Archive for December 2011

Malaysia expects plantation exports bonanza

KUALA LUMPUR: Malaysia can expect record high plantation commodity exports this year as global demand for palm oil, rubber and pepper surpasses supply. 

Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said from January to October, exports had jumped 28 per cent to RM118.2 billion. “That has already exceeded last year’s overall figure,” he added.

Last year’s RM113.29 billion achievement was 24 per cent higher than 2009’s RM91.16 billion. It also overtook 2008’s previous record of RM112.43 billion. 

Malaysia’s plantation commodities comprise palm oil, rubber, timber, cocoa, tobacco and pepper.

In the last decade, the sector had been the nation’s second largest foreign income earner after manufacturing. 

Since then, the export value has grown three and a half times. 

“I think we can hit RM140 billion this year,” Dompok told Business Times in an interview.

To a certain extent, Dompok said the higher palm oil, rubber and pepper pricing was also fuelled by the weakening of the US dollar against the ringgit. In the first eight months of this year, the US dollar weakened by about three per cent against the ringgit from RM3.05 to RM2.95.

The US dollar forms the basis for major index of commodity prices. Hence, Malaysia’s plantation commodity exports like palm oil, rubber, timber, cocoa and pepper are quoted in the greenback.

The minister said palm oil earnings, which are slated to touch RM80 billion this year, will make up the bulk of the country’s plantation commodity’s exports. High palm oil prices have been contributing to higher income for oil palm planters. So far, it is averaging at around RM3,100 a tonne.

“Although palm oil is our number one revenue contributor, pepper exports seemed to have grown the fastest,” Dompok said.

In the first 10 months of this year, pepper exports jumped the highest by 42 per cent to RM224.06 million. Timber exports slipped 3.1 per cent to RM16.52 billion, while tobacco products fell 2.6 per cent to RM833.90 million.

Rubber tappers have good reason to smile as bulk latex has been trading at good price of more than RM10 a kilogramme in the first four months of the year. Although it has since settled to around RM6.60 per kg, rubber tappers still feel motivated to tap their trees regularly.

“As world crude oil continues to trade at high prices, so will natural rubber because it is a substitute for synthetic rubber in making tyres. In the first 10 months, our rubber exports expanded by 28 per cent to RM27.34 billion,” Dompok said.

Renewable energy producers in Sabah not 'FiT' yet

PUTRAJAYA: RENEWABLE energy (RE) producers in Sabah, who are mostly biomass and biogas plant operators at palm oil mills, will not enjoy the 32 sen per kilowatt per hour (kWh) under the feed-in tariff (FiT).

RE producers in Sabah will only be paid the rates accorded under Tenaga Nasional Bhd's (TNB) Small Renewable Energy Projects, according to a statement by Sustainable Energy Development Authority (Seda).

This means oil palm biomass and biogas plant operators there will only be paid 21 sen per kWh instead of the promised 32 sen per kWh under FiT.

Energy, Green Technology and Water Minister Datuk Seri Peter Chin had reportedly said heavy power users in Peninsular Malaysia and Sabah, who use more than 350kWh or whose monthly bills exceed RM77, are to start paying the one per cent RE levy this month.

However, Seda, the implementing agency under Chin's ministry, said on Tuesday TNB will collect the RE levy only from consumers in Peninsular Malaysia. This is because there has yet to be a gazette to this effect in Sabah.

The regulator said RE producers in Sabah will only be eligible for FiT when the one per cent RE levy is collected by Sabah Electricity Sdn Bhd, a 70 per cent-subsidiary of TNB, from heavy power users in Sabah.

Sarawak, however, is exempted from the RE levy because under the Renewable Energy Act 2010, the FiT is only applicable to Sabah and Peninsular Malaysia.

FiT essentially guarantees RE producers a premium selling price over that generated from depleting and finite sources such as oil, gas and coal.

Power generated from sustainable sources that benefits from FiT includes that of oil palm biomass, biogas, small hydro and solar.

Meanwhile, RE producers will not automatically receive payment under the FiT from December this year. This is because RE producers need to go online and bid for the quota and the relevant FiT rate. 

The FiT rate differs for varying RE technologies and installed capacities. RE producers have to apply for licence from Seda via Online application is meant to facilitate quota allocation on a first-come, first-serve basis.

Within a week of bidding, Seda announced that applications for the FiT allocation under the categories of biomass and solar projects were fully taken up.

Yesterday, it clarified that some of these applications were incomplete and disqualified. Therefore, the portion of FiT allocation applied for will be released for online bidding again today, at 10am.

Seda has limited individual solar energy producers to 12kWh each. Multiple applications for the same installed site is also not allowed. The new measures are meant to encourage more people to install solar panels on their roof tops and sell back excess energy to TNB.

Malaysians pioneer China’s oleochemicals industry

Malaysians who pioneered China's oleochemical industry close to 10 years ago are now benefiting from its 1.3 billion consumers' pursuit of better living standards, writes OOI TEE CHING.

MALAYSIAN investors in China’s oleochemical industry are gaining from the rising demand for eco-friendly soaps and detergent as consumers there pursue better living standards, said Malaysian Palm Oil Board (MPOB) director-general Datuk Dr Choo Yuen May.

“Household cleaning products made from oleochemicals are increasingly seen as sustainable alternative to petrochemical variants,” she told Business Times in a recent interview.

Detergent made from cheaper petroleum by-products like kerosene, containing an active ingredient called linear alkylbenzene sulfonates (LABS), takes a very long time to biodegrade. This can cause foaming at rivers and excessive algae growth in the lakes. The algae covered lakes robs oxygen from the water, leaving fishes and other aquatic organisms to die.

As detergent manufacturers seek to improve their environmental profile, many replaced LABS with methyl ester sulfonates (MES), eventhough it is a little bit more expensive.

Choo said MES is sourced from palm oil and palm stearin. Both are renewable resources and easily available in Malaysia. Therefore, it is not a surprise that Malaysia is a global hub for making oleochemicals, which are then processed into biodegradable detergent.

