Archive for May, 2010

EU lawmakers to look into palm oil discrimination

The following are written by my colleague Rupa Damodaran.

European Union (EU) lawmakers are increasingly convinced that Malaysia is on the same path as the EU on the sustainability of palm oil production, but would need more scientific data to support Malaysia’s case.

Dan Jorgensen, who is the vice-chair of the environment, public health and food safety committee in the European Parliament, has promised to bring Malaysia’s case on its discrimination versus other oils in the Renewable Energy Directive (RED).

“We don’t want any discrimination at all of the palm oil sector, and we promised the industry here to help have discussions with the EU on this,” he said.

Jorgensen, who was in Malaysia last week with two other Members of the European Parliament (MEPs) Martin J. Callanan and Ole K. Christensen. They were impressed with the work undertaken by the government and the palm oil industry on sustainability efforts.

“People in Europe don’t know how efficient an oil it (palm oil) is. I wasn’t aware myself how much oil you can get per hectare compared with other oils – in that way it is discriminated against,” he added. Oil palms on the average produce 2.5 times more oil per ha than rapeseed.

According to the RED which will come into force in December this year, biofuels must have greenhouse gas savings of at least 35 per cent and according to EU’s calculation, the use of palm oil-based biodiesel failed the requirement as it achieved only 19 per cent.

“We promise to look into the discrimination (claim) and, if there is, we’ll do everything in our powers to change it. The numbers would need to be accurate and based on scientific data,” said Jorgensen.

A social democrat MEP who hails from Denmark, Jorgensen said the EU is committed to the sustainability criteria as it helps mitigate problems of greenhouse gases, climate change, global warming and also biodiversity.

“We’re happy to hear that the industry acknowledges and respects it. They have been discussing how it can become more competitive on the sustainability criteria.”

Jorgensen also suggested that the palm oil industry considers making entrapment of methane gas mandatory to increase the energy efficiency of Malaysia. Palm oil mills are currently encouraged to trap methane gas from palm oil mill effluent.

“We are convinced that the industry has been doing a lot and we expect it will proceed to become more sustainable because palm oil is important for biofuel as well as oil for food,” he said.

The EU lawmakers recognised that palm oil has been the largest contributor of wealth to Malaysia and lends bigger potential compared to the other edible oils.

Christensen also lauded Malaysia for its achievements via oil palm planting in bringing the people out of the poverty bracket, especially in the Felda smallholder schemes.

“Palm oil is not a bad thing as is being perceived by many people in Europe. We are gratified that Malaysia has strict laws in place to make sure no more rainforests are destroyed and expansion is on agriculture land,” said Callanan.

Callanan also does not expect Malaysia to be affected by the RED in the short term as the use of palm oil for biofuel in the EU is still very small.

Malaysia’s ambassador to the EU, Hussein Haniff, who also attended the meeting in Kuala Lumpur, said more outreach programmes were necessary to enable the EU lawmakers to be convinced that Malaysia is not clearing rainforests to grow oil palm. There is also the tendency to lump both Malaysia and Indonesia, the top two producers of palm oil, together.

“We want an equal playing field and they are willing to take up on the verification of scientific data. From what we know, they have outdated data. In the process of review, if they find the default value is not 19 per cent, then it will be good for us to be on par with the other oils,” said Hussein.

Palm oil deserves equal trade opportunities

TRADE in palm oil products should not be victimised by legislation in the European Union (EU), and in Australia, arising from the Western anti-palm oil campaigns, said the Malaysian Palm Oil Council (MPOC) chief executive officer.

Tan Sri Yusof Basiron said that such legislation would be seen as a trade protection measure, which could force the affected countries to relatiate.

Malaysia’s above average performance in habitat conservation of the orang utan and in greenhouse gas emission (GHG), as well as being a net sequester of carbon, deserves recognition, he said.

“We have earned our right to trade. We should not be asked to clean the mess (GHG emission) of developed countries,” Yusof said in addressing the International Palm Oil Sustainability Conference in Kota Kinabalu recently.

