Archive for December 2010

Masing: There's no land grab

This is written by my colleague Lian Cheng at Kuching bureau in Sarawak.

KUCHING: There is no way for the state government to grab the land of the natives, especially the Penans, when there are strict procedures that must be followed when developing Native Customary Rights (NCR) land to oil palm estates.

State Minister of Land Development Datuk Seri Dr James Masing said allegations of the state government grabbing NCR land was based on ignorance and arrogance.

"Ignorance, because they do not know that there are procedures involved. Arrogance, because they are making the assumption that Sarawak politicians are all crooked," said Masing at a press conference here.

"There is no way the government can grab land as alleged by international non-governmental organisations, should the land be genuinely NCR land. There are strict procedures, which include the signatures of every land owner. We seek the co-operation from every NCR land owner before we develop their land. If they disagree, we won’t go in.

Masing pointed out that anyone who wished to know about the land development concept in Sarawak is free to check with his ministry.

He was refuting allegations made by a Kansas-based human rights activist Robert E. Rutkowski, who wrote to Prime Minister Datuk Seri Najib Razak to inform the latter that "the hunter-gatherer Penan and other tribes are under threat from new plans to expand oil palm plantations massively in the Malaysian state of Sarawak".

"The Sarawak government has announced plans to double the area used for oil palm by 2020, using indigenous land which it says is 'mostly under-utilised and without titles'," said the letter dated 21 Dec 2010, copied to Chief Minister Tan Sri Abdul Taib Mahmud and United States Secretary of State Hillary Clinton.

Masing clarified it was indeed the government's plan to develop two million hectares of land but not only as oil palm plantations but also other crops, such as rubber. "By 2020, our target is to develop some two million hectares of land which belongs both to the state and the natives for plantation purposes. In our case, it will be oil palm and rubber," he said.

"I am not going to apologise for trying to develop unproductive land for land owners when we are trying our best to do it properly. If the land  remains  idle, then the owners will remain poor. Among the main objective to develop the NCR land is to eradicate poverty among the people in the rural area.

He added that while there were only 1.5 million hectares of NCR land in Sarawak, the accusation that the government intend to turn two million hectares of NCR land into an oil palm plantation was wrong.

"Of the 900,000ha of existing oil palm plantations, only 50,000ha are NCR land. There's another 200,000ha of NCR land identified for oil palm," said Masing, adding that the plan to develop land for cash crop plantations not only involved NCR land, but also other land types.

He then pointed out that according to the Land Law 1958, the natives could only claim the land as theirs if they cultivated on the land. "The Penans were not cultivators. However, the state government understands their needs, so they are allowed to hunt and roam freely in the areas they want, such as the catchment areas of Bakun and Murum, while other natives, such as Iban, do not have the privilege."

He said there were about 3,000 Penans who were still nomads, living in the Baram and Belaga areas. Others have joined the mainstream society. "There are only 3,000 nomadic Penans. And the total catchment area of Bakun Dam (including Murum Dam) is 69,000ha."

Sime sues ex-CEO Zubir & 4 others

This is written by my colleagues Irdiani Mohd Salleh, Zaidi Isham Ismail and Azlan Abu Bakar

KUALA LUMPUR: Sime Darby Bhd former group chief executive officer Datuk Seri Ahmad Zubir Murshid and two senior executives were slapped with another civil suit by the conglomerate, a day after it filed the first suit. 

This time, it was in relation to the Bakun dam project. 

The company and its three subsidiaries Sime Engineering Sdn Bhd, Sime Darby Holdings Bhd and Sime Darby Energy Sdn Bhd filed the suit at the High Court registry here today through Messrs Zaid Ibrahim & Co.

Besides Ahmad Zubir, former Sime Darby Energy Sdn Bhd vice president Datuk Mohd Shukri Baharom and chief financial officer Abdul Rahim Ismail were named as defendants in the suit. The plaintiffs are seeking at least RM92.2 million from the defendants.

Among the reliefs sought are:

* an order that the defendants make restitution of two amounts of RM74 million and RM16.5 million which were wrongly paid out in the Bakun project;

* an order that damages be assessed and be paid by the defendants for wrongly giving away plants to Sinohydro;

* an order that damages be assessed for all losses caused by the defendants and suffered by the plaintiffs in the Bakun project to be paid by each of the defendants;

* aggravated and exemplary damages to be paid by each defendant;

* alternatively, an order that damages be assessed on the basis that each defendant acted in breach of trust and fiduciary duty and an order that such payment be made;

* an order that Mohd Shukri and Ahmad Zubir make restitution of RM851,313.49 each; and

* interest and costs.

