Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said from January to October, exports had jumped 28 per cent to RM118.2 billion. “That has already exceeded last year’s overall figure,” he added.
Last year’s RM113.29 billion achievement was 24 per cent higher than 2009’s RM91.16 billion. It also overtook 2008’s previous record of RM112.43 billion.
Malaysia’s plantation commodities comprise palm oil, rubber, timber, cocoa, tobacco and pepper.
In the last decade, the sector had been the nation’s second largest foreign income earner after manufacturing.
Since then, the export value has grown three and a half times.
“I think we can hit RM140 billion this year,” Dompok told Business Times in an interview.
To a certain extent, Dompok said the higher palm oil, rubber and pepper pricing was also fuelled by the weakening of the US dollar against the ringgit. In the first eight months of this year, the US dollar weakened by about three per cent against the ringgit from RM3.05 to RM2.95.
The US dollar forms the basis for major index of commodity prices. Hence, Malaysia’s plantation commodity exports like palm oil, rubber, timber, cocoa and pepper are quoted in the greenback.
The minister said palm oil earnings, which are slated to touch RM80 billion this year, will make up the bulk of the country’s plantation commodity’s exports. High palm oil prices have been contributing to higher income for oil palm planters. So far, it is averaging at around RM3,100 a tonne.
“Although palm oil is our number one revenue contributor, pepper exports seemed to have grown the fastest,” Dompok said.
In the first 10 months of this year, pepper exports jumped the highest by 42 per cent to RM224.06 million. Timber exports slipped 3.1 per cent to RM16.52 billion, while tobacco products fell 2.6 per cent to RM833.90 million.
Rubber tappers have good reason to smile as bulk latex has been trading at good price of more than RM10 a kilogramme in the first fours months of the year. Although it has since settled to around RM6.60 per kg, rubber tappers still feel motivated to tap their trees regularly.
“As world crude oil continues to trade at high prices, so will natural rubber because it is a substitute for synthetic rubber in making tyres. In the first 10 months, our rubber exports expanded by 28 per cent to RM27.34 billion,” Dompok said.
RE producers in Sabah will only be paid the rates accorded under Tenaga Nasional Bhd’s (TNB) Small Renewable Energy Projects, according to a statement by Sustainable Energy Development Authority (Seda).
This means oil palm biomass and biogas plant operators there will only be paid 21 sen per kWh instead of the promised 32 sen per kWh under FiT.
Energy, Green Technology and Water Minister Datuk Seri Peter Chin had reportedly said heavy power users in Peninsular Malaysia and Sabah, who use more than 350kWh or whose monthly bills exceed RM77, are to start paying the one per cent RE levy this month.
However, Seda, the implementing agency under Chin’s ministry, said on Tuesday TNB will collect the RE levy only from consumers in Peninsular Malaysia. This is because there has yet to be a gazette to this effect in Sabah.
The regulator said RE producers in Sabah will only be eligible for FiT when the one per cent RE levy is collected by Sabah Electricity Sdn Bhd, a 70 per cent-subsidiary of TNB, from heavy power users in Sabah.
Sarawak, however, is exempted from the RE levy because under the Renewable Energy Act 2010, the FiT is only applicable to Sabah and Peninsular Malaysia.
FiT essentially guarantees RE producers a premium selling price over that generated from depleting and finite sources such as oil, gas and coal.
Power generated from sustainable sources that benefits from FiT includes that of oil palm biomass, biogas, small hydro and solar.
Meanwhile, RE producers will not automatically receive payment under the FiT from December this year. This is because RE producers need to go online and bid for the quota and the relevant FiT rate.
The FiT rate differs for varying RE technologies and installed capacities. RE producers have to apply for licence from Seda via http://seda.gov.my/. Online application is meant to facilitate quota allocation on a first-come, first-serve basis.
Within a week of bidding, Seda announced that applications for the FiT allocation under the categories of biomass and solar projects were fully taken up.
