What new initiatives is the Malaysian Palm Oil Council involved in?
BASIRON: The Malaysian Palm Oil Council, or MPOC in short, is involved in promoting the acceptance of palm oil. We are involved in market promotion and development of new markets for palm oil. We are also addressing negative campaigns against palm oil, especially those initiated by western environmental NGOs, who portray the palm oil industry in a bad light; for instance associating palm oil with the destruction of forests and wildlife habitats. These are ongoing campaigns that we have to address, and we undertake a lot of initiatives to overcome the negative perceptions created by these NGOs. Overall, the palm oil industry is striving very well because we are supplying an essential food commodity to the world. Malaysian palm oil is exported to more than 150 countries worldwide making it a critical commodity in terms of exports and in meeting future world demand.
Why do you think NGOs target the palm oil industry?
BASIRON: The NGOs have the wrong understanding of the role of the palm oil industry. Palm oil is produced mainly in Malaysia and Indonesia; we are the two main producers in the world. We are responding to world demand for food requirements. The NGOs claim that if the demand continues to grow, more land will be opened up for planting oil palm. They feel that the expansion of the industry must be stopped even though the world population is growing and more food is needed. The NGOs are not concerned in feeding the increasing world population; they are more concerned in not allowing more land to be developed into agriculture. This is the premise of their campaigns. They are also opposing the development of the bio-diesel/bio-fuel industry. The argument is that expansion of the bio-diesel industry will lead to more demand for palm oil, which is a very competitive raw material, resulting in more expansion or replacement of forest with oil palm plantations. Over the years, deforestation has occurred without the involvement of the palm oil industry. In fact, the expansion of oil palm took place because the developing countries needed to produce agricultural commodities, food, and timber; all of which have nothing to do with oil palm. So this is delusion on the part of the NGOs; trying to pre-empt deforestation from occurring by halting the expansion of the palm oil industry is premature at best and is not supported by trends or any evidence. We feel that they have been misguided in their understanding of what the industry is doing or will be doing, and this needs to be corrected.
The Environmental Protection Agency (EPA) has rejected palm oil as a raw material for bio-diesel in the USA. Is this a case of ‘green protectionism’?
BASIRON: The EPA attempted to reject palm oil from being used in the US as a bio-diesel raw material because they were influenced by the NGOs, who claim that palm oil for bio-diesel use will lead to more deforestation in Malaysia or Indonesia, where palm oil is mainly produced. The implication of more deforestation is worrying the EPA officials, who do not want to cross words with the NGOs. This forced them to find the right scientific approach to generate data and results that would enable them to show the value of carbon emissions on paper. This resulted in carbon emission savings accorded to palm oil being set at only 17%; way below the 20% threshold level of acceptance for bio-diesel raw materials, or even the 50% threshold level for acceptance in the EPA FS2 regulations. The issue is, the damage done by NGOs to black-wash palm oil with a negative connotation, such as that palm oil leads to deforestation, has influenced the officials in the EU and the US to formulate strategies and regulations that hamper palm oil’s participation in their bio-fuel trade. Of course, this suits those officials well. First, they no longer have to deal with the pressure of the NGOs, and second, they would receive support from the local oils and fats producers, who foresee competition from palm oil. Therefore, the governments find comfort in pursuing this particular strategy. It is obviously unfair in terms of world trade commitments; not allowing our palm oil to participate in a trade where other oils are allowed is against WTO provisions. While it is convenient to prevent palm oil from participating in bio-diesel markets in both the US and EU, it is not fair to the developing countries. We have millions of farmers who depend on this commodity for their revenue and income. These people used to earn less than $2 per day before we exposed them to the benefits of the palm oil industry. Now, they earn $20 per day by planting oil palm. As soon as the farmers are able to make progress in their standard of living and income, the big countries who champion free trade and WTO commitments are now putting palm oil out of their market, simply because of the pressure from NGOs.
There are NGOs who are working toward improving the life of the poor people. They want to plant more oil palm because they know that this will bring the people more income that they have never gotten before. The green NGOs are trying to protect the environment at all costs and are opposing any form of development. The world needs more food and needs to move toward balancing the demand for sustainability by looking after the three Ps; planet, profit, and people. Yet these NGOs are only concerned with deforestation, or with the planet. So to me, these type of NGOs have no real contribution to improving our palm oil industry’s performance in terms of sustainability. These NGOs benefit financially, both directly and indirectly, from playing this game of going on a negative campaign against palm oil. They do not care how the affected parties, the producers and small farmers of his country, may be prevented from benefiting from the prosperity this industry can bring. The NGOs are not responsible to any constituencies; they were not elected nor are they accountable to anyone. Their mode of oppression is to bombard their messages through the internet. Therefore, the end result is that the whole world will be denied a competitive, nutritious, vegetable oil that could help them reduce their expenditure or cost of living.
Is Malaysia considering taking this complaint to the World Trade Organization (WTO)?
