MARKET DEVELOPMENT
10-12-2001
Next charted course for palm oil sector
Monday, December 10, 2001(The Star) - What will the fortune of the edibleoil business, in particular palm oil, be in the face if the abnormally lowwould price for some time now? This is the million-dollar question for theMalaysian Palm Oil Promotion Council (MPOPC). MPOPC chief Datuk HaronSiraj, a former secretary-general of the Ministry of Primary Industries,talks to LIM HOCK CHYE on the next charted course for palm oil.IF one were to ask Malaysian Palm Oil Promotion Council (MPOPC) when palmoil would regain its brilliance, it would say the answer relates to whenthe US-Afghan war will end.Even French astrologer Nostradamus’ prophecies may not provide the rightanswer, although elsewhere, predictions abound that the war may heightenin the middle of next year and hopefully, be over by year’s end.Speculation aside, the MPOPC is not dodging the question, but no one canexactly chart the prospects for the commodity, one of Malaysia’s toprevenue earners.Being the largest world producer of palm oil, the current development inPakistan and Afghanistan is certainly a concern for the industry, inparticular, its supply and demand.As MPOPC chief executive Datuk Haron Siraj said, the local palm oilindustry post Sept 11 was looking ahead only from month to month as theindustry was still reeling from the consequences.Any longer term projection will be too ambitious as many shippers arereluctant to move to the markets in Pakistan, Russia and the formerCentral Independent States.Haron said during an interview in Petaling Jaya recently that manyshippers were unwilling to move to that part of the world because of thehigh insurance due to risk factors.Currently, palm oil is still being transported by various lines such asMalaysian International Shipping Corp Bhd and Sutrajaya Shipping Sdn Bhd,and the war has added uncertainties to freight cost and landed prices ofpalm oil.But Haron argues that at the same time, the industry cannot let certainparties take undue advantage of the situation by hiking the rate ofinsurance.“I hope to have an understanding among the buyers and the shippers,†Haronsaid, adding the industry already had its fair share of its “war†inrespect of price and it could ill-afford more problems in the interest ofprice stability and consumption.He said further price war would disrupt the commodity from reaching itsdestinations.It certainly will not benefit any party, as oil is such a basic need andfor the foreign buyers, stocks are going to start dwindling soon inanticipation of the coming festive seasons, such as Hari Raya Puasa andChristmas.The shipment of the oil must come in November and that is the main worryfor the local industry as well as the buyers.There have been reports from Egypt and the north African states that thepassage of ship in this region can be affected due to the war and this hasfurther dampened sentiment. MPOPC, nevertheless, is not directly involvedin the shipping.As a promotional agency, it is responsible in ensuring that we are able todeliver things in respect of time, quality and quantity specified,†saidHaron. More importantly, Malaysia has to see that palm oil enjoys a goodreputation.He noted that the buyers appreciated the problem and that the MPOPC was afacilitating agency, and the government would have to spearhead therelevant move.It has come to MPOPC’s ears that in Pakistan, people are selling the oilsparingly as they are afraid stocks may be in short supply. The councilhas been told some 40,000 tonnes will be shipped to Pakistan.“The situation at Karachi and Lahore ports is quite all right...the worryis again on the shippers and the country wants to order more, some 140,000tonnes for the next few months,†said Haron.The Pakistan market demand for our oil has increased to more than 15% overlast year’s demand. The buying is now more on CIF and understandably, thepremium is many times more.“I think there is a solution. It has to be shared responsibility. We haveestablished a good relationship among the various parties. There areindications that certain parties are willing to share the responsibilityif trade is disrupted,†Haron said.Everyone was affected and palm oil prices had been quite low for a longtime, he said.The new markets may provide a breather to the industry. Malaysia isselling to 140 countries. Every effort has been made to penetrate theworld market and the furthest sale is to some parts of Africa.“We are selling to some new markets too,†said Haron.The MPOPC is looking at, for instance, China (mostly urban areas), theUnited States (some 200,000 tonnes) Canada, Vietnam, Bangladesh, Laos andKampuchea.Iran is also on the list, according to Haron, and the Malaysian Palm OilBoard has set up a representative office there recently.“Our presence in Iran, for instance, has shown results. From January toAugust this year, Iran bought 60,000 tonnes against some 3,000 tonnes overthe corresponding period last year. This is an encouraging jump,†he said.The increase is due to the greater understanding between the two nationsand Haron said his immediate concern was to increase the number ofcountries which could absorb the commodity, because “by the time we cometo the 141st or 142nd country, the volume will be quite marginal.