Palm | Kelapa Sawit

THE government said the windfall profit tax on oil palm planters stays, dismissing calls for a review of the calculation of the levy."The Cabinet has decided that the windfall tax on palm oil be maintained for now," said Plantation Industries and Commodities Minister Tan Sri Bernard Dompok.

Oil palm planters via millers in Peninsular Malaysia are at the verge of having to pay a windfall tax via millers starting January 1 this year when palm oil futures traded above RM2,500 per tonne. The Malaysian Estate Owners Association (MEOA), which represents small-and medium-sized estates of more than 40ha, appealed to the government to review the current windfall tax formula. This is because the calculation of windfall tax assumes all planters make money when palm oil prices in the physical market surpass RM2,500 per tonne.

MEOA president Boon Weng Siew reportedly said it would be more justified if the windfall tax is on actual profits of audited financial accounts, like corporate tax. "This is because not every planter makes tonnes of money as the profitability of oil palm plantations depends on the age and productivity of the trees. A newly-replanted estate would still be losing money even if palm oil prices surpass RM3,000 per tonne."

Oil palm planters in the peninsular have to pay the windfall tax when palm oil prices go beyond RM2,500 per tonne in the cash market. Planters in Sabah and Sarawak, however, only need to pay the windfall tax if the price crosses RM3,000 per tonne.

In the last three weeks, palm oil prices fell as the US dollar strengthened against ringgit. Yesterday, the third month benchmark crude palm oil price slid a further RM62 to close at RM2,407 per tonne on the Bursa Malaysia Derivatives Market.

Asked if he is comfortable with the current palm oil pricing trading above RM2,000 per tonne, Dompok said, "At RM2,400, RM2,500 and RM2,600 per tonne, there's still a margin. Farmers and plantation owners should be happy. When they're happy, I'm happy."

THE government may offer specific incentives for palm oil millers to recycle waste to generate renewable energy and contribute to the national power grid, said Plantation Industries and Commodities Minister Tan Sri Bernard Dompok.

"We're carrying out a comprehensive study to help palm oil millers reduce their carbon footprint and at the same time become green independent power producers (GIPPs)," he told reporters after touring Bell Eco Power Sdn Bhd's biogas power plant in Batu Pahat, Johor yesterday. Also present were Bell Group chairman Dato' Low Boon Eng and chief executive Datin Liana Low.

"This will be in line with the country's overall policy to reduce dependence on fossil fuel. By 2020, we target annual usage of renewable energy to 2,000 megawatts(MW) from just 50MW now."

Dompok said his ministry will work with two other ministries - the Energy, Green Technology & Water Ministry and the Rural & Regional Development Ministry - to streamline new incentives with existing efforts on electrification of rural areas.

According to the Malaysian Palm Oil Board, there are now 417 palm oil mills in the country, of which 117 are in Sabah. Mills emit greenhouse gas like methane from retention ponds after oil extraction. Estate owners can trap methane from the mill sludge and re-use discarded empty fruit bunches to fuel up steam turbines and generate electricity, a renewable source of clean energy. Biomass and biogas technology is available now.

Currently, utility giant Tenaga Nasional Bhd via its Small Renewable Energy Programme buys renewable energy at 21sen/KWh. Bell Group's 60-tonne-per-hour palm oil mill is able to generate 2MW. By selling electricity at 21sen/KWh to Tenaga Nasional, GIPPs like Bell Group get to earn some RM3 million a year.

Not all palm oil millers can do the same as Bell Group because many are located far away from the national power grid and the cost to connect can be formidable. The Ministry of Energy, Green Technology and Water is facilitating RM1.5 billion worth of cheap loans via local banks for the provision and usage of green technologies. While palm oil millers can gain access to this cheap loans, this fund is shared with property developers and home owners looking to build and buy buildings incorporating energy-efficient lightings and water saving toilets.

Palm oil millers have suggested that if the government fund hook-up cost to the national grid and raise power purchase price to 30sen/KWh, the initiative to convert greenhouse gas to electricity for the benefit of neighbouring rural communities can be realised more quickly.

Dompok commented that incentives to encourage palm oil millers to be GIPPs will reinforce the notion that oil palm planting is sustainable. "It is important that we provide scientific evidence that palm oil is produced in a sustainable manner in view of the European Union's Renewable Energy Directive that will impose a target to only accept biodiesel that can reduce carbon dioxide emissions by at least 35 per cent versus fossil fuel," he said.