BASIRON: We are a small country with limited financial resources. Taking a complaint to the WTO will cost us a fortune. Only big countries are able to do so because they can afford it financially. However, we are taking that step, although on a slower and more careful pace because of the financial implications. It is for this same reason that the big countries, like the EU and US, will bulldoze their way against WTO provision, knowing very well that there will be a long journey if some small countries were to challenge them. It would take at least five years before the WTO provides a conclusion on a particular complaint. By that time, there would have been elections, a change of presidents, and change of administrations. These will be the problems for the next administration of this country. Again, this is a game and who knows if it will continue to be played in this way. The WTO and the bureaucratic approach will allow them to do so. The one that bears the wrath of this game is actually the poor farmers in the developing country, who hope to earn a better income from their sweat and tears producing this commodity.
How significant is palm oil to Malaysia’s economy?
BASIRON: The contribution of the palm oil industry to Malaysian GDP is about 7%. The contribution to exports is about 10%, and actual revenue last year was about RM84bn ($27bn). For a small country where half a million farmers are involved in this industry, an income of RM 84bn ($27bn) is quite a substantial amount to be distributed to reduce poverty throughout the country. The significance of palm oil to the Malaysian economy can be judged from the fact that about 76% of our agricultural land is planted with oil palm. If you travel in Malaysia, you see a lot of oil palm trees and this is simply because oil palm gives the highest revenue per hectare per year to the farmers. They could have planted soy bean, corn, or any other crop, but they would only get a fraction of the income from what they currently earn from planting oil palm.
The future lies in exploiting the biomass that is produced in huge quantities, ten times more in terms of volume than the palm oil that we produce, as an associated product of the industry. This huge amount of biomass can be converted into an energy source or even into fiber products like furniture parts...Imagine one day that the biomass is commercially used in an appropriate way, using the appropriate technology. It would bring in another RM100bn ($32bn) worth of revenue for the country as well as address the needs of the world in terms of fuel, food, and fiber.
However, that does not mean that we will open up all the land in this country to plant oil palm. We have a land use policy where we keep at least 50% of our total land area under permanent forest reserve. This is to ensure sustainability, habitat, and biodiversity conservation. The other 50% of the land can be devoted to development, such as building cities, settlement areas, roads and recreational area, or for agricultural use. We have a very prudent and well-balanced land use policy, and this is almost the best pattern of land use policy in the world. Most of the developed countries do not have as high a percentage of forest compared to their total land area. The UK has only 11% forest and the US has 33% while Malaysia has 56%. So the NGOs should actually be campaigning to ask the developed countries to follow the standard of forest upkeep that we have set up in Malaysia. Yet they are reversing the approach by condemning us, and for what? They want forests and we have more forests than their countries have. If they want productivity of land use, oil palm has ten times more productivity per hectare compared to the soy bean that is grown in the EU or US. So on all grounds of comparison, we are very much superior and yet we are being negatively portrayed.
What impact do you expect the FELDA IPO to have on the Malaysian palm oil industry?
BASIRON: FELDA launched the world’s second biggest IPO of this year by listing their oil palm activities and subsidiary activities under the flagship of FELDA Global Ventures (FGV). Obviously it attracted the attention of the world because of the size and the boldness of moving what was initially a farm cooperative, called FELDA Small Farmer’s Cooperative, to a market listing. It is a good concept, but it is not a new one. If you look at companies like Nestle, it used to be run as a cooperative of dairy producers in Switzerland. But today, a cooperative of dairy producers has become a world food conglomerate, sending food items to every home and kitchen. FELDA could be the same in the future. Therefore, the IPO was a right move as, similar to dairy products, palm oil is a much needed product throughout the world. The demand for palm oil will grow. The worldwide attention given to this IPO is rightfully so, as it’s a company where future revenue and growth will be on an upwards trend. When you invest, you need to invest in growth companies if possible.
What technology is currently being used to increase efficiency in palm oil production?
BASIRON: We have a research center that was originally called the Palm Oil Institute of Malaysia (PORIM) and is now called the Malaysian Palm Oil Board. They are involved in undertaking research on all aspects of the palm oil industry. There are many technologies that have been produced through R&D and these technologies are being brought back to help the industry grow further into the future. The future lies in exploiting the biomass that is produced in huge quantities, ten times more in terms of volume than the palm oil that we produce, as an associated product of the industry. This huge amount of biomass can be converted into an energy source or even into fiber products like furniture parts. This could create an even bigger industry for the future. But we are starting from a base of zero because the industry is so blessed with profit from the palm oil that we have neglected to exploit, commercially, the biomass that is available in huge amounts throughout the country. Imagine one day that the biomass is commercially used in an appropriate way, using the appropriate technology. It would bring in another RM100bn ($32bn) worth of revenue for the country as well as address the needs of the world in terms of fuel, food, and fiber. Fiber is needed everywhere. Some of our palm fibers are being used in car seats right now. Imagine how many car seats there are in the world that will need a continuing supply of fiber in the future. The world’s resources are going to deplete, but our resources are going to grow. Whether we are talking about bio-fuel, renewable material, fiber, or energy sources, when fossil fuel becomes depleted, we will be there. In fact, my favorite quote is that when you all run out of fuel and start traveling by ships again, we will still fly with our airplanes using palm bio-fuel. Because of the sheer volume of the biomass that we have, it remains the biggest untapped opportunity and would probably allow FGV to go on a second listing in the future.