Yesterday, it clarified that some of these applications were incomplete and disqualified. Therefore, the portion of FiT allocation applied for will be released for online bidding again today, at 10am.
Seda has limited individual solar energy producers to 12kWh each. Multiple applications for the same installed site is also not allowed. The new measures are meant to encourage more people to install solar panels on their roof tops and sell back excess energy to TNB.
Malaysians who pioneered China’s oleochemical industry close to 10 years ago are now benefiting from its 1.3 billion consumers’ pursuit of better living standards, writes OOI TEE CHING.
MALAYSIAN investors in China’s oleochemical industry are gaining from the rising demand for eco-friendly soaps and detergent as consumers there pursue better living standards, said Malaysian Palm Oil Board (MPOB) director-general Datuk Dr Choo Yuen May.
“Household cleaning products made from oleochemicals are increasingly seen as sustainable alternative to petrochemical variants,” she told Business Times in a recent interview.
Detergent made from cheaper petroleum by-products like kerosene, containing an active ingredient called linear alkylbenzene sulfonates (LABS), takes a very long time to biodegrade. This can cause foaming at rivers and excessive algae growth in the lakes. The algae covered lakes robs oxygen from the water, leaving fishes and other aquatic organisms to die.
As detergent manufacturers seek to improve their environmental profile, many replaced LABS with methyl ester sulfonates (MES), eventhough it is a little bit more expensive.
Choo said MES is sourced from palm oil and palm stearin. Both are renewable resources and easily available in Malaysia. Therefore, it is not a surprise that Malaysia is a global hub for making oleochemicals, which are then processed into biodegradable detergent.
Since the 1990s, MES-based laundry detergent started to gain popularity as it is readily biodegradable, renewable, agreeable to vegetarians and most importantly — cleans well, even in cold water. Current market leaders of such a green product include Japan’s Lion Corp and America’s Stepan and Huish Detergents.
When contacted, Emery Oleochemicals (M) Sdn Bhd group chief executive officer Dr Kongkrapan Intarajang concurred with Choo that the bright outlook for palm oil-based detergents is fuelled by the global trend towards formulations derived from renewable plant-based ingredients instead of depleting fossil fuel.
In China, Emery with one of its shareholders Sime Darby Plantation Sdn Bhd partnered detergent manufacturer Guangzhou Lonkey Industrial Co Ltd to form Guangzhou Keylink Chemical Co. The joint venture company is setting up a 40,000-tonne a year MES plant. “Our MES plant in China is nearing completion. We hope to commission it next year, in the first quarter,” said Kongkrapan.
Choo noted MPOB’s research in MES is applicable in China because this biodegradable detergent cleans well at low dosage, even in washing water that has high mineral content. “Although China’s household waters tend to be high in mineral content, it is not a problem. Detergent manufacturers like Lonkey will find it easy to formulate concentrated washing powder using MES,” she said. Among Lonkey’s popular laundry detergent brands in the Guangzhou province include Gaofuli and Yeshu.
In Malaysia, KLK Oleochemicals Group’s unit, KL-Kepong Oleomas, operates a 50,000-tonne per year MES plant. “We’re carrying out some upgrading works and doubling the capacity to 100,000 tonnes,” said KLK Oleochemicals managing director A.K. Yeow.
As the world’s top oleochemicals producer, Malaysia exports around 2.2 million tonnes every year. Malaysia’s lead is partly driven by its community of engineers and chemists having the ability to process palm oil and palm kernel oil into more than 100 types of downstream products.
With such technical prowess and advantage, Malaysians have become pioneers and key investors in China’s oleochemical industry.
Among the earliest to set foot there are Wilmar International Ltd, in which Robert Kuok’s Kuok Group is a substantial shareholder. The other pioneer is Kuala Lumpur Kepong Bhd’s (KLK) unit KLK-Taiko Palm Oleo Co Ltd. Other Malaysian investors include Teck Guan Perdana Bhd and Kwantas Corp Bhd.
