20/11/2010 (Sabah Today), London - The oil palm industry is important to Malaysia from the perspective of economic development, poverty eradication and providing employment opportunities.

The industry, according to Plantation Industries and Commodities Minister, Tan Sri Bernard Dompok, generated nearly RM50 billion revenue for Malaysia last year and has shown resilience despite facing numerous challenges and has contributed tremendously towards the economic development of Malaysia.

Despite all the negative perception and allegations levelled at it by many quarters all over the world, there are entities within the industry that withstood and are more than 100 years old, he said when addressing a lunch forum at the Institute of Economic Affairs here on Thursday.

He disclosed that Malaysia is one of the world’s largest producers and major exporters of palm oil and in 2009, the country produced 17.56 million tonnes of palm oil and exported close to 15.87 million tonnes or about 90 per cent to the global oils and fats market.

The total revenue generated from the exports of palm oil and its products in 2009 was valued at US$20 billion of 7.5 per cent of the country’s gross domestic product (GDP), he said, adding that the oil palm industry has been a major export earner averaging annually at US$13.4 billion for the past five years and employment to about 300,000 smallholder.

These, he pointed out, made the oil palm sector as one of Malaysia’s major socio-economic drivers and an important pillar in the nation’s economy.

“Taking into account  the limited land available in the country, the current focus of the Government is geared towards enhancing productivity which is currently about four tonnes of oil yield per hectare per year in the oil palm industry.

‘This is about 20 per cent of its theoretical potential oil yield of about 17 to 18 tonnes per hectare per year and could be better enhanced further with better planting material, automation,, mechanization and good agricultural practices,” he said.

Other measures include increasing smallholders’ productivity through the adoption of innovative technology and good agricultural [practices, research in genome sequencing and concurrently to produce higher yielding planting materials in the future.

According to him, the entrepreneur skills discharged by the industry players have enabled the Malaysian oil palm industry to strengthen market share globally and Malaysian companies have s major presence in important markets such as China, India, Pakistan and the European Union.

This, he said, has enabled the oil palm industry to produce products for specific markets through the establishment of refinery and downstream operations in countries such as China, Pakistan and the Netherlands.

In addition, due to limited land available in Malaysia, Malaysian companies have also ventures into plantation development in neighbouring countries such as Indonesia, Latin America and Africa, he said.

‘Domestically, the Malaysian oil palm industry has diversified through the establishment of downstream processing activities in the areas including refining, oleochemicals, phytonutrients, biodiesel, biomass and other value-added products.

‘All these developments would not have materialized without the

Government taking a proactive approach to complement the private sector initiatives by improving the national infrastructure and supporting facilities such as ports, bulking installations and transportation,” he said.

He said that in terms of export, palm oil products generated revenue of nearly RM50 billion for Malaysia last year and added that the industry has always been a good source of foreign exchange earnings for the country averaging close to RM33 billion annually during the last 10 years.

In terms of volume, 2009 registered exports of 20.3 million tonnes of palm oil products and to date, Malaysia on average exported 17.6 million tonnes of palm oil products per year since 2000, he said and pointed out that the industry’s importance to Malaysia is indisputable.

“On a macro level, the palm oil industry is inarguably the best agro-based industry available for a tropical country which took advantage of the crop by introducing large scale commercialization programs.

“Nevertheless, the Government is aware of the pressure of diminishing suitable land available for oil palm cultivation in the country. In addition, with the focus on preserving the environment, the Government is actively looking at ways and means to enhance the industry’s overall productivity,” he stressed.

Dompok lamented that while much has been said about the contribution of the industry, there are detractors who dispute the sustainability of the oil palm industry and allegations hurled against the industry include deforestation displacement of natural habitat as well as contribution to global warming.

“At this juncture, I would like to reiterate that the Malaysian oil palm industry is developed along a sustainable manner as the Government, on its part, has put in place the necessary laws as well as regulations to guide this development,” he said.

The Malaysian Palm Oil Board (MPOB) which is the Research and development (R&D) and regulatory body of the industry has developed Codes of

Practices for the Industry ranging from nursery, plantations, milling, refining and transport and handling operations.

These Codes of Practices, he said, are regularly audited to ensure the compliance of the industry to establish guidelines and concurrently ensure that the industry continues to operate in an environmentally friendly manner.

He said that the efforts by the Government in charting the industry towards sustainable development have been complement by the private sector in Malaysia by adopting a proactive approach towards sustainable practices.

The industry in Malaysia, Dompok said, is actively participating in the business to business initiative under the Roundtable on Sustainable Palm Oil (RSPO) which is aimed at producing palm oil on a sustainable basis.

“Currently, Malaysia has more than 1.2 million tonnes which have been certified under the RSPO and to further encourage sustainable practices among the smallholders, the government has allocated RM50 million towards assisting them in the certification of palm oil,” he said.

However, despite the positive image of palm oil, there are measure imposed by major importing countries on their domestic oil seeds production, he said and pointed out as example being the European Union (EU) Renewable Energy Directive (RED) which does not really favour palm-based methyl ester despite is characteristics from the environmentally friendly perspective.

The EU RED, he said, attributes a 19 per cent default value for greenhouse gas (GHG) emission savings for palm-based biofuel.

“This is far below the actual contribution where our research indicates palm oil with process not specified has a GHG emission saving of at least 50 per cent. In addition the EU does not factor the issue that it cannot produce required biofuels to meet the Directive’s mandate such as the use of at least 20 per cent energy from renewable sources by 2020.

“Palm oil is the cheapest vegetable oil available and will be an important biodiesel source to the EU,” he stressed and added that Malaysia was also concerned about the move by the EU to incorporate Indirect Land Use Change (ILUC) criteria into the RED without justifiable and reliable scientific data.

This, according to Dompok, will disadvantage countries that produce feedstock for biofuel production as he was informed that currently, there is no proof that including this criteria will help to limit biodiversity loss as well as GHG reductions.

As such, the EU need to reconsider the proposal and factor the efforts undertaken by biofuel feedstock producers including by Malaysia in producing sustainable palm oil, he stressed.

Dompok gave the assurance that Malaysia will continue to produce palm oil in a sustainable manner to meet global demands and in addition, it will also continue to undertake R&D activities that will provide opportunities for new business as well as entrepreneurs.

“In the longer term, this initiative will contribute towards strengthening palm oil’s role in meeting both food and non-food purposes, “he said.