Archive for June 2013

Sarawak plunged into darkness

We were driving from Rinwood Pelita Estate in Mukah to Sibu when Adrian Wong noticed that a few sets of traffic lights at crossroads were out.

After a few phone calls and texts via whatsapp, we realised the whole of Sarawak was experiencing a blackout.

We slowed down and carefully navigate through the chaos at traffic light crossroads. We finally reached Kingwood Hotel in Sibu at 7pm. It was pitch black except for car lights at the streets.

The lobby was crowded with hotel guests as the rooms became hot and stuffy. Finding a place to eat proved to be a problem as most restaurants were closed and the handful that were opened, had long queues.

So, our last resort was "romantic candle light dinner" at the pasar malam. The hawkers there enjoyed brisk business.

It turned out to be quite good as there were so many finger foods to pick and choose from. Adrian bought a whole bagful of Sibu "kong piah", which was lip-smacking delicious. It distracted me from feeling sweaty and tired -- for a while.

After 5 hours of anxious worry and chatter, we all decided to go back to our hotel rooms and try to get some sleep even though it was stuffy. After settling into bed, the lights and air-cond suddenly came back on. Hooray!

This was a memorable assignment ... I will remember this for a long, long while.

Multi-faceted barriers to trade

AT A CROSSROAD: The bigger the palm oil industry becomes, the easier it is a target for smear campaigns by rivals via political means. Planters urge the government to tackle barriers to palm oil exports in Malaysia’s free trade agreement talks with the European Union. OOI TEE CHING writes.

WELL-FUNDED environmental activist groups like World Wildlife Fund, Friends of the Earth, Greenpeace and Sawit Watch of Indonesia, have in the last 15 years or so, launched many campaigns alleging the expansion of oil palm plantations have destroyed forests in Indonesia, threatened many endangered wildlife and robbed indigenous peoples of their land.

A manipulative but favourite ploy used by environmental activists to discredit palm oil-producing countries like Malaysia and Indonesia, is to take satellite imagery of a small part of the country and magnify it as logged-over areas in a cynical and deliberate attempt to create the impression that the entire rainforest system is destroyed.

To put things in perspective, the oil palm industry in Malaysia accounts for 15.5 per cent of total land area and only 4.5 per cent that of Indonesia. 

Unknown to many, the environmental activists’ strident criticisms have created trade barriers to the global palm oil trade under the pretext of environmental activism. Indeed, this sits oddly with the fact that oil palm is one of the world’s most sustainable crops. 

Oil World, a Hamburg-based trade journal, noted that the oil palm tree is the world’s most efficient oil crop because one can harvest five tonnes of oil per hectare. This is 10 times more productive than soyabean planted in the United States and five times more than rapeseed, Europe’s main oil crop. 

Should alternatives to oil palms be grown, more land would be needed to produce an equivalent volume of oil to replace palm oil, likely resulting in further deforestation. 

In giving a better insight to the terminology “deforestation”, Sarawak Plantation Bhd chairman Datuk Amar Abdul Hamed Sepawi who studied forestry and was trained as a forester, cited the United Nation’s Framework Convention on Climate Change defined a forest as an area of 0.5 to one hectare having more than 30 per cent canopy cover and having a potential height of two to five metres.

“So, how can it be said there is deforestation when oil palms fit the United Nation’s definition of forest plantations like fir and cone trees in Europe? 

"How can it be said that planting oil palms is highly polluting when these trees, like any other forest species, produce oxygen for us to breathe?” he said in his keynote address before 1,003 delegates at a conference organised by the Incorporated Society of Planters (ISP) in Sibu, Sarawak, recently.

Last year, the Rainforest Foundation of Norway made sensational headlines when it alleged Norwegian Government Pension Fund Global (GPFG)’s investments in Malaysian and Indonesian plantation counters causes wanton deforestation.

GPFG sold off their shareholdings and in their annual report noted: “In the first quarter of 2012, we sold our stakes in 23 companies which by our reckoning, produced palm oil in an unsustainable manner…” 

Abdul Hamed caused a stir among the ISP delegates when he pointed out the elephant in the room. 

GPFG, which was previously known as The Petroleum Fund of Norway and derives its seed money from selling depleting fossil fuels, is throwing dirt at farmers who plant trees that sequester carbon dioxide. 

“We have two groups of people. One digs oil from the ground and the other harvests edible oil from above the ground. Yet, it’s the group that contributes to fossil fuel burning that is blaming environmental pollution on the other group who plants trees that clean up the air,” he smirked. 

Abdul Hamed moved on to highlight that the western environmental activists’ campaign against oil palm plantation expansion, in the name of “saving rainforests”, is actually a blatant violation of international norms and Malaysia’s sovereignty.

“Many people unsuspectingly believe Greenpeace, Friends of the Earth and Wetlands International are protectors of the world’s forests but ... let me ask you ... are they bringing their own governments to justice for deforesting 90 per cent of their country’s landmass? Are they lobbying for reforestation of deciduous forests in their own countries?” he asked.

By criticising the virtues of oil palm planting and ignoring the evidence that economic development leads to better environmental protection, Abdul Hamed said it is questionable whether these activists’ true commitment is to the environment or to erection of trade barriers to benefit rapeseed farmers who are already heavily subsidised by the European Union (EU) government.

