Eight EPPs to capture fast growing global demand for palm oil

Reports by IZWAN IDRIS, LOH FOON FONG, LESTER KONG, RACHAEL KAM, WONG PEK MEI, SHAUN HO and REENA NATHAN in The Star

MALAYSIA’S palm oil industry is the fourth largest contributor to the economy and currently accounts for RM1,889 (or 8%) of the gross national income (GNI) per capita. The industry spans the entire value chain from plantations to downstream activities.

Its development is mainly private-sector driven and is still heavily skewed towards upstream activities, namely production of fresh fruit bunches (FFB) in plantations, processing of FFBs in mills and palm kernel crushing and palm oil refining activities.

While Government support is primarily targeted at promoting downstream activities and supporting independent smallholders, the core focus of the Palm Oil National Key Economic Area (NKEA) is to reinforce the leading role of the private sector in steering the palm oil industry.

The aim is to raise the industry’s GNI contribution from the current RM52.7bil to RM178bil by 2020.

It plans to bridge this GNI gap through the implementation of eight core entry point (EPP) spanning across the palm oil value chain to capture the fast growing global demand for palm oil, which registered a growth rate of 10% between 2000 and 2009.

Five EPPs will focus on improving upstream productivity generating as incremental GNI of RM33.1bil in 2020. The implementation of these EPPs will transform Malaysia’s oil palm industry, resulting in significant productivity improvement from 21 to 26.2 tonnes per hectare per year.

These EPPs are accelerating the replanting of oil palm, improving FBB yield, improving worker productivity, increasing the oil extraction rate and developing biogas at the palm oil mills.

The other three EPPs are focused on downstream expansion that is targeted to generate an incremental GNI of RM14bil by 2020.

These initiatives will involve coordinating public-private R&D efforts with a strong commercialisation focus. Rising income from downstream products is expected to constitute at least 25% of total palm oil income.

These EPPs are developing oleo derivatives, commercialising second generation biofuels and expediting growth in food and health-based downstream segments.