Currently, Europe considers palm oil produced by plantations that have not installed any greenhouse gas capture facility to save only 19 per cent carbon emissions versus that of fossil fuel. If oil palm estates were to capture and recycle these greenhouse gas, palm biodiesel shipped into the EU will definitely meet the technical qualifications specified under the EU Renewable Energy Directive.

"Also, since this carbon emission savings initiative can help in the electrification of rural areas like in Sabah and create jobs, it will be of national priority," Dompok added.

The Plantation Industries and Commodities Minister plans to propose the sale of biodiesel with less palm oil content to reduce government spending for the initiative, known as the B5 mandate. Under the mandate, the government has set a January 2010 deadline to sell B5 biodiesel, a mixture of 5 per cent palm oil and 95 per cent diesel.

If the government sticks to B5, it will have to spend about RM250 million that is needed by the industry to blend the mix and distribute it to petrol stations. Minister Tan Sri Bernard Dompok said a more realistic alternative would be to revise downwards the blend ratio.

"I'll be proposing to the Cabinet to bring down the B5 mandate to B3 or B2. The B5 mandate, if it were to be fully implemented, would cost around RM240 million to RM250 million. This is a problem because ordinary diesel is already being subsidised by the government," he told Business Times and Dow Jones newswire in an interview in Putrajaya yesterday.

Malaysia had planned for the B5 mandate to be rolled out in stages, starting from February this year with government vehicles, followed by the industrial and transport sectors. So far, only Kuala Lumpur City Hall (DBKL), Selangor's Jabatan Kerja Raya (JKR) and the Army have been using biodiesel in their vehicles. They get their biodiesel supply from the Klang Valley Fuel Depot near Puchong, Selangor.

The B5 mandate is scheduled for full implementation at all pump stations throughout the country by January next year. Oil companies like Petroliam Nasional Bhd, Shell, Esso, Caltex and BHPetrol are positive on retailing biodiesel at the pumps, but when it comes to absorbing blending cost at all 36 fuel depots nationwide, they remain hesitant.

According to the Malaysian Biodiesel Association, there are 10 active biodiesel plants. Five are in Pasir Gudang, one in Kuantan, two in Lumut and the remaining two in Lahad Datu.These plants, which are built at seaports, are far away from towns and cities of high population. It costs extra money to transport biodiesel to the fuel depots to be blended with ordinary diesel.

Dompok said the Finance Ministry had agreed in principle to lift the 10 per cent tax on the sale of biodiesel in the country. "The effective gazette date on the tax exemption on biodiesel sales will be announced later," he said.

Below is a story written by my colleague in Sabah, Roy Goh.

THE government is committed towards balancing the development of oil palm planted areas and the environment, says Plantation Industries and Commodities Minister Tan Sri Bernard Dompok.

Land to develop oil palm is getting less across the country where about 4.5 million hectares have been alienated to plant it. Dompok said with that in mind, the way forward is to look at other options such as increasing the yield of the "golden crop".

"If we can double the yield it will be the same as opening land twice the size that has been alienated," he said after launching the two-day Orang Utan Conservation Colloquium coordinated by the Borneo Conservation Trust in Tuaran, Sabah, yesterday.

"The importance of this golden crop is reflected by its export contribution. Palm oil is the country's third largest export contributor with earnings of RM65.2 billion last year and an average of RM47.4 billion for the past three years. "

Taking note of the importance of the industry, its development needs to be harmonised with the demands of nature, in particular balancing the concept of 3Ps & 1D; people, planet, profits and sustainable development," he said.

He stressed the development of the industry should not be singled out as a primary cause for deforestation, depletion of biodiversity and displacement of endangered species.

"Malaysia has a very large land area which has been gazetted as forest reserve," he said, adding that 56 per cent or more than half of the land in the country is devoted and kept as forest reserves.

Sabah State Tourism, Culture and Environment Minister Datuk Masidi Manjun, who was also present, said though industry players should not be solely blamed, they should also avoid providing merely "lip service".

"Planters need to practise self policing or self regulating of their operations toward ensuring the protection of the biodiversity in their surroundings. "They may not agree with all the claims made by select non-governmental organisations (NGOs) about the environment but I will say this, some merit the attention," he said, urging industry players to treat NGOs as friends not enemies.

Masidi also said that despite being home to 11,000 orang utans, Sabah should not be proud of the figure as 50 years ago, there were twice the number of the primates in the wild.

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Here's another story I came across at Australia's ABC news portal.

Palm oil boycott will hurt impoverished farmers

It is rich for activists in developed countries to oppose using developing world's palm oil in food manufacturing, writes Melbourne Institute of Public Affairs director Tim Wilson.