He cited the refusal of Russia, a world leader in timber production and export, to comply with the EU-certified timber scheme. Likewise, palm oil should not be singled out for sustainability compliance unless other competing oils are also subjected to similar requirements.

GHG emission is not an issue as Malaysia is a net carbon sink country with more than 82 per cent tree cover provided by permanent forests and plantation crops, including oil palms, rubber, cocoa and coconuts.

Yusof said the Western non-governmental organisations (NGOs) should focus on campaigning for the reduction of GHG emission in their own countries, for instance, closing polluting coal mines.

“How is it that the UK produces 18 million tonnes of coal per year and the NGOs do not seem to notice the GHG emitted but they can detect burning of a few hectares of forest for agricultural conversion in Indonesia 10,000 km away?”

He pointed out that 66 million tonnes of carbon dioxide emitted a year from 18 million tonnes of coal produced in the UK was equivalent to deforestation of 378,000ha of degraded rainforests.

“This is more than double the yearly expansion of oil palm cultivation in Malaysia which in the past involved deforestation of degraded forest land zoned for agriculture.”

Yusof warned that the Western-orchestrated palm oil campaigns could drive small oil palm growers in Indonesia and Malaysia to poverty even as the industry has been trying to raise the earnings of those in Indonesia to US$20 (RM66) a day from US$5 (RM16.50) currently.

The dangers of global warming should not be used to stifle oil palm expansion unless other GHG emitters in the developed countries are equally focused on mitigating GHG emission, such as taking steps to shut down their coal mines.

On the Sarawak peat paradigm, Ramesh Veloo, Paimin Selamat and Shahrir Abdul Aziz from Tradewinds Plantation Bhd listed zero burning, good water management and palm nutrition as important elements to consider in planting oil palm trees in peat soil.

Sarawak has the highest distribution of peat in the country at 64 per cent of the total of 2.58 million hectares. Tradewinds has 75,000ha of oil palms in Sarawak, with the crop grown in both mineral soil and peat soil.

We brought in the weevils from Africa

May 30, 2010 5 comments

This newstory under the “I remember when…” column was published in New Sunday Times.

Several methods were tried, to limited success, until weevils were brought in from Cameroon to do the job. Several experts shared with TAN CHOE CHOE the story of the bug that has made Malaysia the largest palm oil exporting country in the world.

SOME of the world’s greatest discoveries came about because of a refusal to accept established norms.

Malaysia is the biggest palm oil exporting country in the world today because Datuk Leslie Davidson refused to be hemmed in by claims in textbooks that oil palm fruits could only be wind pollinated.

Davidson, who rose to be the chairman of the plantation group at Unilever, Britain, introduced oil palm in Sabah in 1960 when he was an estate manager and opened the Tungud estate in the Labuk Valley.

Although the plants grew well, they did not bear much fruit. Scientists theorised that this was because heavy rain had washed the pollen away.

Davidson was, however, sceptical. As a young planter in Cameroon, West Africa, he had seen bountiful fruits on oil palm plants despite heavy rain. At the time, Johor’s oil palm estates were yielding bigger fruit bunches than the ones in Sabah because they had an insect pollinator — the thrip hawaiiensis.

Without assisted pollination, the weight of fruit to bunch in the Labuk Valley was only around 30 per cent. In Johor, it was about 54 per cent, while in Cameroon, over 65 per cent. “We experimented with hand pollination and achieved standards close to Johor’s, although still not as good as in Cameroon.”

Davidson kept turning over the problem in his mind until he remembered “the little beasties” he saw in Cameroon.

“Davidson asked Unilever to follow up on his hunch and whether those insects pollinating the palms in Cameroon could be brought in to Malaysia,” said Mahbob Abdullah, who was then the general manager of Pamol Sabah under Unilever. Davidson was his boss.

Mahbob said Davidson approached the Commonwealth Institute of Biological Control (CIBC) for their expertise, and got Datuk Dr Rahman Anwar Syed, an entomologist from Pakistan, to undertake the study.

Rahman proved, in a series of experiments, that the oil palm in its original habitat was pollinated by several different insects, the most effective of which was the weevil named elaeidobius kamerunicus. Armed with the results, Unilever’s research head in Malaysia, Dr R.H.V. Corley, approached the Department of Agriculture’s plant quarantine section head, Datin Kang Siew Ming, who was just into her second day at the job.

