Priorities for Malaysian Palm Oil

Malaysian Plantation Industries and Commodities Minister, the Hon. Datuk Seri Mah Siew Keong is a veteran of politics. He hails from Perak, one of the top three palm oil-producing states in Peninsular Malaysia and an area with a long history of commodity development. He grew up in his constituency, Teluk Intan, seeing at first-hand the positive impact of palm oil on the livelihood of smallholders. He was appointed to his current portfolio in June. In an interview, he speaks on a range of issues that involve Malaysia’s palm oil industry.

Could you tell our international readers about your political career?

I first entered Parliament in 1999. From 2004-2006, I held the post of Deputy Trade Minister, after which I was the Minister for Agriculture and Agro-based Industry for two years. I left Parliament in 2009. Between 2010 and 2013, I was Chairman of the Malaysian External Trade Development Corporation.

In 2014, I returned to Parliament and was appointed Minister in the Prime Minister’s Department, before becoming the Minister for Plantation Industries and Commodities. So I have experience across the portfolios of both trade and agriculture.

What are your priorities for development of the palm oil industry?

Malaysia will mark its centennial of oil palm planting next year. I want to see to it that the industry expands and becomes more competitive globally, while keeping the empowerment of smallholders at its heart.

To do this, we must first counter unjustified negative and discriminatory perceptions of palm oil in European countries. Efforts must be sustained to engage with these countries, and to reinforce the many beneficial attributes of palm oil. We have to defeat anti-palm oil campaigns to ensure continued market access and to maintain our market share.

Secondly, we will have to move toward new downstream activities for further addition of value. With home-grown natural resources at hand, it will be more cost-competitive to add value to downstream products. Higher demand for palm oil will ultimately deliver more revenue to the country and income to smallholders.

I am confident that these approaches, coupled with relevant incentives, will go a long way towards empowering smallholders and contributing to the economic growth of the country.

How important is the palm oil industry to the Malaysian economy?

The industry’s significance cannot be overstated. It contributes around 8% of the national GDP and more than one-third of agricultural GDP. Palm oil exports are worth RM63.2 billion – or 8.1% of all exports.

Over one-third of the oil palm acreage is planted by more than 300,000 farmers and their families. In total, more than 1 million people are dependent upon smallholder farming. This is an enormous contribution to the well-being and success of these families, their communities, and the nation as a whole.

Over the years, the industry has helped bring down the poverty rate from 50% after Independence to less than 5% today. Some 40% of Malaysia’s oil palm acreage now belongs to small farmers. This is proof that palm oil is truly a commodity that distributes wealth throughout the population, while bringing about social and economic benefits especially in rural areas.

The benefits for Malaysia are clear. Are there advantages from the palm oil trade for importing countries?

There are positive economic impacts for countries choosing to import palm oil. In China, for example, palm oil imports are associated with over 900,000 jobs and up to 59 billion Yuan in GDP benefits. In the European Union, downstream palm oil industries contribute up to 117,000 jobs and up to US$2.9 billion in tax revenue.

These figures, calculated by the London-based consultancy Europe Economics, show how important palm oil is as a global commodity. It is a competitive, low-cost vegetable oil that can be used in food and manufacturing, as evident in the major markets of China and India. This is a win-win situation for both producer countries such as Malaysia and for importing countries.

What are your views on the current debate on the environment, in relation to palm oil production?

Let me first state that Malaysia is a world leader in environmental protection: our commitment to preserve 50% of the country’s land area under forest has been recognised by the United Nations. We have also adopted Good Agricultural Practices, such as the zero-burning policy in clearing stands of old oil palm trees.

Moving forward, the Malaysian palm oil industry is giving greater attention to research in order to increase productivity and the oil extraction rate, rather than rely on expanding the planted acreage. Environmental protection and economic growth are not mutually exclusive: Malaysia has demonstrated this with the oil palm sector.

The global market is large enough for all edible oils to compete in, but the question we need to ask is: are we able to fulfill growing demand as the world population increases? This demand is easily met by the oil palm, as it is the highest yielding oil crop. It produces 4.2 tonnes of oil per hectare in contrast to 0.42 tonnes and 0.36 tonnes per hectare from sunflower and soybean respectively.

Furthermore, the oil palm is a perennial crop. It therefore provides a sustainable and steady supply of palm oil. As the world population increases, the superior productivity of the oil palm is the solution to issues like the scarcity of land and food insecurity. In addition, palm oil has a unique composition of texture, efficiency and nutrition, which has made it popular with companies and consumers across the globe.

Are there opportunities to expand recognition of the Malaysian Sustainable Palm Oil (MSPO) standard and similar national schemes?

Yes, certainly. The MSPO standard was launched last year. It is based on Malaysia’s Good Agricultural Practices for oil palm, as well as domestic laws and regulations, and our international obligations. The Indonesian Sustainable Palm Oil standard was developed by our counterparts in Indonesia. There is potential for recognition of these standards through the ASEAN mechanism.

On a recent visit to Europe, I discussed the MSPO with Members of Parliament and Ministers in different countries. The benefits of the MSPO are of great interest to many of our partners in Europe. It will require a concerted international effort to achieve recognition, but the palm oil industry will gain from this.

Regional cooperation appears to be moving forward with the establishment of the Council of Palm Oil Producing Countries (CPOPC). Where is this headed?

We are working closely with Indonesia on the major areas of operations. This is an important step forward for industry cooperation, since Indonesia and Malaysia are the two largest palm oil producers. We are confident that the CPOPC will be an effective organisation that will communicate the benefits of palm oil globally. For example, a coordinated approach to trade policy can help producer countries to fight discrimination against palm oil.

You have spoken in favour of the Trans-Pacific Partnership Agreement (TPPA). What are the potential opportunities for palm oil from this and other trade agreements?

The TPPA – once it enters into force – will be beneficial to both Malaysia and this region, and not just for palm oil. Other opportunities will emerge from the Malaysia-EU free trade agreement, on which negotiations are resuming. We can work toward increasing opportunities for palm oil, whether through lower tariffs, pulling back non-tariff barriers or obtaining recognition of the MSPO.

Is there still a danger of France implementing a new tax on palm oil?

Yes. One tax proposal was defeated in July, thanks to strong opposition from producer countries and others. But on a visit to France recently, it was clear to me that the danger of a new tax exists. It is important that Malaysia takes a firm stance on this matter: any tax increase, in any form, is unacceptable.

France has formed a commission to review the sustainability of palm oil. Malaysia will oppose any attempt to set arbitrary sustainability criteria. We must stand ready to respond should countries impose discriminatory taxes or criteria against palm oil, as it is our key export.

In which regions do you see improved prospects for marketing palm oil?

China and India are still incredibly large export markets. The vegetable oil market in both countries remains fiercely competitive, particularly in China where there is often substitution with other oils. I do, however, think we have the opportunity to generate stronger investment and export ties with both countries when it comes to palm oil.

Africa is the other region of interest. Its countries are becoming increasingly urbanised and vegetable oil demand is rising. There are encouraging prospects for exports, as well as investment in palm oil. We have the experience and know-how to make these opportunities work.