Wilmar’s pioneering investments have given it a headstart over its competitors. Today, it is the biggest player in China’s oleochemical industry with an estimated annual capacity of 800,000 tonnes.
As early as 1999, KLK’s Yeow frequently flew to China to assess the benefits of producing oleochemicals there.
He recalled scouting for an affordable industrial site equipped with basic infrastructure of piped water and consistent electricity supply.
The management finally chose Zhangjiagang, a town two hours drive from Shanghai, and yet easily accessible by sea.
During the last five years, KLK-Taiko Palm-Oleo had invested some RM200 million there. Today, the facility is able to churn out 220,000 tonnes of fatty acids, soap noodles and glycerine in a year.
Teck Guan’s oleochemical plant at Rugao town, about four hours drive from Shanghai, is able to produce up to 200,000 tonnes of fatty alcohol, fatty acid and glycerin per year.
Kwantas’ unit Dongma (Guangzhou Free Trade Zone) Oleochemicals Co Ltd plants in Zhangjiagang near Shanghai and in Guangzhou have a combined 200,000-tonne annual capacity. These plants make soap noodles, glycerine and other oleochemical derivatives.
Asked on China’s oleochemical demand in the next five years, Choo said: “Last year, China consumed some 2.5 million tonnes. The market continues to grow because consumption of soaps, detergent, cosmetics and bioplastics will expand as living standards improve”.
She also noted that through China’s Cleaning Industry Association’s appeal for affordable and steady supply of oleochemical ingredients from Southeast Asia, the China government had lowered palm stearin import duty to 2 per cent.
Choo, however, sees the demand for oleochemicals moderating in future. The operating environment there has become highly competitive. “It will not be as fast as previous years, around 10 to 15 per cent annually.”
Nevertheless, she remains optimistic that new applications like biolubricants, green chemicals, bioplastics and biopolymers will continue to drive the oleochemicals industry there. Choo also expects more usage of palm-based polyols in China’s polyurethane industry.
Johor Baru: Kulim (Malaysia) Bhd shareholders yesterday gave the go-ahead for the company to buy six parcels of oil palm plantation land in Johor for RM700 million cash from Johor Corporation (JCorp).
While the shareholders’ approval indicate their optimism of the purchase and of Kulim’s outlook, for JCorp, the RM700 million it will get from the sale means it will have cash to meet its obligations on bonds maturing next year.
The sale is a major component of the JCorp group’s rationalisation exercise.
The RM700 million cash accruing from the estates’ disposal is the first out of the expected RM1 billion cash to be generated before July 31 2012. The balance of RM300 million will come from internally generated funds.
JCorp president and chief executive officer Kamaruzzaman Abu Kassim said, in a statement yesterday, that the group is finalising a plan for repayment of its remaining debts. As part of the exercise, CIMB Bank which is also its adviser, and Maybank will act as joint lead managers for the new bonds issue in 2012.
Kulim shareholders approved the purchase of six parcels of oil palm plantation land totalling 13,687ha and two palm oil mills at an extraordinary general meeting held here yesterday.
Meanwhile, Massive Equity Sdn Bhd (MESB), a special purpose vehicle jointly owned by JCorp and CVC Capital Partners (CVC), welcome the acceptance KFC Holdings Bhd and QSR Brands Bhd of its offer to buy the two fast food companies.
The privatisation of QSR will not result in JCorp itself incurring additional debt. This is because funding for the transaction will be done via MESB on the strength of the future cash flow of the two businesses. Once the sale to MESB completes, the proceeds will be returned to all shareholders of QSR and KFC.
The move will also give Kulim, which is currently the controlling shareholder of QSR, an opportunity to sell off its stake in the food retail businesses and focus on its core plantation business.
Kamaruzzaman said the acquisition will enable JCorp to gain direct controlling interest in both companies it considers as having good fundamentals and long-term value.
