SINGAPORE: THE Roundtable on Sustainable Palm Oil (RSPO) is seeking to tighten its standards, making land clearance for planting oil palms more difficult from 2013.
If Malaysian and Indonesian oil palm growers, who form the bulk of the industry, disagree to the proposed changes, it could delay the multi-stakeholder body’s first review of its principles and criteria — which govern the standards, said its president Jan Kees Vis.
“Malaysian, Indonesian and African growers would need time to go back and talk with their colleagues if they want to go ahead with the proposed changes,” he said, at a media briefing here yesterday. He added the land use criteria could be the biggest impasse in the review.
The review has been extended by another six months to March 2013 to accommodate various other issues affecting the palm oil industry.
RSPO existing standards, under its eight principles and 39 criteria to define sustainable palm oil, have not been clear on labour and human rights, greenhouse gas in relation to land use change, greenhouse gas (GHG) emissions from current operations.
The GHG and carbon footprint calculator came about after the principles and criteria were established in 2004.
“What we are saying is that if your current business model is to increase production through replanting, please expand on areas which have been deforested earlier,” he said.
Vis also said, with the growth of palm oil demand expected to double from 50 million tonnes now to 100 million tonnes in 2015, the RSPO needs to work to transform the huge markets in China and India which consume eight million tonnes to absorb certified sustainable palm oil (CSPO).
Currently, it is the large consumer goods manufacturers like Walmart and Unilever which can introduce the CSPO in these two countries but both governments need to extend the support, he said.
The RSPO has boasted that the supply of CSPO globally has soared 250 per cent between 2009 and 2011 while the sales volume had grown six times.
Apart from the Netherlands, Belgium has announced that it will source only CSPO by 2015, as a pledge by an alliance of major processors, manufacturers and industry associations. Yesterday, the UK also announced a similar interest.
Meanwhile, Vis said the RSPO was still having talks with Indonesia to enable its palm oil industries which have received the mandatory Indonesian Sustainable Palm Oil (ISPO) to benefit from the international RSPO standards by complying with the additional standards.
He noted Gabungan Pengusaha Kelapa Sawit Indonesia (GAPKI) or the Indonesian Palm Oil Association withdrew its membership with RSPO last year to support the ISPO. “If they (the individual growers) are RSPO-certified I hope they will be certified (automatically) in Indonesia too”, he added.
Malaysian Estate Owners Association (MEOA) president Boon Weng Siew said the industry, which has been over-dependent on Indonesian workers to harvest the oil palm fruits, now find it increasingly difficult to recruit workers from the republic because of competition from plantation expansion there.
“Although the government has recently allowed recruitment from Bangadesh, it is on government-to-government basis,” he said. “The negotiations with Bangladesh is taking too long. Many estates continue to face acute labour shortage to harvest the oil palm fruits,” he added.
“The oil palm industry has been losing billions of ringgit in palm oil export earnings every year,” he told Business Times in a telephone interview from Johor Bahru yesterday.
He estimated that some five million tonnes of oil palm fruits are rotting in the fields. That is equivalent to a million tonnes of crude palm oil. At current pricing of RM2,500 per tonne, that translates to RM2.5 billion in opportunity loss of export earnings.
“Foreign workers, which used to make up half of the 600,000 workforce in the estates, have now been severely reduced,” he said. “We urge that foreign worker intake not be confined to government-to-government negotiation with Bangladesh. Agents should be allowed to bring in foreign workers from any country,” Boon said.
“Otherwise, the government should re-activate the foreign worker intake approval fast-track system under the Plantation Industries and Commodities Ministry. This is almost equivalent to a one-stop centre. Planters prefer this option rather than having to deal with three or four ministries,” he added.
Established in 1931, MEOA represents small- and medium-sized estates of more than 40 hectares.
Boon highlighted that plantation companies have always been offering productivity-based salaries. A harvester, for instance, can earn between RM1,800 and RM2,000 a month, depending on the quantity and quality of fruit bunches he harvests. “A family of three working together can earn up to RM3,000,” he said.
Furthermore, the job offers housing, uninterrupted supply of electricity and piped water, medical, schooling and recreation facilities free of charge by the estate owners. These are now enjoyed by the foreign workers.
IOI Corp Bhd executive chairman Tan Sri Lee Shin Cheng yesterday concurred with Boon and reiterated the call for the government to be more flexible in foreign worker intakes.
