Palm | Kelapa Sawit

The Malaysian palm oil industry earned a healthy RM60 billion last year. This was an increase of RM 10 billion compared to 2009. Most plantation companies doubled their last quarterly profits compared to the previous year. The income generated by high prices as experienced by the palm oil industry led to rural townships around the country undergoing a mini economic boom. Clearly, the rural population benefited the most from the high prices of palm oil, rubber, cocoa and even pepper which form the major plantation commodities produced in Malaysia.
 

The economic contribution of palm oil and other plantation commodities provided the assurance of a remunerative source of income and unlimited employment opportunities throughout the year for the people of Malaysia. A day’s work of harvesting oil palm fruits or tapping rubber trees for latex can provide a person with an income of more than US $30. In a country where two meals per day would cost only US $4, such an income is rather remunerative. Nobody should be deprived of a better life or even resort to begging as long as he or she is willing to put in a few hours of work in a day in our oil palm or rubber plantations. Malaysia enjoys almost full employment which also means that labour shortages exist especially in the plantation sector.

In contrast, rural population of many developing countries often earns a mere US$2 per day, and employment is limited or seasonal. Food is often unaffordable and as previously mentioned in my blog , one billion people on this planet suffer from food insecurity where daily meals are not assured. This is where employment opportunities offered by the plantation industries in Malaysia also benefit labour from other countries. The income earned by the 300,000 foreign workers employed in the Malaysian oil palm industry, ensures that there is food on the table on a daily basis for 1 million of their family members living back home in Indonesia, Bangladesh, the Philippines and other neighbouring developing countries. In simple terms, the oil palm industry not only provides an income to Malaysians, but shares this benefit with an additional one million family members of workers who now do not need to go hungry to bed thus bringing cheer to so many poor people . How many industries can claim to do this?

The oil palm industry is also a major source of income for the government through the collection of corporate taxes. The benefits from such income will be more pervasive as the multiplier effects of government spending will impact education, health and infrastructural development. Essential food items are subjected to price control or subsidized in Malaysia, and this includes cooking oil for the public. The government taxes the palm oil industry in the form of a windfall tax and uses the money raised to make cooking oil affordable to the public. It is clear that palm oil provides solutions on many fronts: affordable food, lucrative income and overall stability to the country (bear in mind that high food prices and poverty have led to uprising in many developing countries recently).

Releasing the importance of the palm oil industry to the country’s economy, the Hon. Prime Minister of Malaysia recently spoke of the narrow view taken by the greenies and their followers who want to tarnish the image of palm oil by linking it to deforestation. No country in the position of Malaysia or Indonesia which benefits from the palm oil industry would tolerate the unsubstantiated allegations made by the greenies to denigrate palm oil. Viewed on a broader perspective, palm oil is a saviour to the current global shortages in oils and fats as a result of insufficient production of soyabean and rapeseed oils. For these oilseeds, lack of new land and unfavourable weather conditions have prevented any substantial expansion in planted areas or yield improvements. The future will see a widening gap between supply and demand of oils and fats. Consumers will face the prospects of escalating prices. Low income consumers from developing countries will be the most affected as they are the least able to afford expensive soyabean or rapeseed oils. Furthermore these oils are mostly burned in the EU for biodiesel, thereby further reducing the availability for world food requirements.

Palm oil plays a critical role in supplying affordable cooking oil to most developing countries which have to depend on imported supplies. The greenies have influenced the EU to discriminate against palm oil from being used as biofuel to protect the local rapeseed industry from competition by creating trade barriers through the implementation of the RED regulation. This leaves palm oil generally available for the food sector globally. As shortages are unavoidable, it does not matter what oil is used for which sector. What is important is that the growth in supply is matched with projected demand. Since oil palm is the most capable crop to meet the increasing demand, its production should be logically increased. Because of its high yield (10 times more than soyabean oil), it will require ten times less land to supply the world’s increasing needs.

The greenies are threatening the world’s food security. On the one hand, they are encouraging the EU to convert inefficient rapeseed oil for biodiesel and on the other hand they are campaigning to limit the production of palm oil, fearing that it would compete with rapeseed as a raw material for the EU biodiesel industry. Inadvertently, their wish to restrict the growth of palm will accelerate the shortage of oils and fats in the world market. While current palm oil producers will benefit from escalating prices created by the greenies anti palm oil campaigns, other consumers, especially those in the developing countries, will be burdened by unaffordable cooking oil and escalating food prices. It would threaten jobs which would otherwise be created through the expansion in the oil palm sector as operations are labour intensive as compared to other oil seeds.

All these potential calamities are being created by the greenies out of their perverted and narrow views of deforestation. Without resorting to scientific evidence or even considering broad macro view of world requirements, they (the greenies) have opposed the expansion of oil palm cultivation fearing that rapeseed oil will be out-competed by palm oil for biofuel use in the EU. They use deforestation as an excuse for campaigning against palm oil without any scientific justification.

