Archive for May 2014

ISPO's deadline may not be practical

As at the beginning of 2014, the Indonesian Sustainable Palm Oil Commission noted only 40 oil palm plantation companies have secured the government-issued ISPO certification.

Plantation companies must obtain their ISPO certification by end of this year, following a 3-year application period from the beginning of 2012. 

The ISPO certification is an acknowledgement that the plantation group has complied with Indonesia's laws and regulations on sustainable agriculture development that balances the needs of People, Planet and Profits.

“As of January 2014, only 40 of the roughly 2,500 plantations had received certification and another 153 had applied for it,” said Indonesian Sustainable Palm Oil Commission executive director Rosediana Suharto.

“Plantations have to independently apply for the certification, or face the penalties, such as a plantation-class downgrade,” she reportedly said.

Legal issues, according to Rosediana, is among the reasons for lack of willingness among most plantations to apply for the ISPO certification. “A lot of plantations do not have all their permits, such as land-user certification, in place and therefore, are unwilling to apply,” she said.

When comparing ISPO with the voluntary Roundtable on Sustainable Palm Oil (RSPO) certification, Rosediana acknowledged that “some principles between the two programmes might be needed to work on”. 

Among them include land optimisation. While the ISPO wants plantation companies to fully optimise usage of their landbank on a balanced development approach, the RSPO unnecessarily pressures companies to leave big portions of their land idle, supposedly for conservation. She commented that unlike the government-sanctioned ISPO, the voluntary RSPO certification is said to promote environmental sustainability, when in reality it aims to curb economic growth.

Indonesian Palm Oil Producers Association (Gapki) chairman Fadhil Hasan urged the government to revise the ISPO certification deadline, given that the vast bulk of plantations were poised to miss it.

“If most of the plantations have not obtained the ISPO certification by the end of 2014, the government has to be realistic and postpone the deadline,” he said. He also questioned the capacity of the commission to accelerate the ISPO certification process due to a lack of reviewers. 

“We as producers are prepared to get certified but there should be preparedness as well among those handing out the certification,” he said, adding that ISPO’s intent is good but the procedural deadline “is too ambitious”. 

Indonesia is the world’s largest palm oil producer, churning out more than 26 million tonnes of crude palm oil in a year. In 2013, Trade Ministry data showed palm oil exports contributed US$19.35 billion to the Indonesian economy.

Heroes of the Palm Oil Milling Industry

I couldn't agree more with Jonathan Fun. Here is his tribute to the men and women working in palm oil mills. They are heroes in their own right – living in remote areas, toiling in harsh conditions – the work they do, helps feed the world.

Working in a palm oil mill is not easy.

To start with, a palm oil mill is usually located in remote areas – far from urban towns, family and friends, and often located within the plantations itself where amenities like shopping malls are scarce.

Secondly, due to the nature of the job, workers at the mill are regularly exposed to heat, dirt and fibre. Although palm oil milling is a blue collar job, these people are earning an honest living.

Thirdly, since steam is widely used all around the mill to heat up the palm fruits, the entire process is really hot and sweaty.

This tribute is dedicated to all the unsung heroes in the palm oil industry. The people who dedicate their lives, blood and sweat not only to their Company but also in fulfilling the most basic and honourable task of Feeding the World.

The next time you eat biscuits, a piece of chocolate, or when you spread margarine onto your bread, think about the sacrifices of these great men and women who are working so hard to keep our stomachs full.

While oil palm planting provide jobs and brings prosperity to the people, the industry is mindful that food production is being carried out on borrowed land... land that belongs to our grandchildren.

Hence, the cultivation of oil palms on a balanced approach of People, Planet and Profits has evolved to be a common practice among big and small planters in Malaysia and Indonesia.

NSTP and Nikkei to share content

New Straits Times Press (M) Bhd group managing editor Datuk Abdul Jalil Hamid (left) shaking hands with Nikkei executive officer and editor-at-large Yoshihiro Hirata in Tokyo yesterday.
TOKYO: The New Straits Times Press (M) Bhd (NSTP) and Japan's Nikkei Inc have agreed to embark on sharing of news content between them to reach out to a wider segment of readers outside their home markets.

Under the memorandum of understanding (MoU) signed here yesterday, NSTP and Nikkei will exchange articles and news headlines published in their respective print and online publications.

The MoU was signed by NSTP group managing editor Datuk Abdul Jalil Hamid and Nikkei Inc managing director and editor-in-chief Katsuyoshi Kondo.

Also present were Nikkei executive officer and editor-at-large Yoshihiro Hirata and other senior company officials.

Founded in 1876, Nikkei is the publisher of Japan's largest business and financial newspaper and online services. Its flagship daily newspaper, The Nikkei, has over three million subscribers.

Nikkei's multi-platform media distribution includes online, a business TV channel and magazines. The company's main focus now is to promote the Nikkei brand across Asia by expanding their operations around the region.


Every day we see people acting thoughtlessly, without care for others.