This hand-in-glove fit is also seen in the activists’ campaign against palm oil imports, especially for biofuels, which is very much aligned with the EU’s Renewable Energy Directive that seeks to discriminate against palm biodiesel.

Skilful in communication and blackballing tactics, these activists have also harassed oil palm planters into submitting to the standards and criteria of which they dictate, such as the Roundtable on Sustainable Palm Oil (RSPO). 

Abdul Hamed described these mercenary activists as whistleblowers, judge and jury, all rolled into one — a stark contrast to the check and balance that corporates undertake in the name of justified return on investments to shareholders. 

“Why should our oil palm industry submit to principles and criteria governing our country’s land resources that is being pushed by green activist-driven organisations such as the RSPO? 

"Where is the respect for Malaysia’s laws enacted by Parliament and state assemblies that had shaped good agriculture practices, workers’ rights and sustainable return on investments for farmers?”

Abdul Hamed noted that France’s smear campaigns of “no palm oil” on food packaging and environmental activists’ incessant harassment for oil palm planters to cough out tonnes of money to be RSPO-certified has restricted market access for palm oil. 

“Is RSPO the EU’s “Trojan Horse” meant to hoodwink plantation corporates into surrendering their rights of redress with the World Trade Organisation that promotes fairness in free trade?” he asked.

Abdul Hamed reiterated the oil palm is an economic security crop. This is because Malaysia’s annual US$25 billion (RM79.75 billion) palm oil exports support some two million jobs and livelihoods along the sprawling value chain.

More than 40 per cent of oil palm planters in Indonesia are smallholders whilst in Malaysia they contribute to 38 per cent of the country’s palm oil output.

Last year, Malaysia and Indonesia earned some US$45 billion from exporting more than 40 million tonnes of palm oil all over the world, data from industry regulators of both countries revealed.

Oil World confirmed that in 2012, Malaysia and Indonesia shipped out the bulk of 41.8 million tonnes of palm oil, or 61 per cent of the 68.2 million tonnes of vegetable oils traded globally. Soyabean, rapeseed and sunflower oils, however, only commanded 27 per cent of market share.

Interestingly, Oil World’s data also showed that while the vegetable oils market had doubled in size since 1990, people around the world have chosen palm oil over other oils. Among 17 major vegetable oils traded in the world, palm oil consumption exceeded soft oils like soyabean, rapeseed and sunflower.

In the last two decades, global palm oil consumption expanded three times. Rapeseed oil purchase, however, only increased by 2.5 times and soyabean oil’s popularity just doubled.

“We’re at a crossroads. It’s time for oil palm planters to adapt to the fast-changing world of ruthless vegetable oil politics if we want to stay relevant in this market,” Abdul Hamed said. 

He then highlighted Malaysia’s neighbour has its own certification called the Indonesian Sustainable Palm Oil (ISPO) that is structured around a more commonly acceptable definition of sustainability and good agricultural practices. 

“Indonesia has embarked on ISPO to retain its sovereignty and bring discrimination against palm oil exports to the World Trade Organisation to achieve liberal trade that thrives on healthy competition. What about Malaysia?” he asked. 

'Fall in commodity prices will pose immediate risks'

This is written by my colleagues Zaidi Ismail and Rupa Damodaran.

KUALA LUMPUR: A significant decline in commodity prices will pose immediate risks for Malaysia, the World Bank says.

It says moderating demand from China and weak growth in advanced economies, combined with expanding supply from surging investments over the past five years suggest downside risks for commodity prices.

"Although Malaysia can cope with additional declines in prices, sharp downward movements could potentially lead to deficits in the current and fiscal accounts as well as slower economic growth from delays in energy related investments," the bank said in its eight Malaysia Economic Monitor report.

Themed "Harnessing Natural Resources", the report was launched last night by Minister in the Prime Minister's Department Senator Datuk Seri Abdul Wahid Omar.

In his speech, Abdul Wahid said Malaysia will prudently manage its natural resources towards achieving a sustainable and a high income nation by 2020.

Malaysia has been able to fully leverage on its endowments both in terms of natural resources and human capital. 

"Natural resources is one of the key factors for our success, with rubber, palm oil and oil and gas," he added.

Meanwhile, the World Bank economist Frederico Gil Sander said not many countries have a good story like Malaysia, where investments totalled more than the 100 per cent of what was taken out of the ground.

The government encouraged commodity sectors to move downstream and industrialisation more broadly by easing foreign investment in manufacturing, reforming regulations and creating tax incentives.

National oil company Petronas acted as an oil fund as it kept some export earnings overseas and made significant direct investments domestically in downstream industries as well as in production abroad. 

"This reduced the flow of foreign exchange into the economy (thus reducing exchange rate pressures), supported downstream diversification and built assets to provide for future generations," he noted.

Firms refute illegal burning allegations

KUALA LUMPUR: Three Malaysian plantation companies refuted allegations that they are involved in illegal burning of forest and peat lands in Riau Province, Indonesia, which is causing the current haze situation.

Sime Darby Bhd, Kuala Lumpur Kepong Bhd (KLK) and TH Plantations Bhd have each issued statements yesterday, refuting allegations of involvement in open burning activities in Indonesia and thereby causing widespread haze which is enveloping Sumatra, part of Malaysia and Singapore.