How can oil palm be blamed for deforestation in Indonesia when the country only uses 5% of its land area to plant oil palm which is one of its agricultural crops. In comparison, the UK has deforested up to 72 % of its land area for planting of agricultural crops. If the total land area under oil palm globally is compared to the total agricultural land of the world, the oil palm share is only 0.22%. Any scientist or non scientist would know that the utilization of 0.22% of the world agricultural area to plant oil palm, does not constitute massive deforestation. The fact is more than 60 and 80 % of the oil palm areas in Indonesia and Malaysia respectively were from non virgin forest areas. In addition, both countries have huge forest reserves which will cater to the need to conserve biodiversity.

How can such a small figure of land use be associated with habitat or biodiversity loss, or even be a cause of major contribution to GHG emission and global warming. I keep challenging the greenies and their fanatic followers to provide clear evidence or proof of any allegations they wish to throw at the palm oil industry. This includes allegations of indigenous people being robbed of their land. Let me correct the misinformation again. Indigenous people have been given ample land reserves by the British when they ruled the country. Their land is mostly cultivated with rubber or oil palm. Many are thankful that they have been given land to enable them to become prosperous smallholders. Obviously, we have laws in place that would address any attempt to rob people of their land.

Consumers in developing countries and also those in the developed countries must be alerted to the potential damage to the economy, food security and escalating food prices which will result from the anti palm oil campaigns orchestrated by the greenies. It is even immoral to support them in their campaign which will ultimately bring misery in the form of food shortages and high prices to the rest of the world. It is even more mind boggling to ask why the EU continues to blatantly fund the greenies to pursue their indefensible intentions to deny developing country consumers with an improved food security for the future.

The world population is estimated at 6.8 billion today. This is predicted to increase to 8 billion people in 2030 and 8.9 billion by 2050. There will be many more mouths to feed perpetually in the future thereby increasing the demand for food.



Over 1 billion, or 15% of the world still do not have enough food on a regular basis. At the turn of this century, United Nations expounded eight Millennium Development Goals. On top of the list is the goal to eradicate extreme poverty and hunger. The need to address this important issue was echoed, not too long ago, at the World Summit on Food Security that was held in Rome, Italy in November 2009. Very recently, in April 2010, World Bank launched the Global Agriculture and Food Security Program (GAFSP), which is a new multi-donor trust fund to improve food security and incomes in low-income countries through assistance to agriculture.




What is food security? According to FAO, food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life.

The oil palm (Elaeis guineensis) is an important agricultural crop, which yields three important sources of food, namely palm oil, palm kernel oil and palm kernel cake. An average of 3.7 tonnes of palm oil, 0.4 tonnes of palm kernel oil and 0.6 tonnes of palm kernel cake is obtainable from one hectare of land. While the first two products can be used for human consumption, such as cooking oil, margarines, shortenings, bakery fats, vanaspati, ice creams and Vitamin E, etc., palm kernel cake is used as an animal feed.




The two major palm oil producers in the world are Indonesia and Malaysia, with outputs of 21.1 and 17.6 million tonnes respectively in 2009. Together, they constitute a magnanimous 85.3% of the world’s production.




Palm oil constitutes the major bulk of the world’s production of oils and fats. It contributed to 27.6% share when its production in 2009 was 45.5 million tonnes. Soyabean ranked second with a production of 35.9 million tonnes or 21.8%, animal fats third with 24.4 million tonnes produced or 14.8% while rapeseed was fourth with an output of 21.5 million tonnes or 13.1%.




There are hurdles to overcome during the pursuit to achieve food security in the future. A major obstacle is the diminishing availability of already scarce arable land. While population increases, the lack of arable land may not permit this to happen as it decreases from 0.75 hectares in 1922 to 0.23 hectares in 2005 and this will decrease further to 0.19 hectares per capita in 2030. An urgent need to use this scarce resource wisely can be realized if palm oil is chosen as the preferred oil over the other major vegetable oils. Due to oil palm’s high land productivity, whereby it can produce 4.1 tonnes versus 0.59, 0.42 and 0.36 tonnes of oil per hectare for rapeseed, sunflower and soyabean respectively, 7 times less land area is needed to obtain the same amount of vegetable oil if palm oil substitutes rapeseed completely.




Similarly, palm oil’s substitution for sunflower and soyabean saves 10 to 11 times more land from being cleared and planted with these two crops. The extra land saved, could then be used to plant other crops or for animal husbandry.




With land scarcity, palm oil’s contribution to ensure food security comes from successful research carried out in Malaysia, whereby clonal oil palm materials, capable of producing 25 to 50% more fresh fruit bunch yield are already planted in the fields. As such, higher land productivity than that obtained currently, can be expected from oil palm in the future, without resorting to felling more new land.

