Datuk Sabri Ahmad

Thursday April 28, 2005 - THE Malaysian Palm Oil Association (MPOA) hascalled for the creation of mega palm oil corporations with one centralisedcost and profit centre to manage the sector’s production, manufacturing(refinery and oleochemical plants) and export units.

Chairman Datuk Sabri Ahmad said cost competitiveness in the sector couldbe achieved through the establishment of such corporations.

Malaysia’s palm oil industry is the most efficient in the world but comesin second in terms of competitiveness.

"It is also my view that various associations and bodies in the industryshould be merged as one mega palm oil association to spearhead totalintegration among the various sub-sectors," Sabri said.

He said this when outlining MPOA’s policies and strategic directions goingforward at its AGM in Kuala Lumpur yesterday.

Sabri said other main areas to be addressed by the sector includedoffshore investments, Sabah and Sarawak oil palm cultivation, marketingstrategy and branding, global market intelligence, palm diesel creationand human resource development.

For offshore investments, among the most effective strategies to capturemarkets or gain market advantage is to own refineries in major andpotential markets.

"The refineries have to produce as many palm oil-based products aspossible as the concept will reduce investment risks," Sabri added.

Major markets that need this prioritising are India, Pakistan, Iran,Turkey, the United States and South Africa.

The Government, through the Malaysian Industrial Development Authority,will have to formulate an incentive package that should be restricted torefineries using Malaysian palm oil.

In the area of palm diesel, Sabri said the Government could introduce aBill to amend the Petroleum Act to provide blending of petroleum dieselwith palm oil as a stock management tool. It will also reduce the nation’sdependence on fossil fuels.

Sabri said the main thrust of future development was to make the industrymodern, dynamic and competitive by 2020.

"The sector should enhance its continued growth both in production andexports of palm oil in tandem with the forecast increase in world oils andfats demand," he added.

The stage would be set for a fully liberalised trade in world oils andfats by then, thus intensifying the competition between the low-costproducers and Malaysia, Sabri said, adding that "price competitivenesswill be a key determinant in the future global oils and fats market."

On market access, he said the increasing competition in the world marketin tandem with the rise in palm oil production had been exploited by someof the major palm oil importing countries by way of tariff preferentialtreatments for crude palm oil (CPO).

This had benefitted countries that do not restrict CPO exports and as aresult, affected Malaysia’s export of processed palm oil, in particular tothe Indian sub-continent and European Union.

"It is imperative for Malaysia to continue to allow duty-free export ofCPO to maintain traditional markets and capture new ones and to meet theincreasing demand from Malaysian-owned refineries over-seas," he said.

However, such a quota should be balanced judiciously so as not tojeopardise local refiners.