Last Saturday, Indonesian Environment Ministry had named eight companies that are being investigated for contributing to the haze by scorching their land in Riau and Jambi.

Another 14 companies are also being investigated for burning, but have not been named yet.

Meanwhile, Bernama quoted Association Plantation Investors of Malaysia in Indonesia (Apimi) as saying that Malaysian companies are not at fault in clearing land in Indonesia and causing fire. 

Apimi executive secretary Nor Hazlan Abdul Mutalib said open burning in oil palm plantations owned by Malaysian companies was carried out by local smallholders in the land allocated to them.

Yudhoyono apologises to Msia and Spore on haze

JAKARTA: Indonesian President, Susilo Bambang Yudhoyono has apologised to Malaysia and Singapore over the haze emanating from forest and peatland fires in Sumatra, which has affected air quality in the two countries.

"As the president, I apologise for what has happened and  hope for understanding from our friends in Singapore and  Malaysia," he told a news conference at the president's office here Monday evening.

"For sure, what has taken place is not on purpose," he  said.

Yudhoyono said at the moment, the areas affected by fires  in Jambi, Bengkulu and Riau had been declared as districts under disaster emergency and the central government had  deployed maximum manpower to fight the calamity.

He said Indonesia was fully responsible for overcoming the  problem and was confident that this would be done soon.

Yudhoyono pledged that Indonesia would put out every  spot of fire burning in Indonesian forests by carrying cloud  seeding apart from mobilising fire-fighting personnel on land  including from the armed forces.

At the news conference, the Indonesian President also  ticked off several government officials of the republic for mentioning the names of plantation companies believed to  have started the fires which he said should not have been divulged.

"From what I monitor daily, there were statements made  by some officials which according to me should not have been  delivered as such," he said. He said the companies concerned involved had not been  determined and government officials should refrain from issuing such statements.

"Even if the companies were negligent, it is not necessary  to name them...or the fact that they are owned by our neighbouring countries. What is more important now is to focus on overcoming the fire disaster that has dragged on for a week," he said. -- Bernama

China's Uighur community want palm cooking oil

KUALA LUMPUR: CHINA-based Firat International Trade Co Ltd, the main distributor of palm oil in Xinjiang, expects to distribute 100,000kg of Malaysian palm oil-based cooking oil per month in the province.

This translates into monthly sales of around RM10 million.

Firat director Elmurat Eli said the company intends to make Urumqi, the capital city of Xinjiang, as the distribution hub for the central region of China and Commonwealth of Independent States (CIS) countries.

"Xinjiang has a Muslim majority population and Malaysia is well known for its halal food, including cooking oil. 

"The Uighur community in my home country China are always active in exploring halal food. After scouring several destinations, we decided to import 100 per cent of Malaysia's palm oil-based cooking oil which is certified halal, affordable and nutritious," he said at a briefing yesterday. 

A Turkic-speaking people of interior Asia, the ethnic Uighurs live, for the most part, in north-western China and are staunch believers of the Quran.

The Xinjiang province has a population of more than 25 million people, of whom 65 per cent are Muslims.

He said Xinjiang will indirectly facilitate re-exports of palm cooking oil to neighbouring countries like Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan and Uzbekistan through Firat's distribution hub in Urumqi.

"We are thankful to Malaysian Palm Oil Board and Malaysian Palm Oil Council for their technical assistance and Malaysian Intellectual Networking Association for establishing this business tie-up with Al-Kaleej Industries Sdn Bhd," he added.

Elmurat said the first shipment of two container loads of cooking oil, brand-named Melor, to Xinjiang will dock at Tianjin seaport next month, in time for Ramadhan.

Designer seeds for fruitful returns

Many people are not aware that there are companies which are specifically set up to breed oil palm trees and produce superior seeds for farmers. Why is there a need for such companies when a farmer can collect seeds that fall to the ground? It's because these seeds, which are second generation, will not grow into trees that are exactly the same as the original.

What oil palm tree breeders do is they select good mother palms and match-make them with good father pollens so as to produce good babies. So, among "good" characteristics these agronomists target in their breeding process are for the trees to yield fruits that are super-oily, short in stature (for easy harvest), resilient against disease and able to withstand drought.

 It's important that farmers plant good seeds obtained from tree breeders in order to get good returns. This is because seeds collected from the ground (which are usually sold at dirt cheap price) will only grow  into "bad" trees and not yield the amount of fruits like the original tree, no matter how much fertiliser the farmer feed the "bad" trees.

To all the first time oil palm planters out there, do remember....good seeds are not cheap and cheap seeds are usually no good.

New threats to palm oil

This is written by columnist Dr Ahmad Ibrahim.

HIDDEN AGENDA: Under the guise of saving the environment, some nations' laws impede the import of palm oil

KUALA LUMPUR: Remember the much publicised London raid on the palm oil giant Guthrie in 1981? According to records, it took only about four hours for the transfer of ownership to take place. Malaysia eventually succeeded in taking over the 100-year-old company built during the colonial era.

