China helps Malaysia out of deep water

January 13, 2015 Leave a comment
KUALA LUMPUR: Prime Minister Datuk Seri Najib Razak is hopeful livelihoods and business in Malaysia’s flood-damaged areas will be restored in less than two years .

“It won’t take as long as two years…. And for those who own land, we can start building permanent homes for them immediately,” he told reporters after receiving initial disaster relief supplies from China at Wisma Perwira today.

“I would like to express my deepest appreciation and gratitude to the Chinese government and its president Xi Jin Ping, for their considerate and kind gesture in providing us with assistance. 

“The contribution is a clear manifestation of the warm ties that we have fostered,” Najib said

China, topping the list of overseas donors, is sending some US$10 million in relief aid such as makeshift tents, water pumps and purifiers as well as power generators. 

Chinese ambassador to Malaysia Dr.Huang Hui Kang said the Chinese people sympathise with those affected by the flood. 

“We are families, we are brothers, we help each other. We cannot just leave Malaysians to deal with this alone,” he said.

The tents come in 12 and 36 sq metres. They can easily accommodate one small family, providing them with temporary shelter while waiting for their permanent homes to be built. 

But first the tents need to be fitted with proper lighting and flooring. These will be utilised by those who lost their houses, including those in Manek Urai, PLKN camps and Wataniah camps in Kelantan.

China will also provide pre-fabricated homes to hundreds of flood victims, the supplies for which will be delivered on multiple flights to Kuala Lumpur’s city airport at Subang.

The US has offered medical support while Singapore has also sent water purification tanks to ensure clean water supplies in the badly-hit state of Kelantan.

Tough times don’t last but tough people do

January 13, 2015 Leave a comment
Sime Darby Foundation (YSD) has contributed over RM1.2 million to assist flood victims in Kelantan, Pahang and Terengganu.

Of this amount, RM700,000 was channelled to the Malaysian Medical Relief Society (MERCY Malaysia) Humanitarian Relief Fund and RM500,000 for relief efforts by Sime Darby group corporate responsibility and Sime Darby Plantation (SDP) to provide essential supplies to affected communities in its estates.

YSD chairman Tun Musa Hitam said he hoped the contribution would help flood victims get through the rough days ahead as they rebuild their lives.

“YSD is also working with MERCY Malaysia to reconstruct homes that were demolished by flood waters in three villages in Kuala Krai.

“In addition, we will provide school uniforms, school shoes, socks, backpacks, pencil cases and stationeries to 300 children there,” he added.

The floods, the worst to hit the nation in the last four decades, also affected SDP estates in Sungai Mai, Sungai Tekal, Kerdau, Jentar and Mentakab in Pahang.

Natural disasters which are perennial like floods are terrifying for those who are affected, especially the feeling of being helpless and having no control over what happens. 

Sime Darby employees are also affected by the floods. 

It is at times like these that the entire nation comes together to alleviate the sufferings of those afflicted.

“Our hearts and thoughts are with them, and we hope that the assistance given by Sime Darby, in some way, will help to tide them over while they are trying to get some normalcy back into their lives,” said Sime Darby president and group chief executive Tan Sri Mohd Bakke Salleh.

Another plantation company Kuala Lumpur Kepong Bhd pledged more than RM1 million in cash aid to its employees and the local community living in Kelantan who are suffering from the worst floods in decades.

“Having witnessed first-hand, the scale of the destruction wrought by the floods in Kelantan, I am saddened to see the plight of our people,” said KLK chief executive officer Tan Sri Lee Oi Hian. 

“I am, however, extremely thankful that all of KLK’s employees and their families totalling 4,000, have survived the floods. I hope that this assistance will help tide our people over until things normalise,” he said.

“KLK will continue to take care of our employees as we always have and provide other forms of assistance to these victims until they are back on their feet,” he added.

This RM1 million cash aid is being distributed to approximately 520 households in Kelantan. 

Earlier, the group had provided food supplies, generators to produce electricity, clean drinking water and clothing to the flood victims. 

Arrangements are also being made to provide school starter kits to 700 school-going children in the affected areas. 

In addition, many of the Group’s employees had volunteered their time to help pack the supplies, and had also donated more than five tonnes of clothes and other essential items.

When the monsoon rain intensified in the middle of December 2014, KLK’s estate managers in Kelantan got ready emergency supplies for the annual floods. However, nothing could have prepared them for the magnitude of the flooding this time around. 