Kang recalled: “On hearing their story, I sensed the enormous impact these weevils would have not only on Pamol Estate, but the entire oil palm industry. But I was concerned that the weevils would cause damage to the oil palm itself or become a pest to other economic crops.”

Kang’s section enforces the Plant Quarantine Act and Regulations 1961, which controls and regulates the entry of all insects, plants and plant products into the country.

To confirm Rahman’s findings, a delegation led by Mahbob, comprising Kang, Zam Abdul Karim, an entomologist with the Agriculture Department and Dr Tay Eong Beok, the assistant director of Agriculture, Sabah, went on a field trip to Cameroon.

“We had to wake before dawn to observe the weevils’ pollinating activities. Zam and I took turns climbing onto selected palms. We saw the comings and goings of several weevil species and were convinced that the elaeidobius kamerunicus was the best pollinator,” said Kang.

It was also found that the weevils had evolved with the oil palm plants and developed a very synergistic relationship with them. After being briefed on the findings, the then director-general of agriculture, Datuk Ahmad Yunus, issued an import permit for the weevils.

In June 1980, Rahman arrived in Kuala Lumpur with 1,044 weevil pupae individually packed in plastic vials.

They were immediately taken into the quarantine insectary at Jalan Gallagher.

The 1,044 pupae were the remains of the 2,000 pupae sent to London for intermediate quarantine checking at the CIBC labs.

Although they spent only one day in London, the journey proved too long for the creatures to remain as pupae. Some adults had emerged and all were examined by Kang and Zam for possible contaminants.

“Only about 400 vigorous ones were selected. The rest were destroyed,” said Zam. “We also tested them with some common pesticides. We needed to be ready to kill them in case anything went wrong,” she added.

After some six months of testing, Zam and Kang were finally satisfied the insects would bring no harm and their results were presented at a meeting of experts from various research agencies. They obtained final authorisation to release the weevils for commercial use at Uni-Pamol Malaysia’s Mamor Estate in Kluang, Johor.

“Rahman and I packed one insect-cage of male oil palm spikelets full of weevils and then he drove us from the insectary to Mamor estate under Uni-Pamol Malaysia in the early morning of Feb 21, 1981.”

In the presence of Corley and many other Pamol staff, Rahman held the cage, Kang slid open the cage door and the weevils flew out to make their new home in Malaysia.

“I remember Rahman wishing them, ‘God bless you in your new home!’, as he observed the cloud of flying weevils heading for the oil palms. They had been his constant companion for almost three years,” said Kang. “The weevil is a hardworking insect. The weevil population exploded after they were released in Mamor.

“Soon, the weevils were taken to other countries and they have helped with the growth of the industry in Indonesia, Thailand, Papua New Guinea, Solomon Islands and India,” said Mahbob.

In Sabah, the insects were released by Rahman on March 13, 1981 at the Pamol estate in Labuk. Since then, Sabah has overtaken Johor as the biggest palm-oil producing state in Malaysia.

Friction and vested interests in pulp and palm oil production

Bill Durodié, who resides in Singapore is the author of this commentary published in the Jakarta Post. He is a senior fellow in the Centre for Non-Traditional Security Studies of the S. Rajaratnam School of International Studies at the Nanyang Technological University.

Campaigns against big pulp and palm oil producers in Indonesia appear to be driven by local activists on the ground. In reality, they are facilitated by huge budgets and shaped by agendas emanating from the West.

Pulp and paper production is big business. So too is palm oil.

Steady global demand for paper and packaging, combined with increasing interest in bio-fuels and replacement fats for the food industry, have made these some of the largest and fastest-growing industries in Southeast Asia.

Indonesia and Malaysia alone, now account for 85 percent of world palm oil production, and their share of the wood, pulp and paper business is rising rapidly too. There are good reasons for this. Aside from access to low-cost labor, the fact is that biomass simply grows faster in the tropics than in North America or Europe.