Since the 1990s, MES-based laundry detergent started to gain popularity as it is readily biodegradable, renewable, agreeable to vegetarians and most importantly — cleans well, even in cold water. Current market leaders of such a green product include Japan’s Lion Corp and America’s Stepan and Huish Detergents.

When contacted, Emery Oleochemicals (M) Sdn Bhd group chief executive officer Dr Kongkrapan Intarajang concurred with Choo that the bright outlook for palm oil-based detergents is fuelled by the global trend towards formulations derived from renewable plant-based ingredients instead of depleting fossil fuel.

In China, Emery with one of its shareholders Sime Darby Plantation Sdn Bhd partnered detergent manufacturer Guangzhou Lonkey Industrial Co Ltd to form Guangzhou Keylink Chemical Co. The joint venture company is setting up a 40,000-tonne a year MES plant. “Our MES plant in China is nearing completion. We hope to commission it next year, in the first quarter,” said Kongkrapan.

Choo noted MPOB’s research in MES is applicable in China because this biodegradable detergent cleans well at low dosage, even in washing water that has high mineral content. “Although China’s household waters tend to be high in mineral content, it is not a problem. Detergent manufacturers like Lonkey will find it easy to formulate concentrated washing powder using MES,” she said. Among Lonkey’s popular laundry detergent brands in the Guangzhou province include Gaofuli and Yeshu.

In Malaysia, KLK Oleochemicals Group’s unit, KL-Kepong Oleomas, operates a 50,000-tonne per year MES plant. “We’re carrying out some upgrading works and doubling the capacity to 100,000 tonnes,” said KLK Oleochemicals managing director A.K. Yeow.

As the world’s top oleochemicals producer, Malaysia exports around 2.2 million tonnes every year. Malaysia’s lead is partly driven by its community of engineers and chemists having the ability to process palm oil and palm kernel oil into more than 100 types of downstream products.

With such technical prowess and advantage, Malaysians have become pioneers and key investors in China’s oleochemical industry. 

Among the earliest to set foot there are Wilmar International Ltd, in which Robert Kuok’s Kuok Group is a substantial shareholder. The other pioneer is Kuala Lumpur Kepong Bhd’s (KLK) unit KLK-Taiko Palm Oleo Co Ltd. Other Malaysian investors include Teck Guan Perdana Bhd and Kwantas Corp Bhd.

Wilmar’s pioneering investments have given it a headstart over its competitors. Today, it is the biggest player in China’s oleochemical industry with an estimated annual capacity of 800,000 tonnes. 

As early as 1999, KLK's Yeow frequently flew to China to assess the benefits of producing oleochemicals there. 

He recalled scouting for an affordable industrial site equipped with basic infrastructure of piped water and consistent electricity supply. 

The management finally chose Zhangjiagang, a town two hours drive from Shanghai, and yet easily accessible by sea. 

During the last five years, KLK-Taiko Palm-Oleo had invested some RM200 million there. Today, the facility is able to churn out 220,000 tonnes of fatty acids, soap noodles and glycerine in a year. 

Teck Guan’s oleochemical plant at Rugao town, about four hours drive from Shanghai, is able to produce up to 200,000 tonnes of fatty alcohol, fatty acid and glycerin per year.

Kwantas’ unit Dongma (Guangzhou Free Trade Zone) Oleochemicals Co Ltd plants in Zhangjiagang near Shanghai and in Guangzhou have a combined 200,000-tonne annual capacity. These plants make soap noodles, glycerine and other oleochemical derivatives. 

Asked on China’s oleochemical demand in the next five years, Choo said: “Last year, China consumed some 2.5 million tonnes. The market continues to grow because consumption of soaps, detergent, cosmetics and bioplastics will expand as living standards improve”.

She also noted that through China’s Cleaning Industry Association’s appeal for affordable and steady supply of oleochemical ingredients from Southeast Asia, the China government had lowered palm stearin import duty to 2 per cent. 

Choo, however, sees the demand for oleochemicals moderating in future. The operating environment there has become highly competitive. “It will not be as fast as previous years, around 10 to 15 per cent annually.”

Nevertheless, she remains optimistic that new applications like biolubricants, green chemicals, bioplastics and biopolymers will continue to drive the oleochemicals industry there. Choo also expects more usage of palm-based polyols in China’s polyurethane industry.

Kulim gets shareholder nod for RM700m land buy

Johor Baru: Kulim (Malaysia) Bhd shareholders yesterday gave the go-ahead for the company to buy six parcels of oil palm plantation land in Johor for RM700 million cash from Johor Corporation (JCorp).

While the shareholders’ approval indicate their optimism of the purchase and of Kulim’s outlook, for JCorp, the RM700 million it will get from the sale means it will have cash to meet its obligations on bonds maturing next year.

The sale is a major component of the JCorp group’s rationalisation exercise.

The RM700 million cash accruing from the estates’ disposal is the first out of the expected RM1 billion cash to be generated before July 31 2012. The balance of RM300 million will come from internally generated funds.

JCorp president and chief executive officer Kamaruzzaman Abu Kassim said, in a statement yesterday, that the group is finalising a plan for repayment of its remaining debts. As part of the exercise, CIMB Bank which is also its adviser, and Maybank will act as joint lead managers for the new bonds issue in 2012.

Kulim shareholders approved the purchase of six parcels of oil palm plantation land totalling 13,687ha and two palm oil mills at an extraordinary general meeting held here yesterday.

Meanwhile, Massive Equity Sdn Bhd (MESB), a special purpose vehicle jointly owned by JCorp and CVC Capital Partners (CVC), welcome the acceptance KFC Holdings Bhd and QSR Brands Bhd of its offer to buy the two fast food companies.

The privatisation of QSR will not result in JCorp itself incurring additional debt. This is because funding for the transaction will be done via MESB on the strength of the future cash flow of the two businesses. Once the sale to MESB completes, the proceeds will be returned to all shareholders of QSR and KFC.