“The trees are fruiting but there’s acute shortage of harvesters and this is affecting the country’s palm oil export earnings. The industry has been finding ways to mechanise for the last 40 years and the reality is it is difficult to mechanise. If it were that easy, we would have done it a long time ago,” Lee told reporters after the company’s shareholders’ meeting here yesterday.
Lee said plantation companies understand and fully support the government policy to employ more locals and enhance mechanised harvesting on the estates. The reality is far from expectations.
Many young locals entering the labour market are just not interested in menial jobs like the harvesting of oil palm fruits. “We do not want to be too dependent on foreign labour, but do we have any other feasible and practical alternatives?” he questioned.
“We’ve bought a piece of land in the Jimei district of Xiamen for 1.2 billion yuan (RM587 million). We have plans for a mixed development comprising a shopping mall, a hotel and office space. The residential space will be in the form of condominiums and villas,” said IOI Corp Bhd executive chairman Tan Sri Lee Shin Cheng.
“The development cost would be around twice the cost of the land,” he told reporters yesterday after its shareholders’ meeting here yesterday. Also present were his sons Datuk Lee Yeow Chor and Lee Yeow Seng, who are executive directors.
Yeow Chor said about RM600 million of IOI Corp’s cash reserves of RM2.7 billion has been committed to finance the land cost in Xiamen.
“Our cash reserves is not too high or too low at the moment. Should there be some good landbank acquisition opportunities, we have the financial might to seize it,” he said.
As early as 2007, IOI invested US$62.63 million to take up a 33 per cent stake in PT Bumitama Gunajaya Agro. This was part of its plan to participate in Indonesia’s oil palm expansion and ensure upstream profit growth.
Today, Bumitama has an agriculture landbank of some 200,000ha in Indonesia, of which some 120,000ha are already planted up with oil palms. Of that total area, 87,851ha are held under the company and 31,311ha under the smallholders or plasma schemes. Currently, IOI Corp has a 30 per cent stake in Singapore Stock Exchange-listed Bumitama Agri Ltd.
“It’s a brownfield block in Bintulu, away from native customary land. The oil palms are young, between two and five years old,” a source said.
“It’s going for RM20,500 per hectare. It is at a slight premium because this Bintulu estate includes a quarry mine, separately priced at around RM70 million. It has income-generating rock reserves of up to 30 years,” the source told Business Times.
“Currently, TH Plantations landbank is about 45,000ha. If you count the 46,000ha block of estates to be transferred from parent company Lembaga Tabung Haji and this Bintulu estate, it will come up to around 100,000ha,” the source said.
Five months ago, TH Plantations told the stock exchange that it wanted to buy 45,738ha of agricul-ture landbank from its parent company Lembaga Tabung Haji for RM536 million.
The acquisition is to be satisfied via the issuance of 209.23 million new THP shares at an issue price of RM2.56 per share. If the deal goes through, TH Plantations’ agriculture landbank would double from the current 44,933ha to 90,671ha.
The deal to double TH Plantations’ landbank hit a snag last week when Sabah Forestry Department rejected the execution of the teak and rubber plantation development agreement with TH-Bonggaya.
“Oh no…my car is out of petrol and I’m going to get a summon? Sigh …” I thought to myself. I got out of my car and explained my predicament to the policeman. He listened attentively and asked if I could still start up my car. I turned the ignition and the car engine whirred.
He then told me to make my way to the petrol station 1km ahead while he and his colleagues followed my car from behind. My happiness, however, was short-lived. The car engine sputtered and glide to a stop, again. I’m about 500m away from the petrol station. “So near … yet so far.”
This time, three policemen got down from their car and walked to mine. As they positioned themselves to push my car from behind, one of them came to the front and told me to engage my car’s gear to “N” and keep the steering wheel straight.
They pushed my car. Throughout that 3-minute journey I thought to myself ….wow! There are really kind souls among the police force. Once we reached the petrol pump, I pulled up the handbrake and got out of the car. The policemen, all hot and sweaty from pushing my car, took turns to advise me on ways to take better care of my car. I thanked them from the bottom of my heart and we shook hands.
Before fuelling up my car, the attendant at the petrol station tinkered with the fuel filter. “Mesti buat macam ini. Kalau tidak, nanti banyak problem (You need to do this first. If not, there’ll be problems later),” he said. The attendant turned the ignition on and off a few times for the fuel pump to push the fuel into the engine. The car started to purr again. Yay! I grinned at the attendant. He winked and waved goodbye, “OK, boleh jalan (OK, you can continue your journey).”