Despite a prompt crisis response, the Group’s estates and infrastructure have sustained severe damage amounting to initial estimate of RM5 million. KLK continues to pay wages to its 1,700 employees despite work having come to a stand-still during the floods.

In Perak, KLK has been working with the State Welfare Department and relief centres to supply humanitarian aid in the form of food and hygiene kits, as well as cleaning equipment. 

KLK’s corporate responsibility activities are still on-going to provide further assistance in the cleaning-up process of the flood aftermath.

“I am very grateful for the solidarity of our employees in the other regions who swung into action to mobilise aid. We will take away the lessons learnt from this flood and re-assess our current disaster response system to further improve on the early warning preparations,” Lee said.

Former FGV ceo Tan Sri Sabri Ahmad passed away

January 8, 2015 3 comments

KUALA LUMPUR (Bernama): Former Felda Global Ventures Holdings (FGV) Group President and Chief Executive Officer (CEO) Tan Sri Sabri Ahmad, 68, passed away from lung cancer at 5.30am here today.

Sabri was also former CEO of Golden Hope Plantations Bhd and former Chairman of the Malaysian Palm Oil Board.

He first joined the civil service in 1970 to serve the Ministry of Agriculture, then moved on to the private sector in 1985 under Harrisons Malaysia Plantations Bhd.

His 28-year involvement in the industry include that at Golden Hope as well as at Mentakab Rubber Co Malaya Bhd, Negara Properties (M) Bhd, MSM Malaysia Holdings Bhd and Australian Agricultural Co Ltd.

When Sabri was at Golden Hope, the company had the distinction of country’s largest plantation landbank and the best oil extraction rate. 

In 2007, he gave solid support to the government’s aspiration of having Permodalan Nasional Bhd’s units Golden Hope, Kumpulan Guthrie and Sime Darby merged into one entity.

When Sabri was appointed by the government to lead FGV, he achieved substantial milestones in bridging the gap between the corporate world and politicians. 

This is a unique challenge because FGV is different from other plantation companies. FGV’s stakeholders have a lot more social considerations and the group’s political influence cuts across a votebank of 54 constituencies. 

Sabri’s optimistic attitude and leadership skills was instrumental in FGV’s listing on the stock market in 2012. At that time, FGV was the world’s second-largest initial public offering (IPO) after Facebook.

A respected plantation expert and friendly corporate leader Sabri is remembered for his distinguished service and contribution to the nation.

He was awarded the Darjah Dato’ Paduka Tuanku Ja’afar (DPTJ) which carries the title “Dato’” from the Negri Sembilan State Government in 2004, the Darjah Panglima Setia Mahkota (PSM) which carries the title “Tan Sri” from the Federal Government in 2013, and the Palm Oil Industry Leadership Award (PILA) 2014 in October last year.

At 3pm, Sabri was buried at the Bukit Kiara Muslim cemetery.

CPO shines in record year

January 7, 2015 Leave a comment
KUALA LUMPUR: Bursa Malaysia’s derivative trades hit all time high in 2014 with total volume averaged 50,654 contracts per day, an increase of 17 per cent from 2013 volume of 43,315 contracts. 

When contacted by Business Times yesterday, Bursa Malaysia Derivatives Bhd chief executive officer Chong Kim Seng noted the market’s star performer crude palm oil futures (FCPO) surged beyond 10 million contracts, up 28 per cent from 2013.

He said vegetable oil traders worldwide continue to look to Bursa Malaysia as the global price benchmark reference for palm oil prices. 

“In the last six years, the palm oil trading volume on the futures market had more than doubled. Back in 2009, it was only four million contracts. 

“2014 is an exceptional year for FCPO. We surpassed the 10 million contract mark. That also translated to an all-time high average daily volume of 41,285 contracts, 28 per cent more than 2013’s volume of 32,251 contracts,” he added.

Malaysia produces some 20 million tonnes of palm oil a year, of which about 19 million tonnes are shipped out of the country in the form of cooking oil, margarine, oleochemicals, animal feed and biofuel.

Bursa Malaysia’s palm oil futures market value adds to this as Chong noted that this year the exchange is expected to repeat or better 2014’s performance of settling more than 10 million contracts of FCPO.

Each FCPO contract is 25 tonnes. So, at more than 10 million contracts, that worked out to 253 million tonnes of palm oil settling at the futures market.