Over the past few weeks New Zealand-based green groups and activists have called for a boycott on Cadbury products because of the use of Malaysian palm oil in its chocolate. The boycott was prompted after Cadbury clarified using palm oil as one of the total vegetable oils used in its products.

And doing so has whipped activists into a tizz.

Opponents of palm oil claim farmers burn forest in poor countries to create available land for oil palm plantations. The claimed the cost is less forest, and threats to endangered species that rely on the forest for survival. They also argue that plantations have a lesser capacity as a carbon sink to offset carbon dioxide emissions.

These allegations cause Auckland Zoo removed Cadbury products from its shelves in August 2009. Anti-palm oil activists have also established a "Boycott Cadbury" Facebook group arguing "Only d*cks eat Cadbury".

But in doing so they aren't seeing oil palm plantations from the forest.

Palm oil is mostly produced across south-East Asia because it is a sustainable, high-yield product that helps small farmers lift themselves out of poverty. It is also a vital food supplement which can deliver up to a third of a person's daily Vitamin A requirements.

The benefits are so great that the anti-poverty Asian Development Bank (ADB) has a strong repayment rate from palm oil producers who take on loans. And growing palm oil provides an export industry for developing economies like Malaysia and Indonesia into markets like Australia and New Zealand.

But international NGO Friends of the Earth is campaigning against the ADB's support for palm oil despite the fact that oil palm planting actually helps alleviate poverty. According to a recent report they're "sceptical about a broad-based economic growth model lead (sic) by the private sector".

Rather than having evidence that growing palm oil won't increase living standards, FOE's reports expose that their agenda is motivated by ideology, not practical environmentalism.

And FOE's claims and motivations cannot be trusted. According to a 2007 press release the palm oil industry is involved in "illegally logging rainforests, setting forests on fire and violating the rights of local communities". The evidence they provide is a photo of a hilly area in Indonesia that 'proves' a forest fire. The problem is that the photo shows no flames amongst the trees, and based on the angle of the sun's reflection the photo was taken at either dawn or dusk, and the 'smoke' could just be mist.

FOE might be right, but the evidence they provide is more of a misting, than smoking, gun.

And FOE's ideological opposition to the use of palm oil won't deliver environmental benefits. The palm oil sourced by Cadbury is certified by GreenPalm - an organisation that certifies the oil has come from sustainable sources. And Cadbury is a member of the Roundtable on Sustainable Palm Oil which was founded in part by international environmental NGO World Wildlife Fund.

FOE's opinion of supposed impact of palm oil on Malaysia's forest is questionable. Of Malaysia's forest, 16 per cent is zoned protected with 60 per cent of the country's total land mass allocated as forest. By comparison, the United Nation's minimum zoning target is 10 per cent and Europe's allocation of land mass to forest is only 25 per cent.

It is easy to be an armchair environmentalist from Australia or New Zealand. What consumers are missing is that the financial saving of not buying a block of chocolate is costing Malaysia's oil palm planters their livelihood.

According to their corporate website Cadbury introduced palm oil to "soften (their) chocolate and maintain affordability". Cadbury did so because it offered better value-for-money and that's good for business. But their decision is also providing a development dividend for the world's poor.

If consumers don't like the taste of chocolate with palm oil then they can vote with their wallets.

But by boycotting palm oil, what certain activists are actually doing, is shutting down the industry in developing countries, and with it their opportunity to raise living standards and increase wealth.

And if you think you can do without chocolate because it goes straight to your hips, imagine the cost to an impoverished farmer's family who can barely afford to eat.

THE Malaysian Palm Oil Board (MPOB) is proposing a heavier fine of RM2 million for criminals who deceive planters into buying and planting low yielding oil palm seedlings.

Currently, those found guilty are only fined up to RM250,000 or jailed up to three years, or both. "There is a need for heavier sentencing as the current penalty does not reflect the severity of the crime," said MPOB deputy director general Dr Salmiah Ahmad.

MPOB is now taking a more serious stance on oil palm seed scams as it is found to be one of the main causes for the country's average yield stagnating at four tonnes per hectare a year for the last 20 years.

Many smallholders have been duped but they cannot be blamed because it is difficult to differentiate a genuine crossbred seedling of dura and psifera (DXP) strains from fake ones.

These fake seeds will only yield five to 10 tonnes of fresh fruit bun-ches a year compared with DXP seeds, which will yield 25 tonnes.

Cross breeding DXP seeds takes time and they are sold for RM2 per seed. Malaysia's strategy to remain the most productive oil palm producer in the world is mainly buoyed by the government policy of using DXP seeds, tissue cultured and clonal palms.

