Wednesday May 11, 2005 - LOCAL oil palm industry players will need moreinvestment incentives from the Government to effectively compete withother major commodity players in the global market.

That is the view of newly appointed Malaysian Palm Oil Association (MPOA)chief executive Azizi Meor Ngah, who said that for the industry to thrive,it needed the Government’s support to ensure that it continued to be aprominent global player.

He said important issues like the increasing usage of biofuel andbiodiesel in Europe required the Government’s assistance in expeditingMalaysia's Green Fuel policy to provide the incentives for the privatesector to start biofuel operations, while the new oil palm growth areas inSabah and Sarawak would need better infrastructure in terms of roads,ports, bridges and hubs for storage.

The MPOA represents 109 members, comprising mostly local oil palmplantation players with a combined hectarage of about 1.7 million.

Going forward, Azizi has outlined MPOA’s two-pronged strategies for thedomestic and overseas market.

On the home front, MPOA would be looking at a consolidation with a focuson increasing productivity and efficiency in the industry, he said.

"We will look at the supply chain management to ensure the industry ismore compact and competitive. Currently, we have been focusing onincreasing estate efficiency rather than the products that leave theestate," Azizi told StarBiz in Kuala Lumpur yesterday.

MPOA also believes that Malaysia could transform into a global supplychain centre given the right investment and infrastructure incentives fromthe Government."“To enable the oil palm industry to compete with other competitors likeIndonesia or even the US, we need to have the best resources, knowledgebase and the right infrastructure to make Malaysia an attractive globalchain centre of the future," he said.

Azizi said Malaysia’s oil palm industry was very efficient and was notsubsidised by the Government, compared with soybean farmers in the US andEurope. "We even pay taxes (in the form of cess) for research work," headded.

"We believe there must be a limit to taxes on the industry," Azizi said,adding that the Government would need to consider the issue of taxesbecause oil palm industry players could not compete globally if theirproduction costs became too high.

In Sabah, the biggest crude palm oil (CPO) producing state, a sales tax of7% is imposed, while in Sarawak, it is 5%. Based on the current CPO price,Sabah's revenue from sales tax alone is estimated at RM500mil while thatfor Sarawak is at RM85mil this year.

"We are overly concerned over these taxes. MPOA believes in the need tonurture the palm oil industry, and focus more on research and if possible,limit the taxes," Azizi said.

MPOA is also seeking a "launching grant" from the Government, which couldbe either in the form of special project funds, annual grant or a one-offgrant similar to that given to other think-tank groups in Malaysia.

Azizi said that on the international front, MPOA would explore furtherend-uses for palm oil.

"We plan to focus on the supply of edible oil and non-edibile oil - whichone would give better returns to the industry," he added. Currently, theequation is about 90% for edible products and 10% for non-edibleproducts.

However, Azizi believes that this equation is set to change with thegrowing importance of biofuel and biodiesel, especially in Europe.

"Europe will be a big potential market for Malaysian palm oil," Azizisaid, adding that about 500,000 tonnes of Malaysian palm oil went toEurope as raw material for biofuel.

He said biofuel legislation in Europe was well proven whereby the price ofrapeseed, which is being used as raw material for biofuel, was now tradingat a premium to soybean.

"We believe Malaysian palm oil will benefit from this legislation andpossibly increase its exports to one million tonnes to Europe in theforeseeable future," he said.