The move will also give Kulim, which is currently the controlling shareholder of QSR, an opportunity to sell off its stake in the food retail businesses and focus on its core plantation business.

Kamaruzzaman said the acquisition will enable JCorp to gain direct controlling interest in both companies it considers as having good fundamentals and long-term value.

Boustead sees bountiful year amid high CPO prices

KUALA LUMPUR: BOUSTEAD Holdings Bhd expects to rake in record profit this year as palm oil prices continue to trade at buoyant levels of around RM3,000 per tonne.

Out of its six core businesses, plantation is the biggest earnings contributor, followed by shipbuilding and property development. In the three quarters ended September 2011, Boustead's plantation division contributed RM267.1 million or 45.5 per cent to the group's RM585.9 million pre-tax profits.

So far, Boustead makes an annual profit of between RM450 million and RM700 million.

Although palm oil prices have been settling from its high of RM3,800 per tonne nine months ago, the third-month benchmark palm oil futures contract on the Malaysia Derivatives Exchange is averaging at around RM3,100 per tonne. Yesterday, the contract closed RM25 higher at RM3,097 per tonne.

"We're looking at record profits this year as palm oil prices are still strong," said Boustead deputy chairman and group managing director Tan Sri Lodin Wok Kamaruddin.

The group has an agriculture land bank of 97,648ha and so far, three quarters of that are already planted with oil palms.

"Our tree profile is at a favourable phase, of which 46 per cent of our oil palms are of prime ages. We expect to harvest about 1.1 million tonnes of fresh fruit bunches this year," he said.

With promising results, Boustead is setting aside RM1.4 billion in capital expenditure for next year. "About 30 per cent of the money will go to plantation," said Lodin.

Yesterday, both Boustead and Pharmaniaga Bhd shareholders approved all resolutions to have Boustead's entire pharmaceutical division placed under Pharmaniaga.

Lodin said the corporate move will allow Pharmaniaga to expand its manufacturing capacity in Kedah and Perak. "Our total capital expenditure for the pharmaceutical division amounts to RM95 million, of which a third will go to the information system," he added.

Pharmaniaga is in the business of making generic drugs. It also supply, trade and install hospital equipment. Last year, it secured a 10-year concession to distribute medicine to government hospitals and clinics.

"We have a 10-year supply concession to all 3,750 healthcare outlets under the Health Ministry throughout the country. The book value is worth some RM900 million," said Pharmaniaga managing director Datuk Farshila Emran.

Lodin said Boustead is still interested in buying ExxonMobil Corp's oil and gas assets in Malaysia, if the latter's deal with San Miguel Corp does not materialise. "We first had a discussion with Esso in August last year. If there is a review with whomever they have made an agreement with, we are open and prepared to talk to anyone," he said.

San Miguel, in August, agreed to buy Exxon's entire 65 per cent stake in Esso Malaysia for about US$206 million (RM655 million), or RM3.50 per share. This will give it control over a chain of petrol stations and one refinery with a capacity of 88,000 barrels a day. Although the deal won the government approval last month, it has yet to be concluded.


LTAT does not dismiss prospect of privatising BHIC

KUALA LUMPUR: The possibility of the Armed Forces Pension Fund or Lembaga Tabung Angkatan Tentera (LTAT) being the vehicle to privatise Boustead Heavy Industries Corp Bhd (BHIC) is increasing.

Tan Sri Lodin Wok Kamaruddin, who is LTAT chief executive, did not dismiss the prospect of LTAT privatising BHIC. He, however, denied that BHIC's parent, Boustead Holdings Bhd, planned to privatise BHIC.

"Once again, we confirm that Boustead does not have any intention to privatise BHIC. We can't comment on what LTAT is going to do about BHIC," said Lodin, who is also Boustead deputy chairman and group managing director. "That you would have to ask LTAT. It is for LTAT's board of directors to collectively deliberate upon," he told reporters after Boustead's shareholders meeting here yesterday.

A research house highlighted that a privatisation made sense given that BHIC's earnings visibility looked secure for the next 10 years after being awarded a RM9 billion contract from the Defence Ministry to design, build and deliver six second-generation patrol vessels.

It could also be advantageous for LTAT to privatise BHIC to avoid public disclosure and scrutiny, given the sensitivity of such government defence contracts.

LTAT owns 61 per cent of Boustead and 8.15 per cent of BHIC. When pressed on what he thought of such a suggestion published in the media, Lodin said: "Anyone can air their views in the newspapers."

On whether LTAT is considering loosening its grip on Boustead to increase share liquidity, he said: "It is good to have liquidity. LTAT will do so at the right time and right price and make some capital gains along the way."

Making palm oil sustainable

This is contributed by Datuk Dr Zakri Abdul Hamid, science adviser to  Prime Minister Dato' Sri Najib Razak.

THE virtues of oil from olives, sunflower seeds, canola, soybean and corn are familiar to consumers in the West and the affluent countries of the Middle East and North Africa. That's not the case with palm oil, even in those large markets for the product.

That may be a vestige of the bitter attack on the palm oil industry mounted in the 1980s by the soybean lobby, complete with self-serving claims that palm oil could harm human health. Malaysian scientists, including Tan Sri Augustine S.H. Ong, then attached to the Palm Oil Research Institute of Malaysia, countered with authoritative documentation that, in addition to its numerous industrial uses, palm oil is indeed a versatile, nutritious ingredient.

Now, the palm oil industry is once again confronted with new challenges, possibly more formidable and multi-faceted than the earlier one -- that of the need to be environmentally sustainable.

Sustainability in the palm oil industry means making minimal impact on the environment from the time of planting through to processing the oil in the mills. Today, the Malaysian palm oil industry has largely got it right, but sustainability concerns linger among some, mainly Western, consumers and well-meaning non-governmental organisations.

