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A century of growth

Malaysia marks 100 years of commercial oil palm cultivation this year. Plantation Industries and Commodities Minister Datuk Seri Mah Siew Keong talks to StarBiz about issues to overcome and initiatives to ensure the sustainability of this golden crop.

KUALA LUMPUR: Palm oil is a highly versatile agri-commodity which adds to Malaysia’s economy. The dynamic growth of the palm oil sector is well reflected by its strong export earnings of RM60.16bil in 2015 and its high employment rate.

The sector provides a stable source of income to more than one million local smallholders nationwide. To-date, about 5.64 million hectares of land are cultivated with oil palm, accounting for over 70% of the country’s agriculture land.

As the sector marks its 100 years of commercial cultivation this year, Plantation Industries and Commodities Minister Datuk Seri Mah Siew Keong tells StarBiz that his ministry will be stepping up efforts to resolve the country’s decade-old issue of stagnating palm fruit yields, while pushing hard to evolve mechanisation in plantations within the next 10 years to mitigate labour shortage.

Going forward, local palm oil players are strongly encouraged to diversify into further downstream sectors such as oleo derivatives and specialty oleochemical-related ventures.

This year, the ministry has also put in place several intiatives, including an RM30mil replanting grant as well as research and development grants to step up the game for palm oil players including smallholders.

For smallholders, replanting their palm trees that are more than 30 years old would ensure that they to continue to earn from selling oil palm fresh fruit bunches (FFB).

Mah, who assumed his ministerial post about six months ago, plans to tackle Western green activists and anti-palm oil lobbyists’ propaganda by implementing the Malaysian Sustainable Palm Oil (MSPO) certification, working closely with Indonesia under the newly set up Council of Palm Oil Producing Countries (CPOPC), and, harmonising the Malaysia-Indonesia crude palm oil (CPO) export duty while supporting the biodiesel mandates.

Key areas: Resolving the issue of stagnating palm fruit yields and pushing for mechanisation in plantations to mitigate labour shortage are the Plantation Industries and Commodities Ministry’s priority, says its minister.

On the country’s stagnating FFB yields, Mah admits that there is a disparity of 30%-40% in FFB yields between the estates owned by big plantation groups and smallholders. Big plantations have the capability to produce about 20 tonnes per hectare per year, compared to 15 tonnes per hectare per year by smallholders.

“That is why my ministry is sending out officers to the ground to assist and empower smallholders with new replanting techniques and good agricultural practices to boost yields. A lot of our smallholders have ageing oil palm with some trees as old as 30 to 35 years,” says Mah.

Under Budget 2017, the Govern­ment allocated RM30mil worth of grants for smallholders to undertake replanting as well as planting of new oil palm.

Between 2011 and 2015, RM969mil was provided to replant 84,400ha, and new planting on 74,600ha in the country.

With the initiatives for replanting, Mah says the ministry targets to achieve an oil extraction rate (OER) of 23% by 2020. Currently, the OER is about 20%. Malaysia’s CPO production fell to 15.8 million tonnes between January and November last year due to the El Nino dry weather phenomenon. Mah is confident that the industry can achieve an average CPO production of 20 million tonnes this year.

“CPO production dropped in 2016 but fortunately the price shot up. However, productivity of palm oil has stagnated so there must be more innovation,” he says.

Mah also notes that there are new seedlings in the market, which can raise output in the next six to seven years.

“You won’t see results immediately, so we are planning ahead for the country to accelerate the sector to become a high-value added industry,” he adds.

Meanwhile, the plantation sector is facing labour shortage; it was reported that as of September last year, the industry required another 38,000 workers.

In Sarawak, there were estimated losses of RM1bil resulting from uncollected FFB at the plantations.

“This problem will continue to persist as Indonesia which is the world’s largest palm oil producer has also increased the wages of its estate workers. Bear in mind that palm fruit harvesters in Malaysia are mostly Indonesian workers.

“I foresee within the next three to five years labour shortage will become a big problem in the oil palm plantations if we do not mechanise FFB harvesting methods,” cautions Mah.

“The existing harvesting tools still have plenty of weaknesses as they could not reach the taller palm trees. Therefore, there’s a lot more to be done in terms of mechanisation of FFB harvesting.

“Towards this, there should be more grants for intensive R&D to create harvesting machines as I believe the way forward must be through science and technology.

“What we need is the science and technology initiatives for innovation of new machineries that will make us less reliant on labour force,” Mah suggests.

He urges all parties in the sector, including higher learning institutions and private corporations, to pool their resources to speed up mechanisation in oil palm estates, while the ministry is planning a competition to come up with an economically viable oil palm harvesting tool.

The Government has also launched the oil palm industry mechanisation incentive scheme that offers rebates of up to 20% to estate owners for purchasing machines to be used in oil palm plantations but the uptake is still low.

Mah says Malaysia is preparing the strategic palm oil industry for the tough challenges ahead.

He stresses that the industry must be sustainable given its importance to the country’s economy in terms of exports and employment.

Malaysia is currently the second largest producer of CPO which accounts for 36.4% of total global exports of palm oil products.