Insight - Oil palm industry: The sustainable star

But for some 650,000 smallholders and stakeholders of the oil palm industry, the surging price of CPO must feel like the lifting of a siege. They must have celebrated.

A milestone has been achieved!

The crude palm oil (CPO) spot prices reported by the Malaysian Palm Oil Board have averaged close to RM4,050 per tonne in the first five months of this year.

It hit an all-time record peak of RM4,773.50 per tonne, which crowned this good run on May 18.

This is indeed welcome news amid much “doom and gloom” which was wreaked upon us by the Covid-19 pandemic now ravaging the land like a plague.

Millions of desperate Malaysians, mired in fear and hopelessness, are torn between securing their lives and livelihoods.

For its part, the government has orchestrated a massive RM600bil pump-priming exercise.

Even the B40 group’s pockets remain empty and worse still, their old age savings have virtually been wiped out.

But for some 650,000 smallholders and stakeholders of the oil palm industry, the surging price of CPO must feel like the lifting of a siege. They must have celebrated

Aidil Fitri some two weeks ago with much joy and relief, secure in the thought their larders will be well stocked for a few months at least.

This reminds us once again of how often the oil palm industry has come to the fore to ease the economic pains of the nation.

Decade after decade. Time after time. And so often it is the oil palm industry that gets rural Malaysia moving again after an economic downturn. Like now.

Undoubtedly, there is still much to be done to modernise the oil palm industry and make it more efficient.

It is a work in progress needing massive investments. With the emergence of Industry 4.0 – drones, lasers, sensors, big data and exoskeleton technologies coupled with artificial intelligence (AI) – are being explored to help drive greater business efficiency in the sector.

And yet its detractors, at home and abroad, chose to ignore the pivotal role of this industry in alleviating rural poverty.

Why, oh why? The backbone of the rural economy remains the plantation sector. There are towns and communities entirely dependent on the oil palm industry.

Yes, for old planters like me, retired but not rested, all the dots, dashes and lines of the world still converge under our tropical skies forming row after row of oil palms,

their fruit bunches ripening in the sun which in time will be harvested and turned into virgin golden palm oil.

Driving along a highway, with such rows on either side as far as the eye can see, one can be fooled into thinking an estate is an extension of Modern Malaysia.

Nothing can be further from the truth. It is a rural industry offering steady employment to both Malaysians and foreigners.

Plantation work can be dirty, dangerous and difficult. Some even describe it as demeaning to which I take strong exception.

It is this same work that lifted three generations of Malaysians of all races out of abject poverty. How can that ever be demeaning?

And to those calling for an increase in the windfall tax from 3% to 6% from the RM2,500 and RM3000 per tonne CPO threshold respectively for Peninsular Malaysia and Sabah and Sarawak, they must be reminded the oil palm industry as a whole is the “windfall”!

Let us not kill the proverbial goose that lays the golden eggs without first knowing what ails it now.

Make no mistake; the oil palm industry is at a critical juncture.

Strong headwinds

Three strong headwinds are buffeting it and these are getting stronger by the day. The first is the acute shortage of workers now more keenly felt following the government’s freeze on foreign workers.

Crop loss estimates run into billions of ringgit. A top-level strategy is desperately needed. Skilled guest workers – in particular crop harvesters – now stuck in their respective countries, must be allowed to return to Malaysia. In addition, the freeze must be lifted. Strict standard operating procedures (SOPs) can and will be complied with.

The next headwind is the issue of taxation. It is estimated that oil palm growers contributed some RM5bil plus in taxes, levies and cess payments to the government treasury in 2020, excluding CPO export duties. The government must engage with the industry so as to arrive at an equitable solution.

One must also take note that the cost of land obtained in the colonial era is vastly different from that opened up recently.

Moreover, the variability of crop yields has increased as a consequence of extreme climatic conditions; besides factors such as geology, topography, nutrient depletion of soils and shortage of workers.

A one-size-fits-all increase in the windfall tax will be disastrous for some players.

The third headwind is market access. The industry is on record appealing to the government to expedite and invest more resources on ensuring a robust government-to- government (G2G) engagement programme is in place to counter both anti-palm oil campaigns and discriminatory trade barriers.

Let us not go the way of natural rubber. As a crop it is hanging on but when we look at its downstream activities in this country, rubber is an undoubted success story.

In 2020, some 4.2% of our exports were rubber-based products valued at a whopping RM41bil.

The Malaysian oil palm industry is the product of a century and more of unremitting efforts and toil by generations of Malaysians first at the worker level and after independence at the investment and expansion level.

We remain a driving force in the global edible oils industry. But sustaining it through challenging times requires both the government and the industry to work together to resolve issues and put the glow back in palm oil. We can never tell when we need this gem of an industry to bail us out next!

M.R. Chandran is a 60-year veteran of the agri-commodity industry. He is the adviser of the RSPO, director of The Incorporated Society of Planters and chairman of IRGA Sdn Bhd. The views expressed here are his own.

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