Two recent episodes illustrate this concern. One is the proposed Australian "Truth in labelling -- palm oil Bill" which has since been rejected by its House of Representatives Economics Committee following the intervention of the Malaysian government and Malaysian Palm Oil Council.

Lately, even some well-meaning members of the Girl Scouts of America are mounting a campaign for their organisation not to use palm oil as an ingredient in their world-famous Thin Mint cookies as "oil palm cultivation destroys the habitat of orang-utans". Such concerns have to be addressed to ensure the crop remains the golden egg-laying goose we would always like it to be.

Forest clearing, the agronomic practices used to cultivate the plants from seedlings to the fruit production phase, processing the fresh fruit bunches into oil at the mill -- all relate to sustainability.

A sovereign country like Malaysia is fully entitled to open up its forests for agriculture or settlement, of course.

Our second prime minister, Tun Abdul Razak Hussein, started the Felda scheme in the 1960s, a man ahead of his time as evidenced by the aspirations articulated in the Millennium Development Goals (MDGs) agreed some 40 years later.

A primary objective of the MDGs is poverty alleviation, a mission that Tun Razak expressed in those days with his slogan, "land for the landless; jobs for the jobless".

The "Felda Story" remains a textbook example of best-practice poverty eradication, according to renowned Columbia University economist Jeffrey Sachs.

So, while it is true that oil palm plantations mean forest displacement, Malaysians are also fully aware of the need for balance. Malaysia is committed to managing forests in a sustainable manner, not just for economic reasons, but also for maintaining environmental stability and ecological balance.

According to the United Nations Food and Agriculture Organisation, Malaysia has approximately 62.3 per cent of its territory under forest cover -- 20,456,000 forested hectares in total. At the Earth Summit in 1992, Malaysia pledged to keep at least 50 per cent of our land mass under forest, including national parks, wildlife sanctuaries and nature reserves. That promise is still intact today.

Within these protective areas Malaysia can honour its commitment to maintain suitable habitats for our flora and fauna, including the iconic orang-utans in Sabah and Sarawak.

With the current focus on global warming and greenhouse gas emissions, it is instructive to note that, relative to other oil producing crops, the oil palm emits up to 10 times more oxygen and absorbs up to 10 times more carbon dioxide per hectare per year, figures far superior to any crop planted in temperate countries.

Spearheaded by the Malaysian Palm Oil Board (MPOB), the Malaysian oil palm industry is making a serious effort to meet the challenges of sustainability. Last year, MPOB released the Malaysian Palm Oil Sustainability Manual, which spells out the principles and procedures to be adhered to by estate and mill managers and other workers along the supply chain to achieve sustainability.

For example, plantations today routinely employ barn owls to reduce rodent populations rather than chemical baits, a perfect means of biological pest control. Chemical weed killers and pesticides are minimally used as the oil palm is a hardy plant largely unaffected by pests and diseases. There are standard operating procedures of waste management at the oil palm mills in accordance with environmental quality acts and regulations.

In response to the urgent and pressing global call for sustainably produced palm oil, a global organisation, the Roundtable on Sustainable Palm Oil (RSPO) was formed in 2004 with the objective of promoting the growth and use of sustainable palm oil products through credible global standards and engagement of stakeholders. The organisation is still "a work in progress" and has not matured into a one-stop clearing-house for the trading of sustainable palm oil.

Malaysia is already mulling the idea of establishing its own "Malaysia Sustainable Palm Oil" standard, a move which is similarly being considered by Indonesia. Such moves can only be applauded, for in the long run, the benefits not only accrue to the palm oil industry and this country, but to the whole global community.

Don't make Felda settlers pawns in political game

This is written by my boss.

UNFORTUNATELY, the planned flotation of Felda Global Ventures Holdings Sdn Bhd (FGV) on the stock exchange has entered the political realm, a murky environment where lines separating truths, half-truths and outright lies become blurred.

While the initial public offer (IPO) for FGV has now entered its final stages, the subject matter's entry into the political environment was made official when the president of the National Felda Settlers' Children Association (Anak), Mazlan Aliman, recently gave a veiled threat to the government by reminding Putrajaya that Felda settlers are a formidable voting force in at least 54 federal seats -- a threat no doubt, directed at a government that is close to facing the polls.

Anak has been outlining reasons it is against the planned listing of FGV, while attempting to create a perception that it is not politicising the subject and is trying to save Felda and the settlers from the lions.

That's a bit difficult to consume since Mazlan is also a member of opposition party Pas' central committee, a sworn enemy of the incumbent ruling coalition. But let us stop there.

The fact is Felda is not a political party. Although it was started by former prime minister, the late Tun Abdul Razak Hussein, in 1956, participants in its hugely successful land development schemes may well be members of any political parties making up the entire political spectrum in the country now.

That the political inclination of the settlers does not matter to Felda may well be the foundation upon which proponents of the IPO could start with if and when they decide to go to the ground, explaining their argument on why FGV should be listed.

Felda has a long history of which its settlers are proud. Starting as a group of rag-tag farmers in what was then a god-forsaken place called the Lurah Bilut land scheme, they have built a company with interests across the world.

More than half-a-century and scores of land schemes later, some of the following generations of Felda settlers have gone on to seek their fortunes elsewhere while many more stayed to own their plots of land. Their quality of life has improved to a level the early settlers could never have imagined.

As a company, Felda, too, has moved on from just buying and selling oil palm fruits to downstream activities and research and development. It has ventured overseas and into several sectors and has also collaborated with some of the bigger global names in the oleochemical, food and even the hospitality industries.

As Felda prospers, settlers, too, reap the gains as a majority of interest in the company is owned by Koperasi Permodalan Felda (KPF), a cooperative in which all settlers are members. In recent years, the cooperative has emerged as the most profitable in Malaysia.

More opportunity lies ahead for KPF. With the listing of FGV, doors will be opened for more collaboration between Felda and international players in the oleochemical, food and agriculture industries.

