets and strengthening trade relations including reducing trade barriers and enhancing marketing efforts for Malaysian palm oil will be beneficial for us. Banks or Financial Institutions need to play a vital role in the growth of destination markets across the globe by offering trade financing at competitive rates to agriculture exporters such as Pacific Inter-Link.
Smallholder Support The success of the palm oil industry is deeply intertwined with the welfare of smallholder farmers. We urge the government to implement programmes that provide resources, financial assistance and training to smallholders, empowering them to improve yield and quality while adhering to sustainable practices. Empowering smallholders is crucial for the overall growth and stability of the sector.
Policy Framework Establishing supportive government policies that promote investment in the palm oil sector while balancing environmental and social considerations. Clear regulations can attract foreign investment and innovation.
Infrastructure Development Improving transportation and logistics infrastructure to facilitate the efficient movement of goods. Enhanced infrastructure will support export capabilities and reduce costs.
Human Capital Development Investing in education and training for the workforce to ensure a skilled labour pool that meets the demands of a modern economy. Fostering entrepreneurship within the palm oil sector can also drive growth.
EU Deforestation Regulation (EUDR) The Malaysia government’s Budget 2025 can play a crucial role in helping the country materialise the European Union’s Deforestation Regulation (EUDR) through several key initiatives:
Funding for Sustainable Practices: Allocating resources to promote sustainable agricultural practices in the palm oil sector can help producers transition to methods that comply with EUDR requirements. This could include subsidies for sustainable farming technologies and practices.
Support for Certification Programmes: Increasing support for certifications like Malaysian Sustainable Palm Oil (MSPO) can encourage more producers to adopt sustainable practices, ensuring their products meet EUDR standards.
Investment in Traceability Systems: Budget allocations for the development of robust traceability systems will be essential. This includes funding for technology and infrastructure that enables the tracking of palm oil from plantations to consumers.
Research and Development: Supporting R&D initiatives focused on sustainability can help identify new ways to improve yield and reduce environmental impacts. This could involve partnerships with universities and research institutions.
Training and Capacity Building: Investing in training programmes for smallholders and farmers can enhance their understanding of sustainable practices and help them meet EUDR compliance. This can include workshops and educational campaigns.
Market Development Initiatives: Allocating funds for marketing and promoting sustainable palm oil in international markets can help Malaysia position itself as a leader in sustainable production, making it more attractive to European buyers.
Collaboration with Stakeholders: Establishing a framework for collaboration among government, industry players, and NGOs can foster a unified approach to addressing EUDR requirements. The budget could facilitate workshops and forums for knowledge sharing.
Monitoring and Enforcement: Allocating funds for monitoring and enforcement of environmental regulations can ensure compliance with both domestic and international standards, strengthening the integrity of the palm oil supply chain.
Dato’ (Dr) Fouad added that by strategically investing in these areas through the 2025 budget, the Malaysian government can support the palm oil industry in meeting EUDR requirements, thereby enhancing its competitiveness and sustainability in the global market.
By focusing on these considerations, Pacific Link believes Malaysia can strengthen its palm oil industry, contribute to economic growth, and work toward achieving its high-income status by 2028.