â€In his opinion, Malaysian businessmen are not that aggressive or keen onpushing themselves to the final frontier.Haron said they must use |the established contacts to further theirbusiness interest. If not for |the war, Malaysia would have expanded thepalm oil market and |be concentrating now on densely-populated countries.Haron also reflected on the American Soybean Association (ASA), which hesaid “things are all right now.â€â€œI must emphasise the truce with the ASA in 1989 has helped both sides alot. We have been meeting on a regular basis and we have always remindedourselves not to hit below the belt. They are also quite gentlemanly. Wehave a complementary role and if we can do that (carrying on the goodties), we are doing a good service to the world,†he said.Haron met ASA officials in September in Australia. At the meeting, thepalm oil industry drew out the best of both ASA and Malaysia’s attributes.As Haron puts it, “we synergise and work out our different niches.â€For instance, efforts have been made to combine soyabean and palm oil tomake a margarine called “smart balance†and this uses the good qualitiesof both oils. More importantly, the ASA has indicated its desire to workwith the palm oil industry and this could not have been a better piece ofnews.“We are always looking at less discriminatory treatment. Let’s talk aboutlevel playing fields in the true sense of the word. If some enjoy animport duty or a certain percentage of tariff, why can’t we enjoy thesame?†he asked, adding that things were not easy because of the differentamount of subsidies by the respective countries.Haron’s advice to the palm oil industry is that anything we can produce,we must be able to sell them.Traditionally, Malaysians are quite comfortable with people coming fromelsewhere to buy from us but the scenario has changed.“We must not be happy with a certain price. The industry must godownstream and get new products. And where palm oil is sold as an edibleoil the cost must be effective,†Haron said.He also said the industry must replant and with the help of research, itwould ensure Malaysia’s survival in the trade.“Don’t forget we have competitors but that aside, we can also cooperatewith neighbouring countries on market development and generic promotion,â€Haron said.In this respect, Haron said, Malaysia could draw on different expertisetogether to cooperate on multi-level trade issues.In essence, the efforts will result in a stronger linkage and eradicateundercutting.“Remember, Malaysia can’t afford to sell below cost, likewise, othercountries,†he said.MPOPC: Industry well-positioned to face Afta challengesTHE Malaysian palm oil industry is well-positioned to face the challengesfrom the Asean Free Trade Area (Afta), said Datuk Haron Siraj, the chiefexecutive officer of the Malaysian Palm Oil Promotion Council (MPOPC).He said this was because the industry had gone downstream and was quitecompetitive. “Our research and development has created a lot ofopportunities for the industry.â€Thailand is aggressively pursuing downstream processing but by virtue ofour relatively lower cost of operations in research and development,Malaysia still enjoys a competitive edge.Malaysia’s lower cost of operation and labour are its selling points andthe Asean market is there for it to tap.Giving his views on Indonesia, the world’s second largest palm oilproducer, Haron said its production would increase. Its cost is relativelycheaper and some 40% is consumed at home.“If they can get over whatever setbacks they have now, they will certainlygrow bigger and it is in our interest to work together with Indonesia,â€said Haron. “I believe co-operation and co-existence are very important.There is a place for everyone.“The world needs edible oils and fats. There is a role for our productsand Indonesia’s. If both of us are efficient and happy with reasonableprofits, we can work together. But I believe it must be attractive forus.â€In terms of value for money, palm oil gives premium health and nutritionalvalue.According to Haron, palm oil is the product for the poorer section of theworld community in particular.Malaysia has conducted 942 research projects worldwide to ensure palm oilis a “healthy†oil.“The relationship between the Malaysian and Indonesian palm oil industryis getting closer. We have been to China and India together to sell palmoil. We also want to appear to be responsible. We don’t want to be seen asganging up or pushing up prices as high as possible,†he said.Palm oil is suffering from tariff discrimination by some countries and itis in the interest of all that it enjoys better treatment compared withother oils.Malaysia and Indonesia will certainly want to see equal treatment of palmoil in some countries.“Transparency has to prevail, and with the quotas, we do not know whatthey are up to. The main objective in imposing a high tariff on importedoils and fats is because the country wants to raise its ownself-sufficiency in the industry,â€said Haron.Notwithstanding this, he said, Malaysia felt it was still doing all right.But there is always room for improvement or for a more level playingfield.