Yesterday, Plantation Industries and Commodities Minister Tan Sri Bernard Dompok launched the Malaysian Oil Palm Nurseries Association (Mopna) in Bangi, Selangor. He advised smallholders to be more discerning. "We must remember that whatever we plant will remain in the ground for the next 20 to 25 years. It is therefore absolutely essential that we get it right the first time, ensuring that only superior planting materials reach the fields," he said.

Under the national replanting strategy to reduce palm oil supply in the immediate months and boost supply in the longer term, RM200 million has been allocated to encourage the replanting of 200,000ha. MPOB has, so far, approved of 160,000ha for replanting this year.

Earlier this year, the Finance Ministry allocated RM50 million more to MPOB to supply seedlings and fertilisers to independent smallholders who do not get support from other government agencies like Felda, Felcra or Risda. It works out to be RM6,000 per hectare spread over three years.

Mopna president Azhari Wasi Mohd Jamli said half of its 60 members already received MPOB's oil palm nursery certificate of competency.

Malaysia's palm oil output, down 4 per cent in the first half from a year ago, is likely to fall further as the government continues to chop down unproductive oil palm trees.

"Replanting is a two-pronged strategy. It will immediately cut off some oil supply into the market, but, in the mid-term, oil yield will improve," Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said.

The minister is optimistic of buoyant palm oil prices in the months ahead.

In an interview in Putrajaya yesterday, Dompok said he had told the Malaysian Palm Oil Board (MPOB) to speed up replanting efforts. "The RM200 million budget has been allocated, MPOB must speed up the implementation," he said.

Asked to comment on conflicting price forecasts by several plantation analysts, Dompok said: "Analysts and traders like Dorab Mistry can forecast from time to time. But you have also seen their predictions were not accurate.

"Palm oil prices are essentially subjected to market forces. You also have to consider the strength of the US dollar against ringgit and the amount of rainfall in oil palm plantations.

"If you ask me, I would not be able to give a specific forecast to palm oil prices. But I can assure you the government is committed to tightening palm oil supply in the immediate term."

Last year, Malaysia produced 17.7 million tonnes of crude palm oil. In the first six months of this year, the output was only 7.92 million tonnes, about 4 per cent less than a year ago.

Dompok estimates this year's palm oil output at 17 million tonnes, 700,000 tonnes less than last year's all-time high. "There is already a supply shortage, compared to last year, because of replanting. Also, since many smallholders cut back on fertiliser usage a year ago, we're seeing smaller and fewer fruit bunches," he said.

Yesterday, the third-month benchmark September contract on Bursa Malaysia’s Derivatives Exchange fell RM20 or 1 per cent to RM1,990 per tonne, the weakest level since March 30.

I read Palm Oil Insider's comment before attending a press conference in Tokyo. I think the minister must be telephatic. In his welcoming greetings to the Japanese media, he spoke on the benefits of Japan's public buses using cleaner and renewable fuel like palm biodiesel, instead of regular fossil fuel.

TOKYO: Japan should consider using more palm biodiesel for its transportation sector because it is a clean and competitively-priced option compared to other variants, Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said.

The Tokyo Metropolitan government is already undertaking trial usage of palm biodiesel in its fleet of public buses, he said. "We're all familiar with the food versus fuel debate and there have been calls for a total ban on usage of vegetable oils for biofuels to ensure food security.

"I can assure you that the Malaysian government prioritises palm oil for food sector," Dompok told reporters after officiating at the Malaysia-Japan Palm Oil Trade Fair and Seminar here yesterday.

Asked if there was enough world supply of palm oil, he said that Malaysia and Indonesia each limits six million tonnes of palm oil a year for biofuel production. "Food will always be more important than fuel and there is enough oil for both usage," he said.

Dompok said palm biodiesel is greener than other sources of biofuel because its life cycle analysis of greenhouse gas emission savings exceeds the 35 per cent threshold set by the European Union's renewable energy directive.

He also assured Japanese consumers that oil palm is cultivated on legal agricultural land in Malaysia and adopts good practices such as "zero burning", integrated pest management and the trapping and recycling of polluting methane gas.

"Since November 2008, Malaysia has started exporting RSPO (Roundtable on Sustainable Palm Oil)-certified palm oil. There are now five supplying companies and, by the end of next month, another 300,000ha of oil palm plantations will be certified," Dompok said.

"The Malaysian government has allocated RM50 million to help smallholders get their oil certified according to RSPO principles and criteria. It is important that smallholders are included because, collectively, more than 300,000 smallholders contribute to 40 per cent of our country's palm oil output."

The RSPO is a not-for-profit association that unites stakeholders in the global palm oil industry.