From then on, Guthrie grew to become a respected global player in the palm oil business, managed fully by Malaysians. It is now merged into the Sime Darby conglomerate. And Malaysia has single-handedly turned palm oil into a leading oils and fats commodity for the world.

Malaysia and Indonesia now together control about 90 per cent of the world's palm oil production. And palm oil dominates the international trade in edible oils, exporting to literally all corners of the world.

Looking back, this might have been difficult if that historic London dawn raid had not taken place. Even to this day, competing oils have tried all sorts of tactics to suppress the global expansion of the palm oil industry.

However, despite the growing popularity of palm oil among consumers and manufacturers worldwide, competitors have not stopped thinking of new ways to deny palm oil its rightful place in global trade.

Palm oil is, for example, the preferred oil in frying because of its unique heat stability. In China, Korea and Japan, instant noodle makers use 100 per cent palm oil. In the USA and European Union (EU), palm oil has emerged as the preferred fat for the manufacture of margarine and shortening.

But this is more to do with the health benefits of a trans fat free product offered by palm oil.

In fact, consumers should thank palm oil for the findings on the deleterious nature of trans fats.
This came about when scientists were looking for the scientific explanation as to why palm oil, despite its higher content of saturated fats, did not raise cholesterol when consumed.

That was when they found the real culprit, trans fats from partially hydrogenated liquid oils. The rest is history. Now all nutritional labels, especially in the West, carry warnings on trans fats content, which is good news for palm oil. 

But the enemies of palm oil are not giving up easily. Their latest attempt is disguised under the widely popular sustainability agenda.

Nowadays, it is easy to sell any idea which promises to help develop solutions for the global sustainability challenge. All you have to do is to come out with convincing arguments that a crop like oil palm is bad for climate change and has to be policed using the many sustainability criteria.

Actually, the palm oil industry in Malaysia has no real problem with that. The problem starts when the criteria imposed become unrealistic and irrelevant. 

In fact, before all the hue and cry over sustainable palm oil, Malaysia had long embraced the commitment to adopt environmentally sustainable management practices for oil palm.

The industry has long implemented biological control of pests, zero burning techniques in oil palm replanting, effective treatment of palm oil mill effluents, recycling of treated water for irrigation, conversion of biogas into energy and many more.

And sustainability is not just about the environment. We must not forget the other two pillars of profit and people.

Admittedly, oil palm is one crop which reaps considerable income. It has also helped alleviate the country's hardcore poverty through land schemes like Felda and Felcra.

However, recent developments in Europe suggest that we may soon again lose control over its destiny. Already we are seeing laws in the EU enacted to deny the export of our palm oil for biofuel to the EU.

All are under the guise of the environment and sustainable development. The Renewable Energy Directives (RED), for example, have classified palm oil as not meeting the criteria for sustainability.

But the criteria for assessment keep changing. New elements such as land use change are introduced to make it difficult for palm oil.

Though we do recognise the noble intentions of sustainability to guide future global growth, it can also be abused. Is colonisation coming back to haunt palm oil-producing nations under the guise of the environment?

Sarawak Oil Palms rides out global storm

The 2013 change of palm oil tax structure gave breathing space to refiners in Malaysia. Sarawak Oil Palms Bhd’s recent downstream venture turned the corner and is now running at full capacity. Ooi Tee Ching writes.

MIRI: The Year of the Dragon is considered the luckiest of the Chinese lunar years. But last year,  the auspicious creature was not kind at all to Malaysia's palm oil industry. 

In fact, stakeholders throughout the palm oil value chain took a very bad beating. Oil palm planters suffered falling palm oil prices while refiners bled losses when they tried to export refined palm oil.

The dismal sentiment was very much fuelled by the Indonesian government's policy move in October 2011 to widen its export tax gap between crude palm oil (CPO) and refined products drastically.

Decades-old partnerships between millers and refiners in Malaysia broke down. It was an unavoidable move as refiners were bleeding losses for every tonne of CPO refined. To stem refining losses, refiners here unwound long-term contracts and slowed down purchases, resulting in a rapid build-up of CPO inventories. 

This, in turn, caused CPO and crude palm kernel oil prices to fall throughout 2012. With cheap CPO and low duty export for packed products, Indonesian exporters were able to sell their products at much lower price, thus grabbing market share from refiners in Malaysia.

Among more than 50 refineries in Malaysia hit was Miri-based Sarawak Oil Palms Bhd (SOPB), a newcomer.

"Our new refinery in Bintulu commenced operations in July 2012. It was very challenging and painful. The tax structure then made it totally uncompetitive. We were only operating at half capacity then," said group financial controller Eric Kiu Kwong Seng.

Refiners also balked at the Malaysian government's surprising move in allowing more duty-free CPO exports in mid-2012. As expected, refiners had to contend with loss of market potential for refined oil.

However, after more than a year of laborious and vociferous lobbying for the restructure of palm oil taxes and waiver of duty-free CPO exports from Malaysia, refiners here finally get to compete on a more level playing field.

In January this year, the government abolished duty-free CPO exports and lowered the export tax from 23 per cent to between 4.5 per cent and 8.5 per cent, depending on the palm oil prices. 

When prices hover between RM2,250 and RM2,400 a tonne, the tax is 4.5 per cent. And if the palm oil prices jump to RM3,450 per tonne, the tax is 8.5 per cent.

