PUTRAJAYA: To encourage the palm oil industry to move further downstream and add value to their end-products, the government, through the 11th Malaysia Plan (11MP), has allocated RM280mil in grants for industry players.
Apart from targeting the big players, the government is also assisting small and medium enterprises (SMEs) in the industry, with RM50mil of the grants dedicated to this group.
Plantation Industries and Commodities Minister Datuk Seri Mah Siew Keong told StarBiz that the grants were aimed at encouraging domestic manufacturing of palm oil-based food and health products as well as chemicals or high-value palm oleo derivatives.
“Under the 11MP, I want industry players to know that there are RM280mil worth of grants for the taking. We want to invite the industry to work together with us, and take up these grants,” he said.
Mah said the bulk of Malaysia’s palm oil output was still being exported in the form of processed palm oil.
In 2015, 68.6% of the country’s palm oil exports were within the upstream and midstream segments, consisting of CPO and processed oil.
The export value of the crude palm oil was RM12bil and processed oil brought in RM28.2bil.
The downstream sector, while only accounting for 30.1% of total exports, saw oleo-chemicals raking in RM14.9bil and exports for finished products amounting to RM1.7bil.
The Minister noted that the export value for finished products were significantly higher, and stressed that industry players had the potential to earn much more by moving further down the downstream sector.
“We really need to add value to our exports, and that is why we are offering these grants.
“If we want to be a game-changer, and to increase our export value, we have to shift our focus to downstream and end-products.
“This is the strategic shift that we want to see in the industry,” he said.
By moving further downstream, the demand for CPO will also increase, and the entire industry will benefit, he added.
Mah said the country’s largest plantation companies had all come onboard the initiative.
“When CPO price is high, the upstream segment will generate the bulk of profits, but when prices are low, planters tend to benefit from the downstream segment.
“This is because the input costs are lower, and planters will gain from their end products.
“Companies that have strength in upstream as well as downstream will be able to leverage whether the CPO prices are high or low,” he added. Palm oil derivatives are found in various daily products - from toothpaste, toothbrushes, shampoos and biodiesel, to food and health items.
In 2015, the export of commodities and commodity products was worth over RM117.16bil, the second largest segment after electronics. The export of palm oil was valued at RM63.2bil.
During the 10th Malaysia Plan (10MP), the government had committed RM416mil worth of grants for commercialisation projects, while the private sector committed RM2.9bil in investments.
The projects under these grants are in various stages of implementation. Under the segment of the grants allocated for commercialisation projects, clinical trials were implemented across five countries.
The minister cited a project successfully implemented in China, in which students in were given biscuits with palm oil derivatives, making the food item rich in carotene and Vitamin A.
He said the programme had resulted in reduced malnutrion among the students and a significant decline in eye diseases.
The project, in collaboration with Lanzhou University in Longxi District, China, was initiated in Dec 2014.Since the 10MP, the government has emphasised on five product categories for industry players to explore.
The categories are surfactants, which are used in detergents, bio-lubricants, which are chemicals used in industries and cars, bio-polyols used to produce foams and plastics, as well as agrochemicals and glycerol derivatives, which can be used in food and non-food products.
Under the total RM280mil in grants, RM100mil is allocated for the manufacturing of high-value palm oleo derivatives or chemical products, another RM100mil for food and health products, RM30mil for clinical trials and RM50mil for SMEs. On the grants allocated for SMEs under the 11MP, the minister said this was a new addition.
While SMEs were not expected to produce oleo derivatives, which involves very costly technology, these businesses incorporate these derivatives into their products.
For example, by adding red palm olein into their food product, the business will be able to produce a higher value-added product, and market it as a health food.
Malaysia has nearly one million smallholders involved in commodities, with 568,354 of them in the palm oil industry, and forming 40% of the oil palm land.
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