Out of its six core businesses, plantation is the biggest earnings contributor, followed by shipbuilding and property development. In the three quarters ended September 2011, Boustead’s plantation division contributed RM267.1 million or 45.5 per cent to the group’s RM585.9 million pre-tax profits.
So far, Boustead makes an annual profit of between RM450 million and RM700 million.
Although palm oil prices have been settling from its high of RM3,800 per tonne nine months ago, the third-month benchmark palm oil futures contract on the Malaysia Derivatives Exchange is averaging at around RM3,100 per tonne. Yesterday, the contract closed RM25 higher at RM3,097 per tonne.
“We’re looking at record profits this year as palm oil prices are still strong,” said Boustead deputy chairman and group managing director Tan Sri Lodin Wok Kamaruddin.
The group has an agriculture land bank of 97,648ha and so far, three quarters of that are already planted with oil palms.
“Our tree profile is at a favourable phase, of which 46 per cent of our oil palms are of prime ages. We expect to harvest about 1.1 million tonnes of fresh fruit bunches this year,” he said.
With promising results, Boustead is setting aside RM1.4 billion in capital expenditure for next year. “About 30 per cent of the money will go to plantation,” said Lodin.
Yesterday, both Boustead and Pharmaniaga Bhd shareholders approved all resolutions to have Boustead’s entire pharmaceutical division placed under Pharmaniaga.
Lodin said the corporate move will allow Pharmaniaga to expand its manufacturing capacity in Kedah and Perak. “Our total capital expenditure for the pharmaceutical division amounts to RM95 million, of which a third will go to the information system,” he added.
Pharmaniaga is in the business of making generic drugs. It also supply, trade and install hospital equipment. Last year, it secured a 10-year concession to distribute medicine to government hospitals and clinics.
“We have a 10-year supply concession to all 3,750 healthcare outlets under the Health Ministry throughout the country. The book value is worth some RM900 million,” said Pharmaniaga managing director Datuk Farshila Emran.
Lodin said Boustead is still interested in buying ExxonMobil Corp’s oil and gas assets in Malaysia, if the latter’s deal with San Miguel Corp does not materialise. “We first had a discussion with Esso in August last year. If there is a review with whomever they have made an agreement with, we are open and prepared to talk to anyone,” he said.
San Miguel, in August, agreed to buy Exxon’s entire 65 per cent stake in Esso Malaysia for about US$206 million (RM655 million), or RM3.50 per share. This will give it control over a chain of petrol stations and one refinery with a capacity of 88,000 barrels a day. Although the deal won the government approval last month, it has yet to be concluded.
LTAT does not dismiss prospect of privatising BHIC
KUALA LUMPUR: The possibility of the Armed Forces Pension Fund or Lembaga Tabung Angkatan Tentera (LTAT) being the vehicle to privatise Boustead Heavy Industries Corp Bhd (BHIC) is increasing.
Tan Sri Lodin Wok Kamaruddin, who is LTAT chief executive, did not dismiss the prospect of LTAT privatising BHIC. He, however, denied that BHIC’s parent, Boustead Holdings Bhd, planned to privatise BHIC.
“Once again, we confirm that Boustead does not have any intention to privatise BHIC. We can’t comment on what LTAT is going to do about BHIC,” said Lodin, who is also Boustead deputy chairman and group managing director. “That you would have to ask LTAT. It is for LTAT’s board of directors to collectively deliberate upon,” he told reporters after Boustead’s shareholders meeting here yesterday.
A research house highlighted that a privatisation made sense given that BHIC’s earnings visibility looked secure for the next 10 years after being awarded a RM9 billion contract from the Defence Ministry to design, build and deliver six second-generation patrol vessels.
It could also be advantageous for LTAT to privatise BHIC to avoid public disclosure and scrutiny, given the sensitivity of such government defence contracts.
LTAT owns 61 per cent of Boustead and 8.15 per cent of BHIC. When pressed on what he thought of such a suggestion published in the media, Lodin said: “Anyone can air their views in the newspapers.”
