Malaysia Has Little Room for Expanding Palm-Oil Production, Minister Says

18/11/2010 (Bloomberg) - Malaysia’s limited room for expanding palm oil cultivation means that industry growth will have to come from improving productivity, its plantation minister said.

About 4.6 million hectares (11.4 million acres) of the southeast Asian nation’s 32 million hectares are planted with oil palms, Plantation Industries and Commodities Minister Bernard Dompok said last night in London. About 58 percent of the country is forested and the government has a commitment to maintain at least half of all land as natural forest.

“I do not see any further large-scale planting of oil palm in Malaysia,” Dompok said during a round-table discussion at the policy analyst Chatham House. “There may be pockets which can be done by people in rural areas that could be turned into palm oil but these are not very much.”

Dompok was trying to allay concerns from environmental groups such as Greenpeace that expansion of palm oil plantations in Malaysia and especially in Indonesia is leading to the further destruction of forests and increasing emissions of greenhouse gases blamed for global warming.

Malaysia, the second-biggest producer of palm oil, this year will produce about 17.6 million tons of crude palm oil and export 15.8 million tons of the substance, which is used in foods and biofuels, Dompok said. Annual productivity per hectare is about 4 tons and this could be increased to 17 tons, he said.

“We can increase the yield per hectare by planting new varieties and new clones,” Kalyana Sundram, deputy chief executive officer of the Malaysian Palm Oil Council, said in an interview in London. “Because of the lack of new land to cultivate oil palms, if you want to be a major player in the industry, that’s the way to go -- increase the yields.”

Power from Waste

Dompok and Indonesian Vice Minister of Agriculture Bayu Krisnamurthi on Nov. 15-16 met with European Union officials to rally support for palm oil. A new European directive governing the use of renewable energy “discriminates” against palm oil compared to other oil crops, they said in a joint statement.

The directive promotes the use of oils in biofuels that cut greenhouse-gas emissions by 35 percent, and palm oil is classified as leading to a cut of just 19 percent. Malaysian Palm Oil Board Director-General Choo Yuen May told the round table meeting that the correct figure is 36 percent because about a third less nitrogen-based fertilizer is used in the Malaysian industry than the EU factored into its assumptions.

Dompok said he’s also trying to promote the burning of waste products from palm oil production to generate electricity. Domestic power prices would have to rise to 35 cents a kilowatt- hour from 21 cents for such a plan to be economical, he said.

“I would like all these palm oil effluents to be used for electrification,” Dompok said. “I am trying to present to the Cabinet that we need incentives to clean up the oil palm industry. We need tariffs.” 

 Malaysian Palm Oil