Vegetable oils such as palm, rapeseed, sunflower and soyabean can be used as biofuels. There is concern that there will be competition between these vegetable oils for use as food or fuel. Chatham House, United Kingdom has optimistically projected that 28% of vegetable oils or 57 million tonnes will be used for biofuels in 2015, with the balance of 72% to be used for food. In 2050, 39% of total vegetable oils will be used as fuel and the balance of 61% will be used for food. Such projected large amounts of vegetable oils dedicated for biofuel usage is unlikely to happen.

Progress has been made to convert biomass to biofuel leading to minimal quantities of vegetable oils being used as biofuels. In this respect, palm oil has a sustainability edge over soya, rapeseed and sunflower, as the oil palm, which is a perennial crop, produces large amounts of biomass all year round and these can be used for biofuel. Palm kernel is already used as a fuel source while palm briquettes can be made from empty fruit bunches. Methane from the palm oil effluent ponds is also trapped and used as biogas. Thus, besides ensuring food security, a new business of converting waste to wealth is created in the palm oil industry.




Palm oil can enhance food security by ensuring that the competition between food and fuel is minimal when its biomass are utilized for fuel and, therefore, any price hike will not be the result of such competing demands.

One of the drivers that often derail food security is the inability of the rural population, some of which live below the poverty level, to be able to afford sufficient food. The oil palm is a proven economic crop that has been used successfully to eradicate poverty due to its successful cultivation. The FELDA model in Malaysia bears testimony to such a success.

In conclusion, palm oil is the leader among the major vegetable oils that has the greatest potential to overcome food insecurity. It is capable of doing so in a very sustainable way since it requires the least land to produce the same amount of oil, thus freeing diminishing arable land for the cultivation of other crops or for animal husbandry. It is also proven that oil palm cultivation can help to eradicate rural poverty and hunger, which is one of the primary Millennium Development Goals.

Ensuring adequate supply of edible oils for the world market at affordable prices is very important to low income people of the developing world. Derailing future expansion of palm oil production through the Western Environmental NGO anti-palm oil campaigns will impact food security among the developing country population the most. It will also lead to massive deforestation as 10 times more land would be required to plant competing crops such as soyabean to meet future shortages compared to oil palm cultivation.

The world population of over 6 billion is increasing by 70 to 80 million people annually. Food supply needs to expand to keep up with the additional demand. Land to grow food crops is getting scarce. By 2020, arable land in the world is projected to decrease to less than 1 acre per capita which is hardly sufficient considering the same land is needed for producing enough grains, vegetables, fruits, meat, milk and oils and fats to feed a single person and his animals for a year. In terms of land utilization, priority will of course be given to the production of cereals and grains as these are staples in most countries and this will be followed closely by oils and fats production.

In the oils and fats sector, global demand is increasing at a rate of 5 to 6 million tonnes per year on average against a total consumption of 165 million tonnes annually. To produce an additional 5 million tonnes of vegetable oils and fats, 10 million hectares of land will be required to plant soyabean, as compared to 1 million hectares if oil palm is the choice. Cereals and grains such as rice, wheat and corn are also experiencing shortages due to population pressure and increasing affluence where more demand for meat will mean more intensive production of grains as feed for cattle etc. The world is facing an enormous challenge. It needs to have 10 million hectares of new land created every year to supply the additional 5 million tonnes of soyabean oil, considering additional land is also needed for grain and cereal production. The annual expansion of oilseed area if planted with soyabean is almost equivalent to the combined total oil palm area of Malaysia and Indonesia. Another 10 million hectares will be needed the following year and similarly, in subsequent years to maintain an additional 5 million tonnes of oils and fats supply annually. BUT if oil palm were to supply the annual increase, the land expansion is more modest, a mere 1 million hectares per year.



It is important to note that most countries including the EU are already net importers of oils and fats. For these countries the chronic shortages will worsen in future because of limited land availability locally for growing oil seed crops. As shown in the chart 1 below, only three countries are significant net exporters of oils and fats, i.e. Malaysia, Indonesia and Argentina. Malaysia and Indonesia which export mainly palm oil, account for 80 % of world net export availability for oils and fats. These countries have announced limitations of available land for oil palm cultivation because of the need to conserve forests. Malaysia has long pledged to keep a minimum of 50 % of its land as permanent forest and that remains till today. Indonesia has recently declared a moratorium on deforestation after a US$ 1 billion compensation agreement with Norway.

(Chart 1)


The challenge facing the future availability of oils and fats is in the need to ensure adequate supply to meet at least the requirements of the net importing countries. As a result of their chronic non self-sufficiency, their import demand is growing. As shown in chart 2, the net import of oils and fats has doubled since 9 years ago from 25 million tonnes to an estimated 50 million tonnes in 2009.Yet, the two largest net exporting countries, accounting for 80 % of world net exports of oils and fats are imposing a limit to future production expansion because of the need to conserve forest.