On whether LTAT is considering loosening its grip on Boustead to increase share liquidity, he said: “It is good to have liquidity. LTAT will do so at the right time and right price and make some capital gains along the way.”
THE virtues of oil from olives, sunflower seeds, canola, soybean and corn are familiar to consumers in the West and the affluent countries of the Middle East and North Africa. That’s not the case with palm oil, even in those large markets for the product.
That may be a vestige of the bitter attack on the palm oil industry mounted in the 1980s by the soybean lobby, complete with self-serving claims that palm oil could harm human health. Malaysian scientists, including Tan Sri Augustine S.H. Ong, then attached to the Palm Oil Research Institute of Malaysia, countered with authoritative documentation that, in addition to its numerous industrial uses, palm oil is indeed a versatile, nutritious ingredient.
Now, the palm oil industry is once again confronted with new challenges, possibly more formidable and multi-faceted than the earlier one — that of the need to be environmentally sustainable.
Sustainability in the palm oil industry means making minimal impact on the environment from the time of planting through to processing the oil in the mills. Today, the Malaysian palm oil industry has largely got it right, but sustainability concerns linger among some, mainly Western, consumers and well-meaning non-governmental organisations.
Two recent episodes illustrate this concern. One is the proposed Australian “Truth in labelling — palm oil Bill” which has since been rejected by its House of Representatives Economics Committee following the intervention of the Malaysian government and Malaysian Palm Oil Council.
Lately, even some well-meaning members of the Girl Scouts of America are mounting a campaign for their organisation not to use palm oil as an ingredient in their world-famous Thin Mint cookies as “oil palm cultivation destroys the habitat of orang-utans”. Such concerns have to be addressed to ensure the crop remains the golden egg-laying goose we would always like it to be.
Forest clearing, the agronomic practices used to cultivate the plants from seedlings to the fruit production phase, processing the fresh fruit bunches into oil at the mill — all relate to sustainability.
A sovereign country like Malaysia is fully entitled to open up its forests for agriculture or settlement, of course.
Our second prime minister, Tun Abdul Razak Hussein, started the Felda scheme in the 1960s, a man ahead of his time as evidenced by the aspirations articulated in the Millennium Development Goals (MDGs) agreed some 40 years later.
A primary objective of the MDGs is poverty alleviation, a mission that Tun Razak expressed in those days with his slogan, “land for the landless; jobs for the jobless”.
The “Felda Story” remains a textbook example of best-practice poverty eradication, according to renowned Columbia University economist Jeffrey Sachs.
So, while it is true that oil palm plantations mean forest displacement, Malaysians are also fully aware of the need for balance. Malaysia is committed to managing forests in a sustainable manner, not just for economic reasons, but also for maintaining environmental stability and ecological balance.
According to the United Nations Food and Agriculture Organisation, Malaysia has approximately 62.3 per cent of its territory under forest cover — 20,456,000 forested hectares in total. At the Earth Summit in 1992, Malaysia pledged to keep at least 50 per cent of our land mass under forest, including national parks, wildlife sanctuaries and nature reserves. That promise is still intact today.
Within these protective areas Malaysia can honour its commitment to maintain suitable habitats for our flora and fauna, including the iconic orang-utans in Sabah and Sarawak.
With the current focus on global warming and greenhouse gas emissions, it is instructive to note that, relative to other oil producing crops, the oil palm emits up to 10 times more oxygen and absorbs up to 10 times more carbon dioxide per hectare per year, figures far superior to any crop planted in temperate countries.
Spearheaded by the Malaysian Palm Oil Board (MPOB), the Malaysian oil palm industry is making a serious effort to meet the challenges of sustainability. Last year, MPOB released the Malaysian Palm Oil Sustainability Manual, which spells out the principles and procedures to be adhered to by estate and mill managers and other workers along the supply chain to achieve sustainability.