Currently, Japan buys about 500,000 tonnes of palm oil from Malaysia annually, the bulk of which is used as food ingredients. Its main uses are in making margarine and shortening and for deep-frying instant noodles, tempura and snack foods.

Also present at the press conference were Malaysia's Ambassador to Japan Dato' Mohd Radzi Abdul Rahman, Malaysian Palm Oil Council chairman Datuk Lee Yeow Chor and chief executive Tan Sri Yusof Basiron and Malaysian Palm Oil Board director-general Datuk Dr Basri Wahid.

MALAYSIA is looking to the East to woo more strategic partnerships with Japanese confectionery and snacks companies to boost palm oil trade.

Currently, Japan buys about 500,000 tonnes of palm oil from Malaysia annually.

Its principal uses are in making margarine and shortening and for deep-frying instant noodles, tempura and snack foods.

"I would like to see more strategic partnerships to boost palm oil shipments to Japan," said Plantation Industries and Commodities Minister Tan Sri Bernard Dompok, who will be leading a 30-member delegation to Tokyo for two days from today to participate in the Malaysia-Japan Palm Oil Trade Fair and Seminar (POTS).

This is the tenth edition of the POTS series organised by the Malaysian Palm Oil Council to generate greater global recognition of the nutritional benefits and eco-friendly features of palm oil.

Among topics to be discussed at the seminar are the versatility of palm oil. The palm fruit oil is suitable for tempura frying while the kernel oil can be made into biodegradable detergent.

Palm biodiesel is increasingly seen as a cleaner fuel because of its lower greenhouse gas emission compared to other variants.

The Japanese are big investors in Malaysia's skin and hair care, laundry detergent and specialty fats industries. Among the big names are Kao, Lion and Nisshin OilliO.

"We're heartened by Japan's oleochemical and specialty fats investments in Malaysia. We welcome more value-adding investments from Japan's snacks and confectionery business community," Dompok told Business Times in an interview in Kuala Lumpur over the weekend.

In this photo, Datuk Peter Chin Fah Kui and Senator Kohilan Pillay hand over the Plantation Industries & Commodities portfolio to Tan Sri Bernard Dompok and Datuk Hamzah Zainuddin.

Chin has moved on to head the Energy, Green Technology & Water Ministry.

Below, my boss made a keen observation when Prime Minister Datuk Seri Najib Razak announced his new Cabinet line up.

RECENTLY, I met some executives who told me how hard it was for their company, a large multinational that has invested about RM3 billion in Malaysia, so far, to open new facilities.

They have done everything by the book and yet the top civil servant at the relevant ministry still said no. The reason was flimsy, with no solid data to back up his refusal.

I'm sorry because I have to be quite vague here. The executives didn't want the story to be out because they believe that it can still be sorted out without going to the newspapers. But the strain was showing, they were worried. They worry because it seemed like the government doesn't want fresh investments, at a time when it needs it most.

This illustrates one of the many challenges facing the new Cabinet line-up.

On Thursday, during the live announcement of the new Cabinet line-up on TV, people went oohs and aahhs, like watching a football match. I have never seen so many people in the office so interested in a live telecast. It was a slight disappointment to me, though. Only one ministry merger was announced when there had been more expected.

The new faces are interesting. Some of them named to the powerful posts were not those who were normally in the limelight. One colleague even blurted out "who is this guy?" for one minister who shall remain anonymous in this column. Maybe it's a good thing that the minister in question is not well known. He will probably let his work do the talking. I like to give people the benefit of the doubt.

Asking ministries to set clear goals is a good move. Setting targets imposes a sense of unity and direction for an organisation and it does wonders for morale when the goals are met or surpassed.

Just look at Malaysia Airlines and what it has done under the helm of Datuk Seri Idris Jala. To do this, some of the targets need to be made public so that every one in the ministry can appreciate them and understand what needs to be done.

The next one month will be very important for our ministers as they need to put on their thinking caps and work out their key performance indicators (KPIs). I believe the new ministers will need all the help that they can get.

So here are two suggestions.
Ministers need to manage their time better. Pick and choose the right events to go to and make them short and sweet. Ministers also need to know the issues. This is where KPIs come in handy. The indicators make people focus not just on the targets, but also the problems.

Ministers should do spotchecks regularly to make sure their work is producing results. Knowing the issues is crucial because there have been instances when reporters were left wondering if the minister actually knew what he was talking about.

French military leader Napoleon Bonaparte once said that leaders are dealers in hope. It means that leaders can have a big influence in the lives of others if they do their job well.
Now, let's get to work!