Reckless car drivers endangering lives of other road users. Financial speculators who drive down stock prices and ruin the lifesavings of other investors. Leaders who make secret deals to enrich their own pockets at the expense of other people's livelihoods. Corporate head honchos who bask in the comforts of their air-conditioned office while their staff fearlessly defend the company's honour in a neighbouring country but end up suffering in jail.

Yet we also have examples where people act nobly against their own self interest.

There are parents that risk their lives to save their kids. Lovers who donate a kidney to save their partner’s life. Employees who risk being harmed for the safety and confidentiality of their bosses.

History is filled with tales of people such as Mother Theresa, Gandhi and Martin Luther King who devote their lives to something they whole-heartedly believe in.

Here's a video of everyday people caught on camera risking their lives to save others.

In the palm oil industry, there are many greedy people who do not hesitate to hurt others for self gain. But then again, there are also quite a few honourable personalities who courageously make good on their promises and remain steadfastly loyal.

As a journalist, I have had my fair share of betrayals and disappointments. Despite these hurtful episodes, I would still like to think humanity will prevail over selfishness.

Malaysia's Small Farmers correct President Obama

The National Association of Smallholders of Malaysia (NASH), in response to wrong allegations made by the USA President Barack Obama, lay down the facts of the oil palm industry in Malaysia:

FACT: Malaysia is keeping the promise made at the Rio Earth Summit in 1992 to maintain at least 50% forest cover. According to the United Nations Food and Agricultural Organisation, 62% of Malaysia is forest cover.

FACT: Only 15% of Malaysia's landmass is planted with oil palms.

FACT: About 40% of Malaysia's oil palm industry is worked by over 300,000 small farmers.

Palm oil is a versatile food ingredient that is 100% free of trans fats. Apart from being the ideal cooking oil for deep-fry snacks, it is also formulated into bakery fats to make cakes, confectionery, sweets, cookies and cereals. 

Palm oil derivatives can also be found in household products such as soaps and detergents.

Today, more than 300,000 small farmers throughout Malaysia cultivate oil palms on agricultural-zoned land of between 4 and 40 hectares. 

Together with big plantation companies, they produce more than 18 million tonnes of palm oil every year. This goes to feeding more than 3 billion people across the world.

Oil palm cultivation is key to poverty reduction in Malaysia. Farming is essentially food production and contributes to improved living standards among rural communities.

Malaysia's small farmers are a robust and diverse group of individuals. They are an integral part of the country's cultural identity and their produce contribute significantly to the economy. 

Last year, Malaysia shipped out RM53 billion (or US$16.57 billion) worth of palm oil to 150 countries.

‘Sabah oil palm sector must remain resilient’

This is written by my colleague Zaidi Isham Ismail.

PROVEN OPTION: Policymakers’ support vital, says IJM Plantations chief

SABAH’S palm oil industry must maintain the same pioneering spirit that  is partly responsible in positioning the state into what it is now — Malaysia’s largest crude palm oil (CPO) producer.

IJM Plantations chief executive officer and managing director Joseph Tek Choon Yee said in order to move forward, Sabah will require the same pioneering spirit and dedication that started the industry many decades ago.

“It will need the same amount of perseverance and resilience amid the multitude of challenges and opportunities confronting the palm oil industry in a number of ways.

“Sabah’s economic well-being may swim or sink with oil palm as it is the only proven option to date of a sustainable tropical plantation crop,” Tek told Business Times in an interview.

As such, he said, continued support from the policymakers, along with the thorough know-how of the industry and other authorities, is pivotal in moving the industry forward.

Tek said if the successes of the past and present are to be used as a benchmark in moving forward, then all the key players, including government bodies, the private sector across the palm oil value chain and the smallholders, must be galvanised to work together.

“For Sabah to nurture a sustainable palm oil enterprise along the palm oil supply chain, its competitive edge must be sustained by balancing its economic sustainability and other socio-environmental aspects.”

Established in 1985, IJM is a medium-sized plantation company that has entered into a joint-venture agreement with Koperasi Pembangunan Desa to develop Desa Talisai.

Starting with 4,000ha of Desa Talisai estates, the area under oil palm cultivation has risen sevenfolds to about 30,000ha presently, all in the Sandakan and Sugut region in Sabah. The group has also expanded its oil palm cultivation activities into Indonesia.

Question: How has the Sabah palm oil industry evolved?
Answer: I did a presentation at ISP National Seminar in Kota Kinabalu in 2010 and my research revealed the following early agri-transformation in Sabah. Before oil palms, agriculture in Sabah was very much into collecting rattans from jungles, padi planting, tobacco planting, harvesting Manila hemp and venture into cocoa plantation later. 

My research revealed that first trial planting of oil palm in Sabah was in 1957 using seeds collected from the jungle in Mostyn estate, Tawau. This was later expanded to the first 200 acres of commercial oil palm planting in 1959. Sabah’s upstream oil palm planting reached its first 100,000ha by 1981. Within the next two decades, it reached its milestone of one million hectares. 