From the RM10 million set aside for its formation, Felda now wants to see the likes of Cargill and Archer Daniels Midland as its peers. If this comes to fruition, KPF and by extension the settlers, which by then would be holding a 35 per cent interest in the listed FGV, would stand to benefit handsomely.

Who knows what more opportunities can present themselves to KPF in the future, once it has even stronger financial muscle? Let's be reminded that the successful Dutch agriculture bank, Rabobank, is owned by a cooperative.

That should be the crowning glory for the early Felda settlers. From farmers who open up land with their bare hands, living in homes on high stilts for fear of wild animals, they are now presenting an opportunity for the next generations to be owners of global entities.

Let not the settlers and their future be made pawns in any political gambit.

Felda Global on track for April listing

This is written by my colleague, Goh Thean Eu.

NILAI, Negeri Sembilan: Felda Global Ventures Holdings Sdn Bhd is on track to make its debut on Bursa Malaysia by early second quarter of next year, its president Datuk Sabri Ahmad said. 

“We are on track. We have the bankers looking into it already. Hopefully, we can list it in April next year,” Sabri told a press conference at Felda Biotech Centre at Bandar Enstek, here, yesterday.

The company has appointed CIMB, Maybank, Morgan Stanley, JP Morgan and Deutsche Bank to arrange the mega listing.

While the actual size of the initial public offering (IPO) has yet to be announced, it is expected to be worth billions of ringgit, making Felda Global one of the country’s 25 most valuable companies.

The proposed listing has its fair share of compliments and criticism. Some welcomed it, saying it would enhance the attractiveness of the country’s capital market, attract foreign investors as well as provide an avenue for settlers to make additional income.

The sceptics contented that the settlers would risk losing their lands upon listing.

Sabri said the Felda group manages a vast 850,000-ha plantation landbank but the listing will only affect 350,000ha, which are owned by Felda. “The settlers, more than 110,000 of them, would not lose their land. The land will still be theirs,” Sabri added.

Six months ago, Felda embarked on an exercise to monetise its assets and listed sugar unit MSM Malaysia Holdings Bhd. It raised slightly over RM800 million from the MSM share sale, which saw the sugar company valued at about RM2.4 billion. Koperasi Permodalan Felda (KPF), which is owned by all Felda settlers, made a paper gain of RM300 million from the MSM IPO, from its 20 per cent stake.

Earlier, Sabri announced that Felda Agricultural Services Sdn Bhd had successfully created the world’s first marker for identifying oil palm susceptible to Ganoderma disease.

Ganoderma disease, commonly known as Basal Stem Rot disease, affects oil palm yields. Every year, between 30 and 70 per cent of oil palm yields is lost due to Ganoderma, with major implications to planters' income.

Sabri said the marker technology would take about another three to four years before it can be commercialised. It would be used to detect seed production trees that are prone to the disease. These trees are shifted out and then, eliminated.

Ta Ann looking at PNG expansion

SIBU, Sarawak: TA ANN Holdings Bhd, having planted three quarters of its 45,000ha agricultural landbank in Sarawak, is looking to venture into Papua New Guinea.

Headquartered here, the group ventured into oil palm planting in 2000. Within 11 years, it has planted 75 per cent of its plantable landbank.

"We have planted about 35,000ha. We are thinking of venturing into Papua New Guinea. There is still a good margin potential as the land cost is much cheaper than in Indonesia," said group managing director and chief executive officer Datuk Wong Kuo Hea.

"Although oil palm yields of pioneer investors there are showing 30 tonnes of fresh fruit bunches per hectare in a year, we will still need to do a feasibility study.

"We need to assess the soil fertility, potential crop diseases and rainfall pattern," he told Business Times.

"If we go ahead with this venture, it will be developed phase-by-phase, over a span of 10 to 15 years. The eventual plot size will be around 100,000ha," he added.

Eight months ago, Ta Ann had forecast 380,000 tonnes of fresh fruit bunches at its Sarawak estates for the year. Incidentally, its trees started to fruit exceptionally well and the company is reaping bumper harvest. Now, Wong raises his expectation to 450,000 tonnes, 45 per cent more than 2010's harvest of 310,870 tonnes.

Ta Ann's profits for the third quarter ended September 2011 has jumped 51.7 per cent to RM47.93 million, buoyed by good harvest and high palm oil prices. The group now has RM200 million in cash reserves.

Wong said part of the money would be used to plant another 5,000ha with oil palms and fund its second mill, next year. "Just like the first one, this mill will be able to process 120 tonnes of fresh fruit bunches per hour. The mill should be ready by end 2012."

On Ta Ann's traditional business, Wong said the company would continue to invest substantially in forest plantations. "As our business expands, we need more plywood that are produced in a sustainable manner. We have invested in forest plantations to reduce the need to source from natural forests," Wong said.

It has been more than nine months since the earthquake and tsunami in Japan. While the plywood price has increased by 12 per cent to an average of US$650 (RM2,045) per cubic metre since the earthquake, Wong sees demand coming from the reconstruction next year. "Japan had a big stockpile of cheaper imports from China. So, we will only see demand from the reconstruction coming in next year," he said.

Eight months ago, Ta Ann announced a one-for-five bonus issue of up to 51.5 million shares of RM1 each. Asked if shareholders could look forward to another round of bonus issue in the coming months, Wong replied: "Well, bonus issue is one way to reward shareholders while improving share liquidity."

Importers decry 'unjustified fees'

SERI KEMBANGAN, Selangor: LOCAL importers are estimated to have suffered about RM500 million in unjustified new fees and increment imposed by shipping companies in the past one year.

If left unchecked, this inflationary move by shipping lines could render many import-dependent businesses to lose out in competitiveness and raise the cost of living in the country.

Yesterday, at a press conference, 13 trade groups issued a joint statement protesting against container deposit and dubious charges by shipping companies.

With about three million containers carrying goods into Port Klang annually, importers estimate that for every RM100 increment in dubious fees per container charged by shipping lines, they are collectively burdened with an additional RM200 million unnecessary costs.