Following this new tax regime, SOPB has started to see better refining margins. "We stand a better chance to buy up more CPO from the mills as we incrementally ramp up our refinery," Kiu told Business Times in an interview in Miri, Sarawak.

Indeed, data from the Malaysian Palm Oil Board showed that the national CPO stock levels have consistently come down in the last five months to 1.8 million tonnes.

"There's a steady flow of crude palm oil coming from the surrounding estates. Our refinery is now running at full capacity," said Kiu.

As stock levels come down, palm oil prices have started to climb. Yesterday, the third month benchmark palm oil futures on Bursa Malaysia Derivatives market rose RM26 to close at RM2,464 per tonne.

In view of increased palm oil demand from the Muslim world ahead of Ramadhan next month, prices are expected to trade in a more volatile bandwidth. Kiu said SOPB's team of traders are hedging back to back to protect against drastic fluctuation in price.

Moving on to SOPB's upstream business, Kiu said the group expects to harvest one million tonnes of fresh fruit bunches, 15 per cent more than last year's 883,000 tonnes. 

As of March 2013, about 24 per cent of its planted area is of prime fruit bearing ages. "As more young trees mature, we expect very good harvest prospects. By the end of this year, about 30 per cent of our total planted area will be of matured ages and bearing more fruit bunches," he said.

SOPB's aggressive plantings in 2007 have resulted in 80 per cent of its planted area consisting of young oil palms and primed to bear more fruit bunches. This means big earnings growth potential in the next five years. To date, SOPB has planted more than 85 per cent of its 75,155ha land bank.

This year, SOPB is spending some RM200 million on the construction of its fifth and sixth mill at Sebauh and Baram.

SOPB was set up in 1968 via a joint venture between Commonwealth Development Corp (CDC) and the Sarawak state government. In 1995, conglomerate Shin Yang Group bought CDC's entire stake. Now, Shin Yang Group is the largest shareholder with 36.5 per cent, while state-owned Pelita Holdings Sdn Bhd holds 28.9 per cent.

Keeping an eye on the less fortunate

MIRI: As one of the pioneering oil palm planters in Sarawak, Sarawak Oil Palms Bhd (SOPB) has set out to be a good role model as it takes on its corporate social responsibilities seriously.

One of its heart-warming initiatives is the Vision Care Programme which saw the provision of eye health check-up services to villagers staying near its estates.

In a recent visit to the hinterland village of Sg Arang at Baram, some 200 village folks received free eye check-ups by medical practitioners brought in by SOPB. Spectacles were also provided free of charge to those who were certified as short-sighted by an optometrist. 

Elderly folks diagnosed with eye cataract problems were subjected to further medical review and surgery at Miri Hospital, also fully funded by SOPB.

"It has been a humbling experience serving villagers in the interiors," said Dr Wan Mohd Hafidz, 36, who was recently transferred from Selayang Hospital to Miri Hospital. He noted that since the villagers in the interiors experience more direct exposure to sunlight, there are quite a few who are diagnosed with pterygium, a benign growth of the conjunctiva.

"Cataract is also very common among elderly folks. Surgery and hospitalisation ranges from RM50 to RM1,000, depending on the severity of cases. So, it's good that SOPB steps in to help out those who cannot afford medical fees," Dr Wan Mohd added.

Challenging year ahead for FGV

This is written by my colleague Zaidi Isham Ismail.

KUALA LUMPUR: FELDA Global Ventures Holdings Bhd (FGV), the world's largest crude palm oil producer, expects a challenging 2013 due to lower CPO prices and soft demand from top buyers China and India.

FGV president and chief executive officer Tan Sri Sabri Ahmad said CPO prices averaged above RM3,000 a tonne in 2011 before settling to around RM2,400 a tonne presently.

"So it will be a challenging year for FGV and the industry this year due to slower economic growth in China and India," Sabri told Business Times and Berita Harian at the company's headquarters here recently.

He reminded the industry to be careful not to allow CPO prices to dip below the RM2,000-a-tonne level. "Everybody wants to see the CPO price rise above RM3,000... we must also make sure it does not go below RM2,000," said the outgoing president and CEO, whose contract expires on July 15.

"For the past few months, some 100,000 tonnes of CPO were taken from the market through the local biodiesel programme, which helped to support prices as well as trim the stockpile level to 1.8 million tonnes.

Sabri did not disclose where he will be heading next, only saying that he will devote his time for the betterment of the palm oil industry.

He declined to comment on whether he will be leading Biodiesel Malaysia Sdn Bhd, a consortium called that was formed to give the lacklustre biodiesel sector a new lease of life. The consortium is 32 per cent-owned by FGV while Sime Darby Bhd holds 23 per cent. The remaining 50 per cent is reserved for industry stakeholders, including plantation companies and biodiesel players.

Before leaving FGV, Sabri said he will helm the company's annual general meeting on June 26, its first since being listed last June. The AGM will be the country's largest shareholders meeting as FGV has more than 180,000 shareholders, including the 112,000 settlers nationwide.

FGV, which contributes to some 10 per cent of the world's CPO output, posted a 55.9 per cent increase in revenue to RM2.68 billion for its first quarter ended March 2013. Its pre-tax profit for the quarter, however, declined 22.2 per cent to RM218.51 million from RM280.81 million. a year ago.

