Archive for June 2010

Heritage Foundation slams World Bank's palm oil policy

This is written by my colleague, Rupa Damodaran.

US-BASED public policy research institute, the Heritage Foundation, has chided the World Bank for its plans to revise its strategy for future development assistance in the palm oil sector.

The International Finance Corp (IFC), under the World Bank, suspended approval of new palm oil development investment in September 2009, pending a review of practices in the sector.

It has embarked on multi-stakeholder consultations to develop its global strategy in palm oil and has held several meetings with stakeholders in Indonesia, Ghana, Costa Rica and the Netherlands. According to the IFC, the final strategy will be announced in September 2010.

"The World Bank should go back to adopting a pro-growth strategy that supports oil palm planting investments in developing countries," said trade and economics expert and fellow James M. Roberts in an interview with Business Times in Kuala Lumpur.

It is learnt that the IFC's moratorium had hampered investment plans of several Malaysian planters keen on expanding oil palm cultivation in Africa.

The Washington-based Heritage Foundation is also urging the Obama Administration to advise the bank to uphold its original mission of alleviating poverty with a pro-growth strategy.

Roberts, in his newly released research paper, said the palm oil sector is vital to economic growth and job creation in Indonesia, Malaysia and other developing countries. "Restriction to further development in the palm oil sector will block opportunities to raise living standards and reduce poverty levels in the third world. Strings, in the form of narrowly-defined sustainable criteria, attached to World Bank's loans will potentially harm trade and investment partners too," he said. 

For the past decade, numerous western environment activists have campaigned against oil palm planting in tropical countries, alleging that it destroys rainforests and endangers wildlife such as the orang utan. "These groups are selective in their environmental crusade. The real motive is to oppose imports of cheaper but higher quality vegetable oils into Europe because it threatens the market share of their homegrown rapeseed oil," he added.

Many of these environmental activists who target their attacks on oil palm planting nations like Malaysia and Indonesia are recipients of tens of the millions of euros in annual grants from the EU environment ministries and the European Commission, the Heritage Foundation report revealed.

"Foreign direct investments to develop the palm oil industry has played an important part in fuelling the economic growth and freedom in developing nations. In the last 30 years, oil palm planting investmens has increased stability and prosperity in Indonesia and Malaysia (together accounting for as much as 85 per cent of world palm oil production), as well as Colombia, Liberia and Ghana," he said.

The oil palm industry employs more than 570,000 in Malaysia and over three million people in Indonesia, contributing to more than US$27 billion (RM87.5 billion) in sales, in 2007. 

Roberts said over the past five decades, the World Bank and the IFC together have invested nearly US$1.3 billion (RM4.2 billion) in oil palm projects and have helped palm oil-producing countries develop prudently while protecting the environment and wildlife.

"It is distressing to see the World Bank re-orientating its development resources away from private sector economic and agricultural development projects," he said.

Migros still buying IOI palm oil

This news article was published last week, 23rd June 2010.

SWITZERLAND'S biggest supermarket chain operator Migros did not said it will stop buying palm oil from us, says a spokesperson for IOI Corp Bhd.

In fact, both companies said they will seek to engage with environmental activists who, without evidence or proof, have alleged IOI of illegal land grab and forest burning.

In a statement issued from the Netherlands yesterday, IOI said the allegations surfaced when the Miri High Court declared on March 31 this year, that the villagers had won a suit against the state authorities and IOI over a land dispute.

This case, however, is not over. IOI and the Sarawak government agency Land Custody and Development Authority (Pelita), have filed an appeal. "The court did not allow the natives' claims for a declaratory order to cancel the leases issued for the lands.

The court also did not order vacant possession of the lands to be delivered to the natives on the ground that the native customary rights on the lands can be extinguished by paying compensation to the natives.

"Thirdly, the court did not grant any injunction sought by the natives restraining IOI and Pelita from remaining and continuing its operation on the lands," said IOI.

When contacted by Business Times yesterday, IOI spokesperson said the group's management had contacted Migros recently and the feedback was that Migros will not replace IOI as their supplier without first seeking clarification from IOI.

"Migros and IOI have regular exchanges on sustainability objectives. We both have already engaged to schedule a multi-stakeholder meeting with several non-governmental organisations (NGOs) involved to discuss the allegations.

"It is very important for IOI and Migros to clarify the current situation and define the next steps," said the spokesperson.

Migros Industries head of food production Robert Keller was recently reported as saying that his company plans to submit a fact-finding request to the Roundtable for Sustainable Palm Oil (RSPO), over the illegal land grab and deforestation allegations by environmental activists.

"Therefore, earlier news reports have wrongly judged IOI over allegations that are not proven," the IOI spokesperson explained.