“If Malaysia only has the physical market, we would only be trading around 20 million tonnes of palm oil. But with Bursa Malaysia’s palm oil futures market settling contracts amounting to 253 million tonnes, we have traded up more than 12 times that of the physical market,” he added.

Chong noted the increased volatility in the crude oil and oilseed markets globally had and will continue to catalyse the volume surge in FCPO.

Indeed, the palm oil industry has seen much volatility last year. From a high of RM2,800 per tonne in March 2014, palm oil prices tumbled to a low of around RM1,950 per tonne, five months later.

Since September 2014, prices have somewhat stabilised and had started to climb. Yesterday, the third month benchmark palm oil futures on Bursa Malaysia closed RM20 higher at RM2,284 per tonne. 

As futures prices climbed, palm oil prices in the physical market rose too. In explaining the tight correlation between the two markets, Chong said “there’s continuous interplay of price movements between the two markets.” 

“Because of this, the futures market allows for price risk encountered in the physical market to be transferred to other parties more willing to assume the price risks,” he said.

Chong urges more businesses in this region, that are exposed to the volatility of palm oil prices, to hedge their position with Bursa Malaysia. “Risks cannot be eliminated but traders can manage it by leveraging on our options and futures,” he said.

In taking the cue from price rises in the futures market, plantation counters on the equity market like IOI Corp Bhd, Sime Darby Bhd, Kuala Lumpur Kepong Bhd, Genting Plantations Bhd and Sarawak Oil Palms Bhd had seen their share prices, in the last couple of weeks, appreciate by beween 5 and 10 per cent.

When asked to comment on palm oil price uptrend in the futures market, MIDF Research analyst Nadia Kamil said the ongoing floods that may have inundated some oil palm estates in the east coast of Peninsular Malaysia is a blessing in disguise. 

“The expectation of lower palm oil output resulting from flood has helped push prices higher. Going forward, prices in 2015 could consolidate at a higher price range of between RM2,400 and RM2,800 per tonne,” she said.

Malaysia needs consistent downstreaming policy

January 5, 2015 Leave a comment
In the last couple of years, Malaysia’s palm oil exports had been, at best, lacklustre. Refiners tell OOI TEE CHING that Malaysia needs to be consistent in its downstreaming policy and be more responsive to overseas tariff changes.

In 2014, India emerged as Malaysia’s biggest buyer when it ordered 2.87 million tonnes of palm oil in the first 11 months. This worked out to be 35 per cent more than 2.12 million tonnes posted in the same period in 2013. This is good news. But recently, the situation has made a U-turn.

On the 24th December 2014, India raised the import duty on crude palm oil (CPO) from 2.5 per cent to 7.5 per cent. It had also increased the duty on refined palm oil to 15 per cent from 10 per cent.

In an interview with Business Times, Palm Oil Refiners Association of Malaysia (Poram) chief executive officer Mohammad Jaaffar Ahmad noted India’s decision was not surprising. 

It was meant to protect the interest of its oilseed farmers and edible oils refiners. 

“It also signals to Malaysia that they are not interested to buy that much CPO. It warrants that Malaysia should stop declaring duty-free CPO exports and let market forces dictate its own course,” he said.

Jaaffar was referring to Plantation Industries and Commodities Minister Douglas Uggah Embas’ declaration of duty-free CPO exports from September 2014 to February 2015. Such a declaration is actually redundant. 

At worst, it even confuses downstream investors as to the Malaysian government’s commitment to value adding the palm oil industry.

Since September 2014, CPO prices averaged below the tax threshold of RM2,250 per tonne. Malaysia should have just let the tax structure run its course, just like what Indonesia is doing. As long as CPO is trading below RM2,250 and US$750 a tonne, respectively, there is no duty on CPO exports from Malaysia and Indonesia.

The strategy of declaring duty-free CPO exports to bring down national stockpile level in the hope of pushing up CPO prices is not so effective like before because Malaysia is no longer the world’s biggest palm oil producer.

“We need to be more discerning about this ‘silver bullet’ because the current global economic situation is very different from 10 years ago,” he said. “Adhoc declaration of duty-free CPO exports can backfire and trigger needless price war with Indonesia. CPO price war is hurtful for all oil palm planters, whether they are in Malaysia and Indonesia,” he said. 

Many people think refiners and planters are at loggerheads, engaged in a zero-sum game. This is a wrong assumption because refiners are purely concerned about the price gap, and not how low the CPO price will go.