KLK upbeat on good dividends

KUALA LUMPUR: Kuala Lumpur Kepong Bhd (KLK), having to contend with low palm oil prices like other plantation companies, has assured shareholders of its plantation growth prospects and the expanding oleochemical business that will help sustain profits and, hence, good dividends.

The third-month benchmark crude palm oil futures on the Malaysian Derivatives Exchange rose RM14 to close at RM2,438 a tonne last Friday. It has been trading at between RM2,200 and RM2,600 a tonne for the last nine months.

"When we do well, we usually pay out more but when we make less, we pay less. In the last five years, we've been dishing out at least half of our profits to shareholders. So, this year, it won't be any different," said chief executive Tan Sri Lee Oi Hian.

When asked for a forecast on the palm oil price trend, Lee said the current strong fundamentals support a rebound to RM3,000 per tonne.

"Prices should hold up in the coming months, given that the national palm oil inventories have dropped to its lowest in nearly a year at 1.8 million tonnes. 

Also, palm oil is still trading at a substantial discount to soya oil," he said on the sidelines of Invest Malaysia 2013 here on Friday.

Maybank Investment Bank senior analyst Ong Chee Ting said even though palm oil prices had risen by RM200 per tonne from a month ago to around RM2,450 per tonne, there is room for it to strengthen to RM2,600 per tonne.

Ong added that the present price gap between palm oil and soya oil of US$270 (RM842) per tonne is very high compared to the historical seven-year average of US$177 per tonne.

KLK has so far planted 211,259ha of oil palm and rubber estates in Malaysia and Indonesia.  The plantation business makes up 76 per cent of the company's profit.

In the first half of its financial year, KLK harvested 1.9 million tonnes of fresh fruit bunches, 19 per cent more than a year ago. This is due to the group's consistent efforts in replanting old and unproductive oil palms with higher yielding clones.

On the progress of KLK setting up three refineries and an oleochemical plant in Indonesia, Lee said these facilities are at various stages of completion.

IOI denies buy of RM900m neighbouring estate

KUALA LUMPUR: IOI Corp Bhd shot down rumours that it is in talks to buy Achi Jaya Plantations Sdn Bhd's 12,074ha oil palm plantation in Labis, Johor, for RM900 million.

"As far as I know, it's not true," executive chairman Tan Sri Lee Shin Cheng said.

Two months ago, an online portal cited an unidentified source claiming that Achi Jaya Plantations, which neighbours IOI Corp's estates in Johor, had been put up for sale for a while.

Achi Jaya Plantations (formerly Achi Jaya Services) acquired Socfin Plantations Sdn Bhd's assets comprising 12,074ha oil palm estate, workers' quarters, staff and executive bungalows, a clubhouse, a nine-hole golf course, a 60-tonne oil mill and other facilities and amenities for RM512.16 million in January 2004.

Meanwhile, IOI Corp had announced last month that it plans to spin off and relist its property division on the stock market. 

It will do so by injecting its property development, real estate investments, land and other related businesses into IOI Properties Group Sdn Bhd in exchange for shares in IOI Properties. It will also distribute one share in the new unit for every three held by existing shareholders. 

When asked on the progress of this plan, Lee smiled and said IOI Corp shareholders are poised to benefit from lower entry price in its property division. 

"The property business is on a stronger footing now with more valuable assets. We have built up the property landbank in strategic locations, so it is about time we unlock its value," he said.

Since IOI ventured into Singapore and China in 2011 and 2012, it has been rebranding itself. It is no longer just a township developer and is moving towards becoming a high-end condominium and commercial developer. 

This effort is seen in its appointment of world-renowned Sir Norman Foster as the architect for its South Beach development in Singapore.

Analysts estimated the share sale of the soon-to-be relisted company to raise as much as RM10 billion.

This is a huge improvement in size, considering that it was only in 2009 that IOI Corp had taken private its then-listed property arm, IOI Properties Bhd, for a mere RM310 million in cash and shares, valuing the unit at about RM1.3 billion.

Misguided attacks on palm oil must stop

PARIS: Nicole Bricq, France’s Minister of Foreign Trade, will be in Malaysia until tomorrow to attend the 2013 Global Summit of Women. 

The minister’s visit comes during a tense period in Franco-Malaysian trade relations due to French attacks on palm oil, a crucial commodity for the Malaysian economy. 

Last year, French politicians proposed a 300 per cent tax increase on palm oil, supposedly to improve public health. 

In the end, the French National Assembly rejected the tax since the allegedly harmful effects of palm oil could not be scientifically documented. 

In fact, French experts such as Dr Jean Michel Lecerf of the Pasteur Institute and Dr Odile Morin of ITERG have published research showing that palm oil is a healthy and nutritious product that is perfectly compatible with a balanced and healthy lifestyle.

However, palm oil still suffered reputational damage as a result of the proposed tax increase. The French government has made some amends by agreeing to a joint Franco-Malaysian taskforce to explore ways to provide more accurate information about palm oil. 

Yet the fact remains that palm oil-producing countries such as Malaysia and Cote d’Ivoire now have reason to doubt France’s commitment to economic cooperation. 