Currently, IOI has three RSPO-certified plantations in Malaysia. It hopes to receive certification for all of its holdings by the end of next year. In April this year, IOI was the first among RSPO members to offer large-scale segregated palm oil shipment to Europe.

Emery sets aside US$200m capex

EMERY Oleochemicals Group, an equal joint venture between Thailand-based PTT Chemical International Pte Ltd and Sime Darby Plantation Sdn Bhd, has set aside US$200 million (RM644 million) as capital expenditure (capex) for the next five years.

“The global demand for oleochemicals has recovered and we’re in the right place and right time to leverage on the prospects. We’ll be expanding our capacity,” said Emery chief executive officer Dr Kongkrapan Intarajang.

Emery, whose global capacity touches 1 million tonnes a year, plans to double its Asian capacity to around 650,000 tonnes a year.

“We want to continue our lead in this industry. In expanding, we could acquire or grow organically. We’ve set aside US$150 million to US$200 million (RM483 million to RM644 million) as capex until 2015 but only a portion of this sum is for the capacity add-on,” he told Business Times in an interview in Subang, Selangor, recently.
Two months ago, it was reported that Emery is keen to buy Kulim (M) Bhd’s oleochemicals plant in Pasir Gudang, Johor, which is designed to produce 380,000 tonnes of fatty acids, 7,500 tonnes of methyl esters and 47,500 tonnes of soap noodles in a year.

Asked on the progress of plant buyover talks with Kulim, Intarajang said, “We’re still in talks but there’s nothing certain yet. So, it looks like we may need to build our own plant. Time is of essence.”

In explaining Emery’s five-year expansion plan until 2015, Intarajang said, “We not only want to sell more, we want to sell better. We want to make more specialty oleochemicals as the profit margin is much higher than the basic ones,” he said.

“We target significant growth in our specialty oleochemicals facilities in Europe, America and Asia.” Already, the group is building a 15,000 to 20,000 tonne a year specialty oleochemicals plant next to its Teluk Panglima Garang refinery.

Examples of specialty oleochemicals offered by Emery include a plastic additive brandnamed Loxiol, used as a lubricant in polyvinyl chloride (PVC) processing. There is also Dehylub, an oilfield chemical made from renewable feedstock that works as a surfactant and blends well with deepsea ecology. Apart from supplying drilling fluids, Emery also provides eco-friendly solutions to contain oil spills in the ocean.

The Emery trade name began in the 1840s, when Thomas Emery started selling lard in Cincinnati, Ohio, the US. His company, much later, became part of German soap and chemicals producer Henkel KgaA. In 2001 Henkel spun off Cognis GmbH that handled its oleochemicals, care chemicals and organic specialties businesses to a consortium of investors comprising Permira (formerly known as Schroder Ventures Europe), Goldman Sachs Capital Partners and Schroder Ventures Life Sciences.

In 2006, half of Cognis oleochemical business was sold to Golden Hope Plantations Sdn Bhd, now part of Sime Darby Bhd. In November 2008, Cognis owners sold the remaining 50 per cent stake to PTT Chemical for €104 million (RM412.88 million).

Renamed as Emery, the oleochemicals group continue to provide job opportunities to more than 1,000 people in the US, Europe and Asia.

Yummy Teppanyaki!

My friend is treating me to a sumptuous lunch of steak teppanyaki. Yay!


1kg beef
salt and pepper
6 tbsp palm cooking oil
9 cloves of garlic
3 green bell pepper
3 carrots
3 cup bean sprouts
soy sauce to taste

Serves 3 people

1. Marinate beef in salt and pepper. Thinly slice the carrot and green bell pepper. Crushed the garlic cloves.
2. Heat frying pan.
3. Add oil then saute garlic until brown.
4. Pan fry the beef cubes.
5. Add the rest of the ingredients and cook until vegetables are done.

Beijing recognises KL as investment destination

CHINA has recognised Malaysia as an approved investment destination under its Qualified Domestic Institutional Investor (QDII) scheme administered by the China Banking Regulatory Commission (CBRC).

The Securities Commission (SC) said in a statement yesterday that the recognition is a major step forward for the Malaysian capital market as it will facilitate the flow of Chinese funds into the country and open up business opportunities for the Malaysian capital market intermediaries.

SC chairman Tan Sri Zarinah Anwar and CBRC chairman Liu Ming Kang signed the letters of exchange in Beijing, China, yesterday to formalise the recognition.

Also present were Bursa Malaysia chairman Tun Mohamed Dzaiddin Abdullah, Malaysian ambassador to China Datuk Iskandar Sarudin and Finance Ministry's deputy secretary general (policy) Datuk Latifah Datuk Abu Mansor.

At the same time, the China Securities Regulatory Commission (CSRC) confirmed Malaysia as an approved investment destination based on its memorandum of understanding signed with the SC in 1997. QDII is a scheme which enables Chinese nationals to invest in overseas markets through approved institutions.