Sime Darby said the suit was filed in the interest of shareholders when in September 2009, the board of directors realised that there were cost overruns in four projects executed by the energy and utilities division including Bakun dam project. The Bakun dam, which is located in Sungai Balui, Sarawak, is the country's largest hydroelectric dam which can generate 2,400MW of electricity.

Yesterday, Sime Darby filed a suit against the three defendants and two other senior executives over their alleged roles in the massive RM1.7 billion losses suffered by its energy and utilities division this year.

Sime Darby is claiming at least RM338 million from the five, with almost half of that from Ahmad Zubir and Mohd Shukri. It is also seeking damages for losses caused by them in three projects and any aggravated or exemplary damages. The suit deals with three projects, namely the Bulhanine and Maydan Mahzam project with Qatar Petroleum, the Maersk Oil Qatar project and building of marine vessels for the Maersk Oil Qatar project.

Ahmad Zubir was asked to take a leave of absence in 13th May 2010 ahead of his employment term expiring 26th November 2010. In July 2010, Datuk Mohd Bakke Mohd Salleh was named acting president and group chief executive officer.

The suit is fixed for case management on 9th March 2011.

Sime Darby recorded RM1.7 billion in cost overruns for the three projects and the Bakun hydroelectric dam project earlier this year, causing it to allocate a RM2.1 billion provision.

The extra costs led Sime Darby to post losses in the third quarter to March 2010, its first quarterly loss since its mega merger with state-owned Golden Hope Plantations Bhd and Kumpulan Guthrie Bhd in December 2007.

Losses dragged on to the fourth quarter ending in June 2010 but Sime Darby continued to be profitable for the full year and has bounced back with a first-quarter profit for fiscal year 2011.

KL Kepong to tighten grip on nitrile latex mart

Kuala Lumpur Kepong Bhd (KLK), which owns 19 per cent of Yule Catto & Co plc, is set to tighten its grip on the world’s supply of nitrile latex following the British firm’s €443 million (RM1.85 billion) purchase of Germany’s PolymerLatex Group.

Chemical maker Yule Catto, listed on the London Stock Exchange, is already the owner of the Synthomer Group’s polymers business. The PolymerLatex acquisition will bring together the world’s two biggest suppliers of butadiene or nitrile latex with a combined turnover of more than £1.2 billion and more than 2,000 employees.

Synthomer’s unit in Malaysia runs a 130,000-tonne per year nitrile plant in Kluang, Johor. On the other hand, PolymerLatex operates a 100,000-tonne a year nitrile latex plant in Pasir Gudang, Johor.

Nitrile latex is used mainly to make synthetic rubber gloves.

KLK director Datuk Lee Hau Hian said the purchase will strengthen Yule Catto’s core business. “It will allow Yule Catto to achieve cost synergy in research and product development,” Lee told Business Times yesterday.

Asked if a bigger sized Yule Catto could lead to price-fixing of nitrile latex, Lee said: “No, it will not because it takes two to make a deal. Both Yule Catto and nitrile glove makers must be happy in order for the industry to grow”.

Hartalega Holdings Bhd managing director Kuan Kam Hon said Yule Catto’s acquisition is a good thing for the former. “I don’t think there’ll be any issue of price-fixing because there is no monopoly. The market is becoming bigger and we see new players from South Korea and Taiwan,” he said when contacted yesterday.

“When we source for nitrile latex, it’s not a decision based solely on price. Technical support is very important,” Kuan added. Hartalega is the world’s largest nitrile glovemaker and biggest consumer of nitrile latex in Malaysia.

Yule Catto is issuing rights shares to fund the PolymerLatex purchase. Its investors are offered four new shares for each three they currently own at 116 pence.

KLK, in a filing to Bursa Malaysia on Tuesday, said it will take up all its rights. This means the company will pay RM209.8 million for its portion.

Yule Catto chief executive Adrian Whitfield reportedly said the enlarged group could compete more effectively in a consolidating emulsion polymer market. He expected the deal, which is scheduled to complete by the second quarter of 2011, to achieve £20 million (RM98.8 million) in cost savings.