Such developments are not without their problems. Struggles between firms for a lucrative market can be intense. Competitors from other sectors and regions may be willing to support any argument that discredits their rivals. And Western governments are concerned that these advances put them at a disadvantage, too.

On top of this, numerous environmental activists and community campaigners have emerged in recent years accusing these industries of ignoring land rights, polluting waterways, logging illegally and contributing to global warming. These have now attracted the attention of the media and regional policy-makers.

A recent BBC documentary that explored deforestation issues in Indonesia, led Unilever — one of the largest food manufacturers in the world — to launch a supposedly independent review and then terminate contracts worth tens of millions of dollars with its suppliers there. For a developing country, this is a significant set-back.

From the corporate perspective it may appear as if producers are trapped in a conflict with a swarm of Lilliputian detractors — well-intentioned but misguided, energetic young people, from countless non-governmental organizations.

They fly paragliders and helicopters over plantations on reconnaissance missions, build dams to prevent effective soil drainage, and foment resentment towards business among local communities, international agencies and eventually the companies own customers and host governments.

Some firms, seeking to prove otherwise, have sought to be seen to be acting in a more responsible fashion. They have hired security contractors to prevent illicit tree-felling on their concessions. They have supported schemes to tag wood. They have established schools and clinics to ensure local communities benefit from their activities. They have even handed-over land to establish nature reserves.

But in reality this is to view the situation upside-down. Eco-warriors are a manifestation of the problem, not the problem itself. Their tactics — to presume guilt by documentation rather than by factual evidence — first emerged elsewhere. And far from being small and disconnected, they are simply the visible expression of a far more coherent, but invisible force.

Among world leaders, confidence in the economic system today is threadbare. In addition to declining political support and legitimacy, contemporary elites in the West lack a sense of greater purpose through which to steer world affairs.

The protesters in Indonesia and elsewhere simply reflect this inner loss of certainty. They are indulged to a remarkable extent by multinationals and governments, keen to latch on to anything that appears to offer popular engagement.

Over the last few decades a negative narrative has emerged in the West that presents ambition as arrogant, development as dangerous and success as selfish.

The instigators of this are not the youthful idealists establishing camps in the forest, but disillusioned politicians and officials. They have been supported by an army of writers, academics and social commentators, who seem determined to show that things are always getting worse and that the cause, as well as the victim of this, is human-action itself.

The consequence has been the creation of a cultural environment within which social advancement is viewed with suspicion. Singapore itself has been on the receiving end of this through the recent publication of a report purporting to show it as the worst environmental offender in the world. In reality, this was for having the temerity to develop a city at the equator on limited land.

Far from being involved in a David versus Goliath-like struggle against “big business”, organizations such as Friends of the Earth International are huge concerns in their own right. They do not receive the lion’s share of their income from public donations, as some presume. A cursory look at their accounts reveals them to obtain well-over 80 percent of their funding from foundations and governments.

For instance, the Dutch Ministry of Foreign Affairs funds Hivos — a Netherlands based civil society group with direct links to campaigns in Indonesia — for up to two-thirds of its annual €100 million budget. In its turn, Hivos is listed as a partner to Aidenvironment who, through a former associate of Friends of the Earth, conducted the supposedly independent review of operations in Indonesia that led Unilever to pull-out.

These groups also send teams of Western activists in search of purpose and an identity to discover themselves in the jungles of Southeast Asia. There they interact with local groups — or “indigenous people” as the campaigners patronizingly call them — encouraging these to share their concerns, according to strategies they learnt back home, and with a view to enhancing their credibility.

Whether donors to US-based philanthropic foundations or European taxpayers even know that they are funding other, Western-based NGOs to mount campaigns against businesses in Indonesia is anybody’s guess.

The real problem has been the failure of industry to engage the public in a wider debate over these issues. This has allowed campaigners to seize the moral high-ground by appearing concerned.

Whilst it is a minority of society that engages with these issues, the majority of these are effectively opposed to business and development. And even when they concede the need for the latter, this is always argued for on a small-scale basis.

Small may be beautiful, but the reality is that big is better. It is more efficient and potentially cleaner. In addition, celebrating small, localized production is a means to entrap communities where they are for the indefinite future.