( Chart 2)


Many potential scenarios can be postulated to prevail in the coming years regarding such future shortages as follows:-

Firstly, countries that are not bound by a moratorium on deforestation will continue to deforest to produce the additional oils and fats needed to feed the increasing world population. As these countries will produce annual oil crops such as soyabean rather than palm oil, the new land required will be 10 folds larger due to its low yield as compared to the higher yielding oil palm. If most of these are forest areas, the deforestation rate will be accelerated by a factor of ten. The deforestation moratorium in Indonesia and Malaysia will translate into an accelerated deforestation which will occur ten times faster in other countries. This will be most profound in the net importer countries as they will have no alternative but to put their own forest areas to work to produce the oil needed to feed their population. (African and Latin American tropical countries could not cultivate oil palm on a larger scale because of the threat of indigenous diseases that could devastate their oil palm plantations).

Secondly, shortages will cause prices of oils and fats to rise. While, producers will try to improve yield to produce more oils and fats from existing land area, this potential has been explored in recent years and future additional yield improvement is limited. Consumers will have to reduce consumption because of high prices in order to reduce demand to match smaller volumes of supply. More than 75% of the net export of oils and fats is destined for developing countries. Future supply shortages and high prices of essential commodities such as oils and fats will mostly impact developing countries. Low income earning population in the developing countries will face the prospects of having inadequate access to oils and fats supply leading to major segments of the population being exposed to mal-nutrition.

Future planning to address the impending shortages should be initiated in the agenda of international bodies like the FAO and not dictated by agendas of the Western Environmental NGOs (WENGOs). Their claim of success in their anti-palm oil campaigns could be premature. When the developing countries are confronted with acute shortages of oils and fats in 10 years time, it will be too late to restart the cultivation of oil palm as the trees take 3 years to mature. By curtailing the continuing expansion of the oil palm industry, through the WENGOs bogus anti-palm oil campaigns, it is the developing countries which will face shortages of edible oils and fats supply in the near future. Furthermore, instead of preventing deforestation, much more deforestation will be carried out by other countries planting inefficient annual crops such as soyabean to meet their local demand. Instead of reducing carbon emissions, the large scale planting of soyabean will cause more deforestation and more CO2 emissions as compared to the situation if oil palm cultivation is allowed its natural expansion to supply the needs of net importing countries.

Bogus studies by the WENGOs have also depicted exaggerated emissions of carbon dioxide when peat land is developed for oil palm cultivation. A recent review (See JOPE, 2010, at http://www.jope.com.my) actually showed that degraded peat land naturally emits much more CO2 equivalent than if the peat area is planted with oil palm. In other words, oil palm planted on degraded peat land will reduce carbon emission compared with the natural emission of the degraded peat forest. Bogus WENGO campaigns based on non-scientific studies will deter expansion of legitimate and logical use of peat land for oil palm cultivation which would otherwise ease shortages of supply for net importing countries and would in future save more forests from being converted into producing oil seed crops in those countries.

Similarly, bogus calculation of default carbon emission figures on palm oil in the proposed EU Renewable Energy Directive(RED) will also force the EU to use high carbon foot print raw materials such as rape seed and soya oil for their biofuel programme therefore increasing carbon emission as compared to a situation if palm oil were allowed to be freely used for biofuel in Europe where carbon savings will occur. Already bogus arguments have been proposed that despite palm oil not meeting the 35% threshold figure of emission saving, (because of fictitious default value of carbon emission saving of 19 % assigned to the crop ), it will continue to be allowed for use in biofuel in the EU but will not be given tax exemptions. Such arguments make no business sense at all as no one would use palm oil under punitive tax discrimination.

Highly disputable land-use change calculations are already being designed to ignore the effect of deforestation avoidance whenever net importing countries import land-efficient palm oil to replace soyabean or rapeseed oil as raw material for food or fuel. The outcomes are equally predictable. Not only will carbon emissions be increased multifold, but the shortages of supply will force prices to rise which will severely hamper consumers in developing countries to have access to affordable oils and fats.

When shortages hit the market, palm oil net exporters such as Indonesia and Malaysia will be the beneficiary of high prices for their commodities. The WENGOs will probably deny any responsibility in accelerating the shortages. They would also probably deny their role in accelerating deforestation that will contribute to a faster rate of global warming. While orang utans will continue to survive in the permanent forests of Malaysia and Indonesia as they have been well looked after for decades by authorities in these countries despite claims by WENGOs that these animals will become extinct by 2012, millions of children and adults in developing countries will suffer malnutrition from low availability of oils and fats as a result of the bogus WENGOs anti-palm oil campaigns. Will the WENGOs be answerable for their suffering?