It doesn’t help the situation that a French member of the European Parliament, Corinne Lepage, is currently leading an effort to discriminate against palm oil in new European biofuels policies. 

Lepage is promoting a scientifically flawed concept known as Indirect Land Use Change (ILUC), which claims that palm oil production harms the environment by displacing rain forest. 

What the concept misses is the fact that palm oil is by far the least land-intensive of all the competing products used to make biofuels. 

A true green policy would, thus, promote reforestation of France and other European countries rather than a halt to palm oil development in Malaysia. Incidentally, Malaysia currently has 63 per cent of its land under forest cover. The corresponding figure for France is 29 per cent. 

Furthermore, major French corporations such as Casino, Système U and St Michel have launched campaigns against palm oil in order to promote their own “palm oil free” products. 

In the case of Système U, the campaign was so blatantly misleading that a group of small farmers from Africa sued the company and won the case in French court. 

The French attacks on palm oil are unfortunate on many fronts. First of all, disinformation and boycotts in France harm thousands of Malaysians who depend on palm oil to make a living. 

Businesses related to palm oil employ more than 800,000 people in Malaysia, including 240,000 small farmers who account for 40 per cent of the land under cultivation. Palm oil accounts for 10 per cent of Malaysia’s gross domestic product. 

Thanks in large part to palm oil production, Malaysia has successfully reduced poverty from 50 per cent at independence to less then five per cent today. 

Secondly, France is missing out on the growth opportunities that would follow from closer ties to Malaysia. At this time when the French economy remains stagnant, it is in the national interest of France to tie itself to the rising tiger economies of Southeast Asia, notably Malaysia. 

France has a proud tradition of sophisticated diplomacy to advance its national interest. Bricq would do well to keep this tradition in mind during her visit. 

It would be wise for the French minister to reassure her Malaysian counterparts about the commitment of the French government to economic development in Malaysia. 

Such a commitment must necessarily include reassurances that France will not discriminate against palm oil. 

Ideally, Bricq should go even further and positively embrace palm oil as a core strategic product for the economic future of both France and Malaysia. 

Such an act would go a long way in countering the negative and misguided campaigns by French corporations and politicians.

Nash: French position unjust

KUALA LUMPUR: THE current French position on palm oil trade is neither free nor fair and, in fact, it is unjust, said National Association of Smallholders (Nash) president Datuk Aliasak Ambia. 

In a telephone interview with Business Times yesterday, he said Nash had appealed to French Minister of Foreign Trade Nicole Bricq to support open trade and positive trading relations between France and Malaysia.

“We wrote to the French minister. We asked for the French government’s commitment not to discriminate against palm oil and not to put up protectionist trade barriers that harm small oil palm farmers here,” Aliasak said.

Of late, big multi-nationals in the French food industry like Casino, Système U, Findus, Lesieur, Lays and Jacquet have been intensifying their campaign against palm oil.

“The French government needs to re-set relations between France and Malaysia. 

"We call upon the French government to publicly disassociate from the actions of these multi-nationals and condemn their aggression towards small oil palm farmers,” said.

Aliasak noted that the Tribunal de Commerce in Paris had, recently ruled that there was no justification for the anti-palm oil campaign and ordered Système U to remove misleading and inaccurate anti-palm oil advertising.

France and Malaysia have excellent trade co-operation and this includes imports of French beverages, food, airplanes and defence equipment. “Why should Malaysia sign a trade agreement with the European Union when French companies vehemently attack Malaysian products and undermine the opportunity for many families here to earn a decent living?” he asked.

The French anti-palm oil campaign is not based on facts and figures but rather on exaggeration and emotions, he said. 

The reality is that oil palm is the most efficient oil crop in the world yielding seven times more oil that France’s rapeseed agriculture. In terms of energy balance, it takes less sunlight to produce a unit of palm oil than any other vegetable oils. 

“These are known to scientists and academics who are worth their salt, including those in France from the Institut Pasteur and CIRAD. In fact, the first oil palm estate in Malaysia, named Tenamaram, was established in Selangor in 1917 by Frenchman Henri Fauconier,” Aliasak said. 

Nine months ago, Nash submitted a letter to the French ambassador to Malaysia, Martine Dorance, to express Malaysian smallholders’ disappointment over the behaviour of French retailers, in particular Casino and Système U, for producing television commercials that slander palm oil and, by association, the small farmers of whom Nash represents.

To make matters worse, French Industry Minister Arnaud Montebourg had even said in a statement that “all (French) left-wing parties should campaign against palm oil”.

Half truths on palm oil were and are still being repeated by other French political leaders. For example, senator Jean-Vincent Place had claimed in Parliamentary Question 02164 that palm oil contains trans fat.

This is simply untrue, said Aliasak, as palm oil is 100 per cent free of the artificial trans fat. In fact, palm oil is instrumental in removing artificial trans fat from the daily diet of common folks worldwide, he added.

Hovid on road to recovery

PETALING JAYA: HOVID Bhd is on the recovery path after taking steps to sort out Carotech Bhd's debts and is looking to expand the pharmaceutical business next year, said managing director David Ho.