“It is a misconception that in times of falling CPO prices, refiners are happy at the expense of planters. As refiners, we are margin players. It doesn’t matter if CPO prices are high or low,” he said.

“In fact, everybody from upstream to downstream of the palm oil value chain win when CPO prices are high. That is the role of the refiners in supporting CPO price as we buy and process every drop of CPO in the country,” he added.

In the last two years, Pakistan’s purchase of palm oil from Malaysia fell significantly. Pakistan consumes about 3.2 million tons of edible oils annually and meets more than half of its demand through imports. 

Jaaffar explained that since 2013, Pakistan’s free trade pact with Indonesia drew parity to palm oil shipment from Malaysia. This means Pakistan’s purchase from Indonesia and Malaysia enjoy a 15 per cent rebate on import duties of 8,000 rupees a tonne on CPO, 10,800 rupees on RBD (refined, bleached and deodorised) palm oil, 9,050 rupees on palm stearin and 9,050 rupees on RBD palm olein.

“Pakistan is a price sensitive market. Since Indonesia is able to sell RBD palm oil more competitively than RBD palm olein, Pakistan had bought more RBD palm oil at the expense of Malaysian RBD palm olein,” he said.

China, like Pakistan, had also slashed its palm oil purchase from Malaysia. In the first 11 months of 2014, China had only bought 2.58 million tonnes. This is a 23 per cent shortfall from 3.34 million tonnes in the same 11 months of 2013.

In the last five years, Jaaffar noted China’s palm oil demand had been artificially pushed as ‘financial products’ rather than ‘commodity products’. Since banks in China give peculiar treatment to palm oil, viewing it as ‘institutional instruments’, palm cooking oil and margarine demand will continue to be augmented by fiscal policy changes there.  

Nevertheless, Jaaffar said the current shortfall in China’s palm oil purchase is also exacerbated by subdued consumer spending. “China is Malaysia’s best cooking oil market. In view of cautious consumer spending, we need to be more focused in market segmentation to raise popularity and branding of our oil,” he said.

Three weeks ago, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said Prime Minister Datuk Seri Najib Razak is forming the National Export Council (NEC) to explore new ways to improve the country’s export chain, logistics and output. 

Poram lauds the NEC formation and urges this high-powered decision-making body to make an iron-clad commitment to palm oil downstream players that ‘a level playing field with rivals’ is consistently maintained for the sake of Malaysia’s export competitiveness.

“The current ‘flip-flop policy change’ in exempting CPO export duties for six months from September 2014 to February 2015 is confusing foreign and local downstream investors who have already sink in billion of dollars in investments. The erosion of investor confidence is not healthy for our economy,” Jaaffar said.

He also proposed that the NEC adopts advocacy and political tools in tackling the global smear campaign on palm oil so as to boost the country’s exports. “The right (and also difficult) thing to do is to tackle barriers (be it tariff or non-tariff) to palm oil trade at its roots,” he said.

“This strategy is healthier for all stakeholders along the palm oil value chain; whether you’re a planter, a cooking oil trader or a biodiesel manufacturer. We must remember, the oil palm is Malaysia’s economic security crop,” Jaaffar said, in reference to the country’s annual US$20 billion palm oil exports which support some two million jobs and livelihoods along the sprawling value chain.  

Since 1st January 2015, Malaysia assumed chairmanship of Asean. The 10-member Asean, formed in 1967, comprises Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei. Cambodia, Laos, Myanmar and Vietnam. 

It is also this year, the Asean Economic Community (AEC) vision is being rolled out. With 600 million people or almost 9.0 per cent of the world population and an economic size of US$1.8 trillion, the AEC is Asia’s third largest economy.

The AEC is created for people, goods and money to move around with little or no economic barriers.

Jaaffar said it would be timely for Malaysia, Indonesia and Thailand to collectively have palm oil listed as ‘environmental goods and services’ under the Asean Trade in Goods Agreement.

“The broad objective of this suggestion is to get environmental branding for palm oil and eventual adoption at Regional Comprehensive Economic Partnerships (RCEPs), Asia Pacific Economic Cooperation (APEC), Trans-Pacific Partnership Agreement (TPPA) and other free trade pacts,” Jaaffar said.

The lure of potato chips

January 4, 2015 Leave a comment

It was during break-time at a palm oil industry meet, a few months back, when I spotted this CEO of a plantation company, standing next to a snack table. 

He was eyeing this big bowl of potato chips.

His hand was reaching out for the snack bowl.