Approved institutions regulated by CBRC and CSRC may now invest funds pooled from their clients into Malaysian securities, including equities, fixed-income products and collective investment schemes approved by the SC. They may also engage the services of licensed Malaysian fund managers to assist with QDII investment matters.

SC said the potential inflows of Chinese funds will contribute to increased liquidity in the Malaysian market.

With the designation, the country now joins the ranks of 10 other QDII recognised jurisdictions under the CBRC. They are Australia, Canada, Hong Kong, Germany, Japan, Luxembourg, Singapore, South Korea, the UK and the US.

In a separate statement, Bursa Malaysia Bhd chief executive officer Datuk Yusli Mohamed Yusoff said the QDII recognition was a significant development for the Malaysian market in paving the way for China funds seeking investment opportunities in this part of the region. "This augurs well for Bursa Malaysia and is aligned with our other initiatives such as improving our country classification for the capital market," Yusli said.
US funds can now trade palm oil in KL
The United States Commodity Futures Trading Commission (US CFTC) has allowed member brokers of Bursa Malaysia Derivatives Bhd to solicit and accept orders and customer funds directly from US customers without the need to register separately as a futures broker in the US.
Bursa Malaysia said in a statement that this approval was issued in relation to Regulation 30.10 of the US Commodity Exchange Act. “The approval was premised on the fact that member brokers of Bursa Malaysia Derivatives Bhd are subject to comparable customer protection standards in Malaysia,” it said.
Bursa Malaysia Derivatives chief executive officer Chong Kim Seng said it was a new added opportunity for its brokers to capitalise on this opportunity to increase their trading base.
“With the approval from US CFTC, and through the active solicitation of our brokers, we believe that Bursa Malaysia Derivatives’ futures products will gain wider market access and thereby, encourage more cross border trading. It will eventually create more vibrancy in the market and strengthen the profile of our derivatives offerings,” he added.
Member brokers are required to file certain representations with the US National Futures Association to avail themselves of the Regulation 30.10 relief.

Sime names Bakke CEO

Datuk Mohd Bakke Salleh has been named the new chief of Sime Darby Bhd and analysts think he could be the man to fix the conglomerate based on his track record.

Bakke earned his spurs after he helped to restructure Lembaga Tabung Haji in 2001-2002 following fraudulent withdrawals and poor investment decisions. The 56-year-old Bakke is currently group president and chief executive of Felda Global Ventures Holdings Sdn Bhd, the overseas investment arm of Felda Group.

TA Securities analyst James Ratnam said Bakke's appointment as Sime Darby's president and group chief executive makes sense due to his experience in plantations and properties and these are the divisions that contribute most to the company's bottomline. "He's reputed to be straightforward and takes a hands-on approach in managing large entities," Ratnam said.

Bakke's appointment, which will happen "as soon as practicable" comes in the wake of Sime Darby losing about RM1 billion from several energy and utility projects.

Sime Darby's board has yet to meet Bakke. "He's travelling. We've not had a chance to discuss employment tenure and possible salary package," Sime Darby chairman Tun Musa Hitam said at a press conference yesterday.

He then said it might be timely to take a fresh look at remuneration although the board is guided by market rates.

Asked if Bakke's appointment was recommended by Prime Minister Datuk Seri Najib Razak, he replied, "No, the Prime Minister does not recommend. The Nomination Committee within the Board recommended Datuk Bakke and I'm pleased to say he is eminently suitable for the job."

Musa also declined to say who else was recommended for the job. Datuk Azhar Abdul Hamid, the head of Sime Darby Plantation Sdn Bhd, will continue to be acting chief executive of Sime Darby until Bakke assumes his new role.

Shares of Sime Darby rose one sen to close at RM7.81 yesterday.

Mercury Securities senior analyst Edmund Tham said he had expected the appointment to come from among existing leaders in other government-linked companies.

Hovid to plant oil palms in Colombia

PHARMACEUTICAL company Hovid Bhd, via subsidiary Agrovid SA, plans to invest RM3 million over five years to plant oil palms in Colombia.

"It wasn't an overnight decision. We thought about it as early as 10 years ago," Hovid managing director David Ho told Business Times in a telephone interview from Ipoh.

"We ventured into Colombia to sell drugs - the legal ones," Ho said with a laugh, "we're selling over-the-counter medicine."

Over the years, three successive Colombian ambassadors to Malaysia have persistently presented investment opportunities in Colombia's agriculture to Hovid.

"After numerous visits and walkabouts in rural Colombia, we made our decision. Contrary to news of Colombia being a crime-infested place, I actually find it a safe place," Ho said.