"We're disappointed with the Transport Ministry and Port Klang Authority for failing to check the list of dubious charges that shipping lines are charging at Port Klang," said Malaysia Hardware Machinery & Building Materials Dealers' Association (MHMBA) president Datuk Patrick Lim Khoon Heng.

"This has been dragging on for more than a year already. We've seen new fees and unjustified charges levied on us without any value-add in service. In the last 12 months, these dubious fees have totalled between RM200 and RM300 per container, Lim said.

"We've repeatedly requested the government to review the current unfair practices by shipping lines at Port Klang," he told reporters at a press conference here.

The group consists of MHMBA, Malaysia Steel & Metal Distributors' Association, Steel Wire Association of Malaysia, Building Materials Distributors Association of Malaysia, Malaysia Mould & Die Association, Malaysia Hardware Wholesaler Association, The Electrical & Electronics Association of Malaysia, Malaysian Indian Metal Traders and Recyclers Association, Malaysian Plastics Manufacturers Association, Malaysia Furniture Entrepreneur Association, Machinery and Equipment Manufacturers Association, Federation of Malaysian Foundry & Engineering Industries Association and the Palm Oil Refiners Assciation of Malaysia.

"We want to highlight that it is illegal for shipping lines to withhold delivery order (DO) after consignees have paid the relevant port charges," said Lim.

"We, once again, appeal to the Transport Ministry to issue a directive to all shipping lines calling at Port Klang to abide by this basic contract law," he added.

KLK set to grab bigger nitrile latex market share

KUALA LUMPUR: Kuala Lumpur Kepong Bhd (KLK), which owns 19 per cent of Yule Catto & Co plc, is set to grab a bigger share of the world's nitrile latex supply as its unit continue to expand output.

London stock exchange listed-Yule Catto, which currently controls 40 per cent of the world's nitrile latex supply, is spending RM110 million to expand its factory in Pasir Gudang, Johor.

Global annual demand for nitrile latex is reportedly around 550,000 tonnes.

The world's six nitrile latex producers, including Yule Catto, are ramping up output to satisfy rising global demand for nitrile latex used in the manufacture of medical examination and industrial gloves.

Yule Catto is making its latest expansion in Malaysia through wholly-owned Synthomer Group.

Synthomer said in a statement that the expansion will continue to strengthen its presence in the synthetic nitrile glove market. Currently, the company runs 100,000-tonne a year nitrile latex plant in Pasir Gudang and another 130,000-tonne plant in Kluang. Earlier this year, it had already expanded its Kluang facility. 

Synthomer Asia managing director Dr Brendan Catlow said that by 2013, Synthomer's combined capacity at Kluang and Pasir Gudang will be 300,000 tonnes per year.

TSH blazes a trail in Sabah oil palm sector

TAWAU: With over RM40 million invested, the TSH Biotech Wakuba tissue culture laboratory in Sabah, is on track to produce 500,000 oil palm ramets this year, gradually increasing to 1.5 million ramets by 2015.

The Wakuba ramet is the result of 10 years of extensive research and development, with researchers collecting data as early as 2001.

The 70,000 sq ft laboratory, which produces high-quality oil palm using tissue culture technology, has 250 employees and technical expertise from the local community, including its head of biotechnology Dr Jinil Malaji.

Currently, all the biotechnology labs producing high-quality oil palm using tissue culture technology are operating in Peninsular Malaysia, and the Wakuba tissue culture laboratory is the only sizeable commercial lab in Sabah. 

Chief Minister Datuk Seri Musa Aman who visited the lab yesterday commended TSH for their foresight over 10 years ago in addressing land scarcity challenges while improving planting material for better productivity and yields.

"Although many oil palm players have spoken of biotechnology in the Sabah oil palm sector, only a few have invested their resources in this untapped field," he said.

Impressed with the success of the lab, Musa was heartened that local oil palm players such as TSH had shown their commitment to the local economy and community. 

"I am very pleased to see the commitment of TSH to not just technology advancement but also to supporting the local community," Musa said, congratulating TSH chairman Datuk Kelvin Tan for his visionary idea in setting up the Wakuba lab.

TSH Resources is taking huge strides in increasing oil palm productivity and yields not just in Sabah but also the rest of the country. 

There are over 4.85 million hectares of oil palm plantations in Malaysia, out of which nearly 30 per cent are in Sabah. "Imagine how far we can go by deploying more tissue culture technology. The potential is enormous," Musa said.

Asian know-how can feed a hungry planet

This is contributed by Eva Clayton, a former US lawmaker. She was participating at the United Nations climate change debate taking place in Durban, South Africa.

POLICYMAKERS from around the world have descended on Durban, South Africa, for the annual United Nations Climate Change Conference.

While it is appropriate that key policy makers involve themselves in the effort to reverse the ill effects of man-made climate change, it is increasingly apparent that amid the discussions of greenhouse gas emissions and ozone compromise, world leaders have lost sight of the daily battle for survival that is waged by an ever increasing number of people from poor and underdeveloped countries.

Climate change is indeed a global threat that must be addressed; but so, too, is hunger and poverty. What is needed is a coordinated approach that seeks to also address food security, economic growth and poverty reduction, while also combating climate change.

Tropical regions are home to some of the world’s most disadvantaged people. Millions of men and women in these areas lack reliable access to food, jobs, education and healthcare.

Recent famines and natural disasters in the tropics illustrate the need for robust and sustainable agriculture development. While the Durban climate talks are critically important, they will mean little if men and women in the global tropics go hungry.

This means we must focus on agriculture production as a driver of economic growth.

For a model, the delegates in Africa can take note of the experience of tropical Asia. Once-poor nations such as Malaysia, Indonesia, Thailand, the Philippines and others have harnessed technology and advanced agricultural techniques to feed their people and tap into export markets.

Asian nations now grow an abundance of papaya, coconut, banana, palm and other food staples. They increasingly feed their own people and, as importantly, trade across the region.

They are climbing the income and development ladder as a result, while showing concern for the climate and the environment.