Palm oil and reduced global warming

Tan Sri Dr Yusof Basiron, the CEO of the Malaysian Palm Oil Council wrote this article.

AT a recent forum organised by the Palm Oil Refiners Association of Malaysia (PORAM) in Kuala Lumpur, it was revealed that there was no moral case for Western Environmental NGO (WENGO) campaigns against palm oil.

Data indicates that the agricultural land occupied by the world palm oil industry is miniscule (1.56 per cent) compared with the total land allocated to growing grains and oilseeds.

Oil palm is the main agricultural crop of major producer countries such as Malaysia and Indonesia, where it occupies 13 per cent and five per cent of their land area, respectively.

Assuming that developing countries are allowed to use part of their land area for agriculture and plant the most profitable crops to provide employment, produce food and generate income, the data shows that there is no excessive over-exploitation of forests due to planting oil palm as a cash crop.

Nationally, both countries retain much higher percentages of forest as compared with developed countries.

If WENGOs claim that global warming is caused by loss of forests due to oil palm cultivation, it would be useful to know that oil palm share of world agricultural land is only 0.22 per cent. 

The share of loss of carbon stock (deforestation) caused by oil palm compared with total global agriculture is thus assumed to be 0.22 per cent. It is, therefore, morally unacceptable for WENGOs to demand palm oil-producing countries to reduce their share of agriculture, which accounts for merely 0.22 per cent of the world's agricultural area.

Even the total greenhouse gas (GHG) emission of global agriculture of 17 per cent is considered small compared with the burning of fossil fuel, which contributes 57 per cent of GHG emission. The carbon footprint of oil palm cultivation globally is, therefore, 0.22 per cent times 17 per cent of the total or 0.0374 per cent of global GHG emissions. This has no bearing on global warming, hence making it immoral to blame oil palm as a significant contributor to global warming.

Many other economic activities are responsible for the vast amount of GHG emission. These activities are accepted as part of the economic growth processes needed to sustain the world economy. Efforts to reduce GHG emissions should be directed at these economic activities as they are the main cause of GHG emission.

Curtailing the expansion of oil palm on the basis of its impact on global warming is, therefore, scientifically unjustified as the contribution is only 0.0374 per cent of global GHG emission.

If the loss of biodiversity is used as an argument to discourage oil palm cultivation, then ample forest is being conserved. The United Nations convention only requires 10 per cent of the country's land area to be kept as forest for conserving biodiversity, and Malaysia has far exceeded this by committing 50 per cent.

Despite the lack of convincing evidence to pin down the palm oil industry against global warming or biodiversity loss, both producer countries have given full cooperation to comply with the needs of stakeholders and WENGOs to produce palm oil sustainably. They have fully embraced the Roundtable on Sustainable Palm Oil (RSPO) to enable palm oil to be certified to meet sustainability principles and criteria.

The Indonesians have signed an agreement with Norway for a moratorium on deforestation while the Malaysian government has repeatedly announced its assurance of maintaining at least 50 per cent of its land area as permanent forest. Deforestation thus appears to be a non-issue.

To ensure a level playing field, it is timely that a similar certification for sustainability be required for other oils produced by various countries worldwide. Otherwise, it will be a clear reflection of the oil palm industry being victimised by being asked to comply to certification needs for sustainability when no scientific justification exists to allow the world to benefit from global warming mitigation or improved biodiversity.

Without premiums given to RSPO certified palm oil, it becomes a big burden for oil palm farmers to bear the added cost of certification when their rivals producing soyabean or rapeseed are not certified for sustainability.

Certifying the other (low yielding and land inefficient) oilseed crops for sustainability would at least contribute to a greater amount of carbon emission reduction compared with oil palm, even though the quantum of saving is still small compared with the carbon footprint of fossil fuel and other agricultural activities.

All evidence clearly shows that there is no moral ground for WENGOs to campaign against palm oil.

Unless the WENGOs can quantify and show that there are clear benefits relating to global warming or biodiversity improvements, or economic premiums for sustainable certified palm oil, then it is only a matter of time before producers realise that WENGOs only impose the no deforestation condition on palm oil but do not bother to do likewise on other low yielding crops which occupy vast areas of land.

Southern Acids Q2 net profit surges 19-fold

Southern Acids (M) Bhd's net profit for the second quarter ended October 2010 jumped 19-fold to RM7.92 million from RM408,000 a year ago.