In mid-2008, Hovid bought two parcels of agriculture land measuring 3,299ha in Alto Manacacias, Puerto Gaitan, for RM3.6 million from a local, named Cecilia Rosas De Bustos. "This (investment) is a long-term move to secure adequate supply of palm oil phytonutrients for our health supplement business," Ho added.

Hovid's subsidiary Carotech Bhd extracts and sells palm oil phytonutrients such as tocotrienols, lycopene and co-enzyme Q10 for use in medical tests, health supplements and anti-ageing cosmeceuticals.

After extracting phytonutrients from virgin palm oil via molecullar distillation, scientists are left with another product called methyl ester. Ho explained that methyl ester is essentially biodiesel. "From virgin palm oil, we get the phytonutrients for medical use, and what's left can be used for fuel."

Agrovid is also planning to sell biodiesel there. Colombia is already mandating 5 per cent of its national diesel usage to incorporate biodiesel. "Fuel usage there was never subsidised. So it is easier for the Colombian government to implement its B5 mandate," Ho said.

Two years have passed since Hovid bought the plots of soyafields in Colombia. Asked why Agrovid was slow to replant the soya crop with oil palms, Ho said that land transfer technicalities took longer than he had initially estimated. "Colombian land laws are structured in such a way that they are suited for small- to medium-sized farmers," he said. "It is coming around now. We hope to forge ahead with our plans by the end of this year."

Ho expressed optimism about planting oil palms in Colombia. It is, after all, the fifth largest palm oil producing country in the world.

Agrovid is more likely to source oil palm seedlings from Latin America instead of shipping hybrids from Malaysia. "We're not necessarily looking to plant DXP hybrids. Our priority is to source for oil palms that can produce high concentrates of tocotrienols," he said.

Crisis offers Sime Darby good opportunity to re-invent itself

Sime Darby Bhd should just focus on its plantation business and use profits to invest in European assets that still offer growth and could help develop Malaysian talent, said a former director of Sime Darby for 18 years.

Dr Charley Chan Chin Cheung, who was part of Sime Darby's board from 1974 to 1992, said the conglomerate should "as far as possible, not compete with local boys in property development, sale of cars and tractors, organic vegetable farming, hypermarket and running of hospitals".

He felt that Sime Darby should not be throwing its weight around locally. It should not have proposed the privatisation of the Institute Jantung Negara or even initiated an idea of building an airport at Labu, in Negeri Sembilan.

Dr Chan views Sime Darby's current crisis as a timely opportunity to re-invent itself. "It should look outward for strategic investments that will help bring about technology and human capital development to all Malaysians," he told Business Times in a recent interview.

"In view of the European debt crises, there's bound to be quite a few affordable assets that still offer growth opportunities. Sime Darby should refocus and seize these opportunities," he said.

Dr Chan, now 76 years old, said it was his proposal back in 1972 for Malaysia to have a conglomerate of its own, preferably by purchasing foreign assets to help uplift all Malaysians, regardless of race.

"My vision back in the 1970s and now is for Sime Darby to compete in the international arena. It should gain control of some meaningful international entities," he said.

Dr Chan became acquainted with Sime Darby since the 1970s. His family were the first Malaysians to plant oil palms in 1965 when the business was controlled by the agency houses and were also involved in the development of Heveacrumb rubber.

"My brothers and I sold our father's oil palm estate to Sime Darby in the early 1970s. Sime Darby did not short-change us, they were just smarter," Dr Chan remembered the deal vividly, and had since been tracking the development of the conglomerate.

The Chan Wing Estate is still part of Sime Darby today.

"By all means, Sime Darby should keep its plantations. It cannot afford to be complacent. It needs to pay more attention to worker safety, accountability of crop sales and efficient fertiliser usage.

"I'm sure, under the leadership of Tun Musa Hitam, Sime Darby still has a chance to rise like a phoenix from the ash," he said.

To a question on public response after the publication of his letter titled "The true story of Sime Darby" on the Internet and newspaper, he replied, "Oh yes, I received calls from my fans, friends and enemies. I didn't realise I had that many enemies," he said, laughing.

Dr Chan had, in the past, helped restructure Renong Bhd and Multi-Purpose Holdings Bhd.

DPM: Plantation workers' permit extend 5 years

KUALA LUMPUR, May 31 (Bernama) -- The government has given the green light for the extension of permit for foreign workers who have worked for five years in the oil palm plantation sector, Deputy Prime Minister Tan Sri Muhyiddin Yassin said.

He said the extension, for five more years, was to address the shortage of workers in the sector. 

"The government is concerned over the shortage of workers in the plantation sector, especially in the oil palm sub-sector. The government is aware that if drastic measures are not taken to address the problem, it will affect the productivity and competitiveness of this sub-sector," he said in a statement.

He said plantation was among the sectors which relied heavily on foreign workers due to the lack of interest among the locals workers.