Some far-sighted African policymakers and business leaders are confident Africa can do something similar. And they are working with experienced entrepreneurs from the Asia-Pacific region to act on this potential.

As former president of Ghana John Kufuor wrote this week, “commercial palm oil represents an exciting opportunity for Africa.

“It has the potential to provide significantly higher returns to smallholders than their current crops or become an inexpensive African-produced source of food, particularly when years of drought have left the continent reliant on vegetable oil imports to meet demand.”

President Kufuor is right; palm oil can play a vital role in Africa’s future as it has in Asia’s recent economic rise. The oil palm is native to the continent and thrives in sub-Saharan Africa’s moist, wet climate.

It is a high-calorie, nutritious product that will be a key component of any anti-hunger effort. The insight, technology and hard-won business savvy of Asian palm oil investors will help kick-start Africa’s nascent palm oil industry.

The continent is expected to more than double its population by 2030. It is one of the fastest growing regions in the world.

It is worth noting some of the greatest benefits of agriculture-led development can accrue to smallholders, particularly women farmers. Malaysia set the global standard in this regard when it implemented its innovative Federal Land Development Authority (Felda) programme to ensure that smallholders shared equitably in the rising prosperity that comes with plantation agriculture.

This path-breaking Malaysian programme inspired Liberia’s Outgrowers Scheme, an effort to support Liberia’s small farmers. Nigeria is also emulating Malaysia’s successful Felda programme.

Many of the delegates assembled in Africa note that climate change increases the risk of widespread hunger and famine as the social justice non-governmental organisation Oxfam pointed out in a new report. This is no doubt true.

But the climate need not change for hunger and famine to destroy the lives of millions of people. This sad state of affairs is with us today.

The discussion on hunger must be raised to the same level as the global conversation on climate. This is why food security must rise to the top of the development agenda discussed in South Africa and beyond.

A concerted effort by policymakers and the business community will make the days of global hunger a thing of the past.

Malaysia open to raising renewable energy quotas

KUALA LUMPUR: THE government is open to raising quotas to generate renewable energy (RE) if consumers are willing to pay another 1 per cent RE levy on top of the current 1 per cent in the electricity bills.

Starting this month, consumers in Peninsular Malaysia and Sabah, whose electricity bills exceed RM77, will start paying the 1 per cent levy to subsidise RE producers.

Energy, Green Technology and Water Ministry secretary-general Datuk Loo Took Gee estimates Sustainable Energy Development Authority Malaysia (Seda) to collect up to RM250 million in levy by the end of 2012.

Due to limited funds, the feed-in tariff (FiT) quota allocation for RE producers is awarded on a first-come, first-serve basis. This prompted a rush in online applications to Seda.

Since December 1 2011, applications for the FiT allocation under the categories of biomass and solar photovoltaic (PV) projects were fully taken up. "There's so much interest in biomass and solar PV," said Seda chief operating officer Ali Askar Sher Mohamad.

Asked if the government may raise the quotas and allow for more RE producers to supply to the national grid, Loo said: "It all depends on the funding. If the (heavy energy) consumers (in Peninsular Malaysia and Sabah) are willing to pay an addition 1 per cent (to the current 1 per cent RE levy on their electricity bills), we're open to raising the quotas."

Loo and Ali were speaking to Business Times on the sidelines of the Solar Symposium 2011 held here yesterday.

When contacted in Durban, South Africa, Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said international leaders are becoming more aware of the achievements and continuous efforts of Malaysian oil palm industry in contributing towards climate change mitigation initiatives.

He was speaking to a panel of experts on Climate Change Mitigation Through Sustainable Practices. The discussion was held on the sidelines of the 17th Conference of the Parties of the United Nations Framework Convention on Climate Change, better known as COP17.

In recognising the importance of greenhouse gas (GHG) reduction and climate change mitigation, the Malaysian Palm Oil Board carried out a life cycle assessment of palm oil and palm biodiesel production. Dompok said the study, which had been reviewed by an international independent expert panel and published in peer reviewed journals, found that one tonne of refined palm oil entails emission of about 1.1 tonne of carbon dioxide equivalent of GHG.

It is lower than the 1.7 tonnes of emission for soyabean oil and 1.35 tonnes for rapeseed oil. "The GHG emission of one tonne of palm oil is comparable if not better than those of other competing vegetable oils such as soyabean oil and rapeseed oil," he said.

Nevertheless, Dompok said the industry is striving to minimise emissions by trapping methane from palm oil mill effluent and converting it to RE for supply to the national grid.

JJ-Lurgi rides on rising regional demand

PETALING JAYA, Selangor : JEBSEN & JESSEN (SEA) Pte Ltd (JJSEA) is in a sweet spot, having clinched an influx of jobs to build and upgrade oleochemical plants in Indonesia and Malaysia, following Indonesia's restructure of palm oil taxes.

Since August 2011, the Indonesian government has raised export taxes drastically to boost refining capacity and downstream activities. Crude palm oil (CPO) export tax was set at 22.5 per cent and refined palm olein tax, at 13 per cent. 

This means CPO and crude palm kernel oil are cheaper for oleochemical producers there. What's more, oleochemicals exported from Indonesian shores are tax-free. As expected, the tax incentives have spurred investments in Indonesia's nascent oleochemical industry.

"We see big potential in process engineering, especially when high CPO tax in Indonesia has prompted many plantation companies to invest downstream," said JJSEA chairman Heinrich Jessen.

"The demand to put up more oleochemical plants has doubled from last year. Currently, our order book amounts to S$200 million (RM490 million) but there are still many projects under discussion, particularly in Indonesia," he told Business Times in an interview here recently.

Jessen likens the group's customers to long-term partners, whereby his staff are regularly scheduled to present technological updates to help clients lower their costs and improve product quality.

"In Malaysia, investors are de-bottlenecking and upgrading their fatty acids and fatty alcohol throughput to leverage on economies of scale," said Jessen, adding that his company undertakes these process engineering jobs via JJ-Lurgi Engineering Sdn Bhd.