Chairman Tan Sri Low Boon Eng said its outlook for the rest of the financial year should be bright. This is given that palm oil prices are likely to remain buoyant at over RM3,000 a tonne as global demand for vegetable oils exceeds supply.

He attributed the group's solid interim results to more sales of oil palm fresh fruit bunches at higher prices and improved performance at its Sri Kota Specialist Medical Centre in Klang.

Southern Acids, via PT Mustika Agro Sari and PT Wanasari Nusantara, has 7,870ha of oil palm plantations in Riau, Indonesia. Chief executive Leong Kian Ming said: "For this quarter, we milled 35,476 tonnes of fresh fruit bunches, 18 per cent more than 30,174 tonnes a year ago.

"Also, our average crude palm oil selling price was RM2,518 a tonne, much higher than RM2,136 a year ealier."

Leong and Low were speaking at a briefing on the company's quarterly results in Klang yesterday. Palm oil prices had been trending upwards in the last five months. Yesterday, palm oil futures on the Malaysian Derivatives Market climbed RM35 to close at RM3,633 a tonne.

Southern Acids operates a 100,000-tonne-a-year oleochemicals plant in Kapar, Klang, via Pofachem (M) Sdn Bhd. Low said the company wanted to upgrade and double its capacity. "The oleochemicals market is doing good. We want to expand," he added.

Another contributing factor for Southern Acids' second quarter results is the absence of foreign exchange losses, which it had incurred previously. "We do not enter into target redemption forward contracts anymore. That was in the past. We now just do the normal hedging," Low said.

Southern Acids' 232-bed Sri Kota Specialist Medical Centre in Klang made a RM1.02 million net profit in the second quarter. This was a turnaround from the RM1.17 million loss a year ago. "We've managed to turn the hospital around and it is now operating at 60 per cent occupancy. We want to tap into medical tourism to improve the rate to 90 per cent," Low said.

Indonesia gov calls for palm oil industry road map

This was written by Desi Nurhayati and published in Jakarta Post yesterday.

The government has called on stakeholders in the country’s growing palm oil sector to set up a road map to ensure that oil palm plantations will not only help economic growth but promote environmental sustainability.

Speaking during an international conference on palm oil in Nusa Dua, Bali, Friday, Trade Minister Mari Elka Pangestu said that such a business road map was important to determine the right direction to take for the country’s oil palm sector.

“All stakeholders have a responsibility to find a balance between economic growth and social progress with aspects related to environmental sustainability.

"Growth could stall if we don’t have a comprehensive approach,” the minister said in a speech at the sixth Indonesian Palm Oil Conference.

She said there had been tremendous growth in the contribution of the palm oil sector to the country’s GDP within the last five years.

Exports of crude palm oil (CPO) and its related products have shown remarkable growth over the past five years. The exports, which totaled only US$4 billion in 2004, had increased to almost US$15 billion at present, with an average growth of 36 per cent per annum. Production also doubled during the 5-year period, with an average growth of 10 per cent a year.

Mari acknowledged the need to promote environmental sustainability on the country’s oil palm plantations, which have often been criticized for their negative impacts on the environment.

But she said that such a sustainability scheme should not impose undue burden on the supply chain of production, starting from farming all the way to trading, especially for smallholders that account for about 40 per cent of palm oil production in Indonesia.

“I encourage all of us to sit down and work out a road map together. It has to be done collectively so that the results are good for all parties,” she said.

Global dependence on palm oil will continue to rise over the next decade, as predicted by Thomas Mielke of Oil World. “About 76 to 77 million tons of palm oil would be required in 2020, with an annual average growth of 3 million tons. Indonesia will have an annual growth rate of 1.9 million tons,” Mielke said in his presentation at the conference.

He said palm oil prices would remain high next year and would reach a peak between January and April, as the current price already reached RM3,500 (US$1,112). “January and April will still be very tight, fuelling prices by RM200 to RM300 from the current level. There will be sizably better production prospects from May 2011 onward.”

Mielke predicted that Indonesia would be able to produce 40.5 million tons of palm oil in 2020, almost double the 2010 production of 21.8 million tons. Malaysia is expected to produce 22.8 million tons in 2020 from 17.52 million tons this year.

Global output is predicted to be up by three to 3.1 million tons in 2011, with Indonesia’s output to increase by 2.1 million and Malaysia’s by 0.7 million tons, he added.