Unfortunately, individual firms are not best placed to make these arguments. They have their own vested interests. But for the benefit of the people of this region and beyond, it is high time a few enlightened individuals sought to establish an organization to represent the needs and aspirations of all.

The real problem has been the failure of industry to engage the public in a wider debate over these issues.

Worker levy hike may cost planters RM1.03b

OIL PALM planters in Malaysia are concerned that the proposed hike in foreign workers levy would increase their cost of production and affect their competitiveness.

Labour is the single largest cost component for them, making Malaysia the highest cost producer among other plantation crop producers in the region.

The Malaysian Employers Federation (MEF) and the Malayan Agricultural Producers’ Association (Mapa) have estimated that the proposed increase in levy and security bond for foreign workers would expand the industry’s cost to over RM2 billion from the current RM200 million in levy and security bond.

They expect the higher levy will cost the plantation sector some RM1.17 billion a year in 2015 from the current RM138.4 million, based on 256,382 foreign workers employed in the sector.

“The proposal to increase the existing security bond of RM25O per worker to RM4,000 per worker will cost the industry about RM64.01 million currently, to RM1.03 billion,” MEF and Mapa said in a joint statement issued late last night.

They are responding to the proposal by the Cabinet committee on foreign labour, chaired by Deputy Prime Minister Tan Sri Muhyiddin Yassin to increase levy for unskilled workers by next year. The committee was also weighing the introduction of security bonds to ensure employers are more responsible for their employees.

Government-linked companies involved in the sector include Felda Plantations, Sime Darby Plantation, Tabung Haji Plantations, Felcra, Risda and state-owned corporations.

According to MEF and Mapa, labour is critical for sustainable growth of palm oil sector and the plantation industry is still labour-intensive. The upstream and downstream activities within the plantation sector contributed RM65 billion and RM50 billion in net export in 2008 and 2009, respectively.

“Therefore, the government should not heavily tax and burden this strategic industry. As an example, soya bean and rapeseed oil producers in North America and Europe are given subsidies,” they said.

MEF and Mapa said the hiring of foreign workers contribute significantly to the expansion of the agriculture sector. An oil palm harvester is estimated to contribute RM195,700 a year to the sector, after deducting salary, housing and amenities, medical and recruitment expenses.

“Based on the approximate figure of 230,000 foreign oil palm harvesters, the total contribution per annum is about RM45.01 billion per year,” they said. The proposed hike in levy and security bond would further increase production cost, which could not be passed on to the consumers as plantation companies are price takers and not price setters.

“The government, therefore, should further facilitate and not frustrate the industry. Please let our golden goose continue to lay golden eggs peacefully,” MEF and Mapa said.

Palm oil trade barriers, a priority in FTA talks

BARRIERS to palm oil trade will be a priority item on the negotiating table in Malaysia’s free trade agreement (FTA) talks with the European Union (EU), said Plantation Industries and Commodities Minister Tan Sri Bernard Dompok.

Malaysia and the EU is due to hold its second round of FTA talks next month.

“We want to ensure the palm oil industry does not face obstacles,” he said.
 “We will assist palm oil exporters to remove trade barriers and explore new markets while making the palm oil industry competitive,” he added.
One of the obstacles, he said, was the negative campaign by Western environmental non-governmental organisations (NGOs) which claimed the expansion of oil palm plantations had sacrificed forest biodiversity.
Rivalry from competing vegetable oils grown in Europe has seen some under-handed tactics adopted by developed nations to curb the growth of the palm oil trade.
Well-funded activist groups like Greenpeace and Friends of the Earth from Europe and their affiliates in Malaysia and Indonesia blame oil palm planters for destroying forests and decimating the orang utan population. They also viciously campaigning against palm oil imports into the EU, especially for biofuels.
The NGOs anti-palm oil campaign is aligned with the EU’s Renewable Energy Directive that seeks to discriminate against palm biodiesel.
“These NGOs continue to mislead consumers in Europe. I will inform the International Trade and Industry minister on such unfair trade practices,” said Dompok.
Malaysia has to seriously address such trade barriers to palm oil trade because almost a million jobs are at stake. The sprawling palm oil industry also supports some two million livelihoods in the economy.
Dr Gernot Pehnelt, founder and director of GlobEcon, an independent research and consulting institute in Germany had last month argued the directive’s assumptions of imported biofuels’ ecological impact reflected political and not scientific or economic reality.
The EU ambassador and head of delegation to Malaysia Vincent Piket, however, denies the EU is discriminating against palm oil. He reportedly said the sustainability criteria used by the EU Renewable Energy Directive were science-based, verifiable and in accordance with the World Trade Organisation principles.