This joint venture with Lurgi AG, a member of French conglomerate Air Liquide, has delivered more than 230 of these refineries, oleochemical and biofuel plants throughout Southeast Asia.

Indeed, JJ-Lurgi is in the right place and at the right time. The oleochemical industry is experiencing robust growth on increased global demand for eco-friendly soaps and detergents, which are viewed as a sustainable alternative to the petrochemical variants.

Aside from process engineering which brings in fat profits to JJSEA, the privately-held industrial conglomerate is also involved in cable technology, chemicals, communications, material handling and packaging.

Asked if there are potential mergers and acquisitions on the horizon, he replied, "Yes, we're keen on acquiring entities that complement our existing businesses. We've set aside RM600 million from our internal finances." Jessen, who is a member of the founding family, said: "We've always funded our own growth. It is a family business and we intend to keep it that way." 

JJSEA, a 116-year-old conglomerate of Danish origins, is very much entrenched in Southeast Asia. Its businesses in Singapore, Indonesia, Malaysia, Thailand, Vietnam, and the Philippines comprise more than 50 subsidiaries and associates, employing some 3,300 staff.

Sustaining oleo's pole position

Malaysia has been the world’s top oleochemicals producer for the last 15 years but is now facing stiff competition from Indonesia. With a 25 per cent market share, Malaysia is the global hub for basic oleochemicals. They are eventually turned into daily necessities like soap, shampoo, moisturiser, toothpaste, shaving cream and laundry detergent.

According to the Malaysian Palm Oil Board, the country exported RM9.06 billion worth of oleochemicals in the first 10 months of this year.

“With inflationary pressures from high feedstock prices, we’ll definitely surpass the RM10 billion mark by year-end,” Malaysian Oleochemical Manufacturers’ Group (MOMG) chairman Tan Kean Hua told Business Times in an interview in Kuala Lumpur.

But the industry’s biggest challenge is from its neighbour. The extremely high palm oil export taxes in Indonesia have distorted the playing level.

Tan explains that in August 2011, the Indonesian government had raised export taxes drastically to boost refining capacity and downstream activities.

Crude palm oil (CPO) export tax was set at 22.5 per cent and refined palm olein tax at 13 per cent. This means that CPO and crude palm kernel oil are cheaper for oleochemical producers there. What's more, oleochemicals exported from Indonesian shores are tax-free.

As expected the tax incentives have spurred investments in Indonesia's nascent oleochemical industry. Musim Mas, Indonesia's biggest oleochemical player with around 750,000 tonnes annual capacity in Medan, is said to be planning expansion.

Wilmar International and US-based Elevance Renewable Sciences too are setting up a 180,000-tonne per year bio-refinery in Surabaya, Indonesia, which is expandable up to 360,000.

"With cheaper feedstock available to the Indonesian oleochemical producers, we no longer compete on a level-playing field. Anyway, with one hand tied to our back, we still have to fight," said Tan.

In the early 1980s, the US, Europe and Japan were the major producers of oleochemicals or fatty acids, accounting for more than 90 per cent of the world's total production. But from 1985 onwards, there was a big shift from these developed countries to Southeast Asia due to the abundance of palm oil derived oleochemicals.

In Europe, with Croda and Cognis selling most of their oleochemical assets, Oleon Holding NV is now the largest there with a 500,000-tonne a year capacity. Oleon's parent is Sofiprotéol, the financial organisation of the French vegetable oils and proteins sector.

In 2006, half of Cognis' oleochemical business was sold to Golden Hope Plantations Sdn Bhd, which is now part of Sime Darby Bhd. Two years later, Cognis owners sold the remaining 50 per cent stake to Thailand's PTT Chemical International and renamed the entity Emery Oleochemicals. Last year, Cognis itself was bought up by German chemical giant BASF.

Currently, the world's oleochemicals exports are around 10 million tonnes, with more than half from Southeast Asia.

One of the reasons for Malaysia's pole position stems from its process engineers and chemists' technological capabilities to process palm oil and palm kernel oil into more than 100 types of downstream products.

There are 18 local oleochemical companies with a combined annual capacity of 2.6 million tonnes. Their plants make basic oleochemicals like fatty acids, fatty alcohols, esters and refined glycerine. These are then formulated to make toothpaste, soap, dish washing detergent, industrial lubricants and even food emulsifiers.

Malaysian companies are expanding, too.

Tan, who is also IOI Oleo executive director, said his company is investing RM130 million to build a new fatty ester and a 20,000-tonne specialty oleo derivative plant at the Prai Industrial Complex in Penang.

Currently, IOI Oleo Group is the leader in Malaysia with annual capacity of 950,000 tonnes.

KLK Oleo Group is the second biggest, with facilities churning out 780,000 tonnes.

KLK Oleo Group managing director A.K. Yeow said the company is investing in excess of RM600 million to build an integrated methyl ester sulphonate and fatty alcohol plant in Shah Alam, Selangor. “We’re also putting up a specialty fatty ester facility in Klang,” he said.

Emery Oleochemicals (M) Sdn Bhd operates a 300,000-tonne per year plant in Telok Panglima Garang, Selangor. It is investing more than RM400 million to go further downstream.

Emery Oleochemicals group chief executive officer Dr Kongkrapan Intarajang said, “Our plan is endorsed by Pemandu (Performance Management and Delivery Unit). One of our highlights is a 25,000 tonne-plant to produce biolubricants, green polymer additives and surfactants. It is now being commissioned”.

When asked on the industry outlook, Tan acknowledged that some quarters worry about Europe’s sovereign debt crisis eroding customers’ buying confidence. MOMG, however, remains optimistic. “We’re a cost-plus business, oleochemicals are a necessity. It is present in household cleaning products, toiletries, cosmetics, industrial and pharmaceutical items we use everyday,” he said. “Overall, there’s customer base expansion from emerging markets,” Tan added.