For example, plantations today routinely employ barn owls to reduce rodent populations rather than chemical baits, a perfect means of biological pest control. Chemical weed killers and pesticides are minimally used as the oil palm is a hardy plant largely unaffected by pests and diseases. There are standard operating procedures of waste management at the oil palm mills in accordance with environmental quality acts and regulations.
In response to the urgent and pressing global call for sustainably produced palm oil, a global organisation, the Roundtable on Sustainable Palm Oil (RSPO) was formed in 2004 with the objective of promoting the growth and use of sustainable palm oil products through credible global standards and engagement of stakeholders. The organisation is still “a work in progress” and has not matured into a one-stop clearing-house for the trading of sustainable palm oil.
Malaysia is already mulling the idea of establishing its own “Malaysia Sustainable Palm Oil” standard, a move which is similarly being considered by Indonesia. Such moves can only be applauded, for in the long run, the benefits not only accrue to the palm oil industry and this country, but to the whole global community.
UNFORTUNATELY, the planned flotation of Felda Global Ventures Holdings Sdn Bhd (FGV) on the stock exchange has entered the political realm, a murky environment where lines separating truths, half-truths and outright lies become blurred.
While the initial public offer (IPO) for FGV has now entered its final stages, the subject matter’s entry into the political environment was made official when the president of the National Felda Settlers’ Children Association (Anak), Mazlan Aliman, recently gave a veiled threat to the government by reminding Putrajaya that Felda settlers are a formidable voting force in at least 54 federal seats — a threat no doubt, directed at a government that is close to facing the polls.
Anak has been outlining reasons it is against the planned listing of FGV, while attempting to create a perception that it is not politicising the subject and is trying to save Felda and the settlers from the lions.
That’s a bit difficult to consume since Mazlan is also a member of opposition party Pas’ central committee, a sworn enemy of the incumbent ruling coalition. But let us stop there.
The fact is Felda is not a political party. Although it was started by former prime minister, the late Tun Abdul Razak Hussein, in 1956, participants in its hugely successful land development schemes may well be members of any political parties making up the entire political spectrum in the country now.
That the political inclination of the settlers does not matter to Felda may well be the foundation upon which proponents of the IPO could start with if and when they decide to go to the ground, explaining their argument on why FGV should be listed.
Felda has a long history of which its settlers are proud. Starting as a group of rag-tag farmers in what was then a god-forsaken place called the Lurah Bilut land scheme, they have built a company with interests across the world.
More than half-a-century and scores of land schemes later, some of the following generations of Felda settlers have gone on to seek their fortunes elsewhere while many more stayed to own their plots of land. Their quality of life has improved to a level the early settlers could never have imagined.
As a company, Felda, too, has moved on from just buying and selling oil palm fruits to downstream activities and research and development. It has ventured overseas and into several sectors and has also collaborated with some of the bigger global names in the oleochemical, food and even the hospitality industries.
As Felda prospers, settlers, too, reap the gains as a majority of interest in the company is owned by Koperasi Permodalan Felda (KPF), a cooperative in which all settlers are members. In recent years, the cooperative has emerged as the most profitable in Malaysia.
More opportunity lies ahead for KPF. With the listing of FGV, doors will be opened for more collaboration between Felda and international players in the oleochemical, food and agriculture industries.
From the RM10 million set aside for its formation, Felda now wants to see the likes of Cargill and Archer Daniels Midland as its peers. If this comes to fruition, KPF and by extension the settlers, which by then would be holding a 35 per cent interest in the listed FGV, would stand to benefit handsomely.
Who knows what more opportunities can present themselves to KPF in the future, once it has even stronger financial muscle? Let’s be reminded that the successful Dutch agriculture bank, Rabobank, is owned by a cooperative.
That should be the crowning glory for the early Felda settlers. From farmers who open up land with their bare hands, living in homes on high stilts for fear of wild animals, they are now presenting an opportunity for the next generations to be owners of global entities.
Let not the settlers and their future be made pawns in any political gambit.