The latest 2013 figures from the Malaysian Palm Oil Board showed Sabah has 1.48 million hectares planted with oil palms, equivalent to 28 per cent of the total area planted with oil palm in Malaysia. It is the largest palm oil-producing state in Malaysia. Last year, Sabah’s midstream and downstream activities comprised 124 palm oil mills, 13 palm kernel crushing plants and 12 refineries.

Question: How significant is the crop’s contribution to the state?
Answer: The crop has provided a sustained flow of income to entrepreneurs and has benefited the state in many ways. An important source of revenue for the state is derived from the sales tax amounting to 7.5 per cent for crude palm oil (CPO) gross prices above the threshold CPO pricing of more than RM1,000 per tonne. In 2013, Sabah produced 5.78 million tonnes of CPO, or 30 per cent of Malaysian production of 19.22 million tonnes. 

Using the national annual average CPO price of  RM2,371 per tonne in 2013 as reference, the estimated sales tax worked out to be RM1.027 billion. Sabah is expected to continue collecting revenues from the State Sales Tax (SST) even after the goods and services tax (GST) is implemented in 2015 as SST is a resource under the jurisdiction of the Sabah and Sarawak governments, as stipulated under the Federal Constitution.

Question: How has the rakyat benefited?
Answer: In Sabah, jobs were created for the rakyat across the palm oil supply chain. These include areas covering research, nurseries, estates, mills and other downstream activities; and many other aspects of service-provision jobs, such as administration, purchasing, human resource, information technology, training, sales and marketing, logistics and others. 

The oil palm business along the supply chain has also created numerous multiplying effects and spinoff businesses, which have also benefited the rakyat. In short, the rakyat has been incorporated as relevant stakeholders — both directly and indirectly — in the palm oil supply chain in Sabah.

Question: What more can be done?
Answer: One must appreciate that palm oil is a commodity and as such is “a price taker and not a price maker”. The venture is also a long-haul one and will be subjected to the vagaries of extreme weather, low start-up yields and other biological interactions. The business game for sustainability is to derive a comfortable margin between the derived commodity price and the escalating cost of production. 

Over the years, various parties have called for a restructuring of the SST on CPO via a revision of the threshold price upward from the present RM1,000 per tonne to RM2,000 per tonne in the light of rising production cost and other statutory charges being levied on the growers, such as windfall levy, charges and cesses. A two-tier sales tax system has also been advocated, similar to the practice adopted in Sarawak based on equity taxation, which is deemed more accommodative vis-a-vis the fluctuating CPO commodity prices.

Question: What are IJM’s contributions towards Sabah’s palm oil industry?
Answer: We are but a smaller and younger player amid the many giants like Felda, IOI, Sime Darby, Wilmar, Kuala Lumpur Kepong and Sawit Kinabalu in Sabah. Since our humble plantation saga back in 1985, our contribution to the palm oil industry in Sabah is set against our strong fundamentals already in place, where the group continues to augment the business activities based on its core competency — namely in oil palm cultivation, research and advisory and midstream milling processes. Today, we are proud to be among the best in the Malaysian plantation fraternity in terms of productivity and good agricultural practices.

Costlier oleochemical exports

KUALA LUMPUR: Oleochemical exports will be more costlier following the natural gas’ price hike effective yesterday, said Malaysian Oleochemical Manufacturers’ Group (MOMG) chairman Tan Kean Hua. 

Effective May 1 2014, those using natural gas of more than two million standard cu ft per day (mmscfd) pay RM19.65 per million metric British thermal unit (mmBtu). This is about 20 per cent more than RM16.45 mmBtu previously.

“There has been and will be inflationary pressure on oleochemical exports. Just like feedstock price increases in the last six months, we had no choice but to pass on the cost increases to clients,” he said in a telephone interview yesterday. 

The main feedstocks for oleochemical manufacturers are crude palm oil and crude palm kernel oil, whose prices have risen by about 15 per cent since November 2013. These feedstocks on average make up between 80 and 90 per cent of oleochemical pricing. 

The oleochemical industry consumes quite a fair bit of natural gas compared with other manufacturers as they use it for fuel and as a component for their products. Tan estimates that this year, MOMG members’ annual gas bill would rise by about RM350 million. Their natural gas and electricity bills represent more than 50 per cent of their total production cost.

 Asked if the natural gas price hike would have a negative impact on MOMG members’ earnings, Tan replied, “we’re a cost-plus business and oleochemicals are a necessity. It is present in household cleaning products, toiletries, cosmetics, industrial and pharmaceutical items we use everyday”, he said. 

“Our members have over the years made concerted efforts in using energy-efficient equipments. Some are considering putting up co-generation units in the near term. We’re in the business of making renewable chemicals. It’s only logical for us to incorporate energy-saving methods and more affordable components in walking the talk of sustainable development,” he added.

MOMG members churn out 25 per cent of the world’s 10.8 million tonnes of oleochemical demand. There are 18 local oleochemical firms with a combined annual capacity of 2.7 million tonnes.

In the first three months of this year, the Malaysian Palm Oil Board data showed the country exported RM2.78 billion worth of oleochemicals, 25 per cent more than a year ago.