CB Industrial expects 50pc more profits

This is written by my colleague, Rupa Damodaran.

CB INDUSTRIAL Product Holding Bhd (CBIP) expects profit to jump by 50 per cent this year on strong palm oil prices and prospects of more estates building and upgrading their palm oil mills.

“We should be doing much better as long as palm oil prices do not drop below RM2,000 per tonne,” managing director Lim Chai Beng said after the company’s annual general meeting in Petaling Jaya, Selangor yesterday.

Its engineering division, which contributes 60 per cent of its total earnings, is expected to improve although it has been affected by currency fluctuations as half of its contracts are quoted in US dollars.

For the first quarter of this year, results also improved by almost 50 per cent to about RM13 million from RM8.5 million previously, Lim said, adding that the second quarter is likely to be better due to the prices. Last year, CBIP posted RM49 million in pre-tax profit and turnover of RM331 million.

CBIP’s has jobs worth RM350 million in its order book till the end of next year, Lim said. “With palm oil prices  hovering at RM2,500 per tonne, we can expect strong and promising growth in our engineering division,” he said.

Lim said the economic crisis affected CBIP’s profits last year as plantation companies deferred their milling projects. CBIP offers a range of palm oil mills designed to the requirements of oil palm planters, priced between RM3 million and RM40 million.

Lim said CB Industrial is also making a name within palm oil milling circles in Africa and Central America. It has started construction work on a milling plant in the Ivory Coast and three smaller ones in Guatemala and Mexico.

Ta Ann to invest RM50m in 2nd mill

SARAWAK timber and oil palm giant, TA Ann Holdings Bhd, is to invest RM50 million in a second crude palm oil (CPO) mill this year.

Its group managing director and chief executive officer Datuk Wong Kuo Hea said the mill, to be sited in Igan near Sibu, will have a capacity of 90 tonnes per hour. He was speaking to reporters after the group’s annual general meeting in Sibu yesterday.

Wong said its logging and oil palm divisions were still the main contributors to group profit, contributing 54 per cent and 39 per cent, respectively.

On its oil palm division’s target this year, he said it is to develop another 4,400ha in Igan, Daro and Matu in the Mukah Division.

The group as of December last year had a total planted area of 26,056ha comprising 13,984ha of matured area, 6,699ha of immature area and 5,373ha of young palms. “If the current market price at RM2,300 per tonne for the commodity is maintained, we can expect an even bigger contribution from it this year to our bottom line,” he said.

For the logging division, Wong said it was able to export 63 per cent more logs at 226,601 cubic metres last year, compared to 139,328 in 2008.

“Log prices remained resilient in the year under review and the division revenue was 30.6 per cent higher. India remained the largest buyer, accounting for 70 per cent,” he disclosed.

Meanwhile, Wong Said Ta Ann too had achieved another environmental milestone, when it signed a memorandum of understanding (MOU) with the WWF Malaysia in “Global Forest and Trade Network (GFTN)” on December 8 last year. It became the first public-listed company in the state to support responsible forestry.

“We are going forward in our forest certification. Hopefully, three years from now, we can get our forest certified. Once we have achieved this, our products will be certified as coming from a legal and sustainable source,” he explained.

He said by facilitating trade links between companies committed to responsible forestry, the GFTN would create a market condition that helps to conserve forests, while providing economic and social benefits for the businesses and the people dependent on it.

“In other words, there will be better market connectivity, wider market prospects and product acceptance for Ta Ann through this network of buyers,” Wong said. — Bernama