“Hey! You said you’re cutting down on oily, sugary and salty food. You don’t even want to eat mooncakes,” I snapped at him.

His hand hesitated. But when he looked up and realised it was me, he smiled. 

He proceeded to cram more potato chips into his mouth. Crunch! Crunch! Crunch!

Two seconds later, another CEO of a plantation company, quickly stepped over and “came to his rescue.”

This CEO, who happens to be his good friend, quipped, “potato chips are fried in palm oil. There’s no trans fat, it’s a healthy snack.” In making good on what he said, he also reached into the bowl of potato chips.

I blinked and stared at these two CEOs smiling at each other while munching on their potato chips. Crunch! Crunch! Crunch!

“See … it’s so crispy. Try some,” the normally poker-faced CEO grinned. Crunch! Crunch! Crunch!

Admittedly, these two smiley-faced CEOs are very convincing. 

The delectable crunch is so irresistible. Before I knew it, my hand reached into the bowl of potato chips, too.

POW!! The taste of salt flakes, faint hint of fresh pepper and the crisp fried potato sensations exploded in my mouth. 

Looks like the lure of the potato chips can really make people smile.

So, how do you get crispy potato chips? The two CEOs recommend deepfrying the potatoes in palm cooking oil.

Oils and fats have the ability to create unique textures — crispy or creamy — that appeal to our taste buds.

So, what is crispiness? When potatoes are dropped into a wok of frying oil — which is far hotter than water’s boiling point of 100°C — rapidly expanding steam creates crispy bubbles that gives the potato chip its satisfying crunch.

As the potato chip snap between our teeth, the crunchiness signals freshness on our tongue. The fat in the potato chip catalyse the release of volatile compounds in our mouth and, ultimately, the flavourful perception in our brain.

So, the next time you’re thinking of reaching out for “light colour or purer-looking” cooking oil to deepfry … stop!

Remember the words of these two CEOs, “It’s best to deepfry with palm cooking oil. Unlike softoils that oxidise very easily, palm oil is heat stable and is packed with nutrients like the supervitamin E called tocotrienols.” 

Crunch! Crunch! Crunch!

What are we doing for Asean Economic Community?

January 2, 2015 Leave a comment

It’s the start of 2015. It’s the start of Malaysia taking the lead of Asean. 

At the Kuala Lumpur International Airport, there are dedicated lanes for Asean citizens at the immigration counters. It’s a good sign that Malaysia is walking the talk on freer movement of Asean citizens.

2015 is also the start of the implementation of the Malaysian Sustainable Palm Oil (MSPO) certification. 

What are palm oil exporters’ role in the implementation of MSPO? This question is often met with blank stares and the shrugging of shoulders. 

This can be quite disconcerting when palm oil exporters are the workhorse contributing to the bottomline of Malaysia’s economy and gross national income (GNI). 

When it comes to MSPO, not many in the palm oil industry have a clear picture of what each stakeholder’s rights and responsibilities are. 

The key to measuring how well or poorly a sector performs is to look at salient statistics of production and exports. The Malaysian Palm Oil Board (MPOB), the custodian of the palm oil industry, releases statistics on the 10th of every month. This is good. 

At MPOB’s website, the table of palm oil export destinations are listed down by countries. There is even a specific table just for EU-28. Good job, keep it up.

The strange thing, however, is there is no specific table for Asean10, despite Malaysia taking chairmanship of Asean this year. 

One would expect there be a dedicated compilation of Malaysian palm oil exports within Asean10 in the last five years to prepare for the launch of 2015 single economic market known as the Asean Economic Community (AEC).

It would also be helpful if there is a specific compilation on palm oil consumption on a per capita basis for countries around the world, with a specific table for Asean10.

The 10 governments of southeast Asian countries or Asean actually want to make life easier for the business community as they facilitate the formation of AEC.

It is a great vision. With 600 million people or almost 9 per cent of the world population, an economic size of US$1.8 trillion, and its strategic location between China and India, the AEC is Asia’s third largest economy. People, goods and money can move around with little or no economic barriers.

With great powers entrusted to Kuala Lumpur to lead Asean this year, comes great responsibility to do what is right for 600 million people. 

Here’s a new year resolution for all stakeholders along the palm oil value chain in Malaysia and Indonesia. Ask not what Asean can do for you but what you can do for Asean. Here’s to seeing more talks of collaboration realised into actions that bring about meaningful results.