Last week, in its filing to the stock exchange, Hovid's third quarter net profit ended March 2013 rose 33 per cent to RM5.13 million from RM3.85 million posted a year ago. 

Excluding the non-recurring item, Hovid’s year-to-date pre-tax profit RM18.41 million works out to be 51 per cent higher than the previous year’s RM12.19 million.

In its notes to investors, Hovid said Carotech was an associate company up to December 22 2011. It has now become a simple investment to Hovid. 

In the last three years, Carotech faced difficulty as there was no working capital. One way for Hovid to raise funds is to embark on a rights issue of new warrants.

Hovid is set to raise RM7.62 million. These 5-year warrants will replace the original warrants that had expired. The listing of the new rights warrants will be carried on June 10. Apart from working capital. Hovid will also use a portion of the RM7.62 million to defray expenses incurred in the right issue of warrants.

In an interview with Business Times here, Ho assured investors that Hovid is on the recovery path. It has been 17 months since Hovid was lifted from PN17 status on January 16 2012. 

"When Hovid slipped into PN17 status, it was like we were in intensive care. Now that we've been lifted from that status, you can say Hovid is well on the recovery path in the normal hospital ward," he said. 

"In Hovid's books, Carotech is written off to RM1. The plant in Lumut is still running with just a skeletal workforce. We are still resolving Carotech's debts with the banks. Hopefully, we can resolve this by the end of this year and get discharged from the hospital, so to speak," Ho added.

Hovid's laboratories in Perak produce antibiotics, antidiabetics, antihypertensives, antimalarial and anti-inflammatory analgesics, ranging from skin care and hair care products to health beverages. Its products are GMP-compliant and exported to more than 40 countries. 

In the consumer market, Hovid is known for its popular Tocovid SupraBio health supplement and Ho Yan Hor Herbal Tea.

The Tocovid SupraBio health supplement is currently the consumer market leader for palm oil phytonutrient extract. Among the active ingredients in the extract are tocotrienols, little known but the better half of the vitamin E family.

Tocotrienols, which are most abundantly found in palm oil, are showing promise in clinical trials that they are capable of reducing risk of degerative diseases such as stroke, heart attack and cancer.

Asked on the prospects of Hovid's pharmaceutical business, Ho said the requirement for product registration has become lengthier with increasing stringent rules in the development of generic drugs. This, he said, has slowed pharmaceutical launches.

Nevertheless, Hovid has at least 10 to 15 products being developed in the pipeline each year. "We hope that our margin will improve slightly in the second half of this year. We are tweaking our product mix to drive sales of higher margin products. 

"We have been working hard submitting dossiers to gain market approvals. We do expect some new dossiers to come in some time towards the end of the year," he said.

"This year, if we can maintain our performance, that will be quite good. Hopefully, by next year, we will be back on our feet and focusing on growing the pharmaceutical business," Ho added.

Sime: RM3.2b profit target within reach

This is written by my colleague Roziana Hamsawi.

KUALA LUMPUR: SIME Darby Bhd, the country’s largest and oldest conglomerate, is expected to match or even exceed its internal net profit target of RM3.2 billion, said president and group chief executive officer Datuk Mohd Bakke Salleh.

“We have, so far, achieved 75 per cent of our current financial year KPI (Key Performance Indicator) net profit target,” he said.

Mohd Bakke said Sime Darby’s internal profit target is RM1 billion lower than what the group had achieved in the financial year ended June 2012. Last year, it registered RM4.2 billion in net profit.

Sime Darby, which last year beat Russian billionaire Roman Abramovich to acquire London’s iconic Battersea Power Station for £400 million (RM1.88 billion), had anticipated the current financial year to a challenging one. Net profit in the current quarter ended March 2013 stood at RM691 million, 21 per cent lower than the RM876 million recorded a year ago.

The figures were posted on the back of RM10.84 billion in revenue, which is one per cent lower than corresponding period last year.

Mohd Bakke said the anticipated lower fullyear profit was due to the challenging conditions of lower crude palm oil (CPO) prices and weaker economy in some of its markets. 

The average CPO price in the three months ended March 2013 was RM2,147 per tonne, 26 per cent lower than RM2,903 in the same period last year. As a result, its plantation division’s pre-tax profit declined to RM413.2 million, a 27 per cent drop year-on-year.

For the nine-month period, its net profit was RM2.39 billion, 22 per cent lower than the RM3.05 billion registered previously. Revenue was RM33.84 billion, two per cent higher than in the previous nine-month period.

The bright spot for the conglomerate came from its motor, property and healthcare divisions, which posted double-digit gains. 

The motor division's pre-tax profit expanded by 18 per cent, helped by strong local and Hong Kong sales, while the property unit's pre-tax profit climbed 15 per cent year-on-year and 100 per cent against the preceding third quarter due to higher sales from new projects.

The healthcare unit also did better in the third quarter with a 28 per cent rise in pre-tax profit.

Mohd Bakke said with the group's recent joint venture with Australia's Ramsay Healthcare, a major expansion in Asia was on the cards. The healthcare business, he said, is planning to double the number of hospitals in five years and a listing will only be considered thereafter.

On the listing of some of its other flagship businesses, Mohd Bakke said the company is working towards that direction, but at this point of time, "it is still too premature to announce anything".