Economic Transformation Programme: Palm oil to boost GNI by RM125b

KUALA LUMPUR: The palm oil industry, the fourth largest contributor to the national economy, is expected to generate an additional RM125 billion to gross national income (GNI) in the next decade to reach RM178 billion by 2020.

The industry currently accounts for RM53 billion in GNI. The government, via its entry point projects (EPP), intends to expand both the upstream and downstream segments to achieve this target as well as create an additional 41,000 jobs in the industry.

A cumulative funding of RM124 billion over the next 10 years, with 98% of the funding coming from the private sector, is required to carry out the initiatives in the industry. The total public funding for capital expenditure is expected to be RM2.9 billion with an additional RM2.7 billion in the form of tax incentives, soft loans and cash incentives to promote private sector development in the downstream sector.

Some of the EPPs will focus on improving upstream productivity and transforming Malaysia’s oil palm plantations by accelerating the replanting of aging oil palms.

It is learnt that some 365,000ha of palm oil land is currently above 25 years of age. An addition of 125,000ha will join the band every year if replanting is not carried out.

Additionally, mechanising plantations, stringent enforcement of best practices to enhance fresh fruit bunch (FFB) yield, implementing strict quality control parameters to enhance oil extraction rate and developing biogas facilities at palm mills to capture the methane gas released during the milling process are also part of the initiatives to be carried out.

The industry is aiming to achieve FFB yield of 26 tonnes per year and oil extraction rate of 23% by year 2020 from the current 21 tonnes and 20.5%.

The government also targets to capture the lucrative downstream segment where Malaysia has little presence today by focusing on developing finished segments that generate high value, including oleo derivatives and selected food and health based segments.

Nonetheless, the palm oil industry continues to face challenges from environmental non-governmental organisations and a shortage of labour.

The industry is expected to require a workforce of 703,400, creating about 123,400 new jobs in the next 10 years. In a presentation at the Economic Transformation Programme (ETP) Open Day yesterday, it was also revealed that there was a target to reduce 110,000 foreign labour.

According to a statement on ETP, there are also three key sector-wide enablers that must be set up including increasing the number of university courses and graduates in chemical engineering, bio engineering and related courses to meet the demand for the nearly 80,000 skilled personnel in the palm oil industry.

Another milestone that the palm oil industry aims to achieve is to commercialise second-generation bio fuels from the resulting bio mass that is generated in the industry.

It is learnt that the implementation of the 5% mandatory biodiesel blend would be expanded to several areas in Malaysia by mid next year. It is currently only implemented in several government agencies.

This article appeared in The Edge Financial Daily, September 22, 2010.