I reached into my handbag and my assignment sheet stated I’m required to cover an Malaysian Palm Oil Board (MPOB) event at Equatorial Hotel Bangi. Sigh…the only place I know in Bangi is the MPOB headquarters. I made a few phone calls and drove over.
Soon as I reached MPOB headquarters, En Saufi returned my call and got En Aedham to escort me to Equatorial Hotel. As I started the car engine again, I thought to myself … wow! There are really kind souls among MPOB officials 🙂
“The value add of palm oil will spur more usage of this commodity,” said MPOC regional manager for China market Desmond Ng.
“Currently, palm oil is mainly used as a deep-fry and baking ingredient in many restaurants and food-processing factories in China,” he said in his presentation at the Outlook of China’s Oils and Fats Industry in 2013 at the Palm Oil Trade Fair and Seminar (POTS) 2012 yesterday.
According to the Malaysian Palm Oil Board’s data, from January to September this year, China only bought 3.39 million tonnes of palm oil from Malaysia, 19 per cent less than last year’s 3.95 million tonnes.
When asked on China’s palm oil demand for the rest of the year, Ng replied, “it’s likely to end at around 5.7 million tonnes, as brisk shipments are starting to pick up in preparation of the Lunar New Year in February 2013”.
He explained that China’s palm oil purchase in the last three years were below six million tonnes as local soyabean farmers enjoyed good harvest and the government thus slowed down on palm oil imports.
He also said China had, in the last few years, been importing more soyabeans instead of soyaoil becau-se local livestock farmers demanded more soyameal to feed their pig, cattle, dairy and poultry farms.
“Soyameal demand in China has reached its peak and we think it will start to taper next year. So, instead of importing more soyabeans, we hope to see more purchase of palm oil … perhaps six million tonnes,” Ng said.
Asked on implication of China government’s tighter controls on blending of palm olein with other imports of vegetable oils for the retail market, which will come into effect from January, Ng said since palm oil is mainly used by food processors and the baking community, and is “classified as industrial use”, it is not likely to have too big of an impact”.
China to tighten import quality of vegetable oils
KUALA LUMPUR: In the news article titled “China’s palm oil imports likely to touch 6m tonnes”, Malaysian Palm Oil Council regional manager for China market Desmond Ng clarified that from January 2013, China is tightening control on the quality of vegetable oils imports.
The new rules do not mention blending of palm olein with other vegetable oils.
He said palm oil shipments from Malaysia are likely to qualify quarantine rules imposed on the quality of vegetable oil imports into China as long as they meet refiners’ specifications at the seaports.
“I don’t know who said that, it’s not me,” the minister retorted, when asked if the government may have changed its mind and decided to carry on issuing duty-free CPO (crude palm oil) export quotas after December.
Dompok, who was clearly irate over the confusion and undue anxiety the news report had caused among vegetable oil traders, said the unidentified person who claimed that Malaysia had a policy reversal “is mischievous”.
“We stick to what we have announced. There’s no deviation,” Dompok told Business Times on the sidelines of the Palm Oil Trade Fair and Seminar (POTS) 2012, organised by the Malaysian Palm Oil Council, here, yesterday.
The minister once again confirmed that Malaysia will adopt a flexible CPO export tax structure that mimics Indonesia’s from January 1. Malaysia will also abolish duty-free CPO export quota.
The new CPO export duty will fluctuate on a monthly basis, between 4.5 per cent to 8.5 per cent, from 23 per cent currently. If palm oil price hovers between RM2,250 and RM2,400 a tonne, the tax is 4.5 per cent. And if the palm oil prices were to jump to RM3,450 per tonne, the tax is 8.5 per cent.
Dompok, while noting refined palm oil will remain tax-free, said the government is committed to ensuring that downstream players have a level playing field and not suffer in the hands of refineries from another country from 2013.
Palm Oil Refiners Association of Malaysia (Poram) chairman, Wan Mohd Zain Wan Ismail, who was also at the conference, said the reports suggesting Malaysian plantation companies with overseas refineries had asked the government to reconsider its policies had caused much confusion among traders. “That’s not true, it was mischievous reporting,” he said.
September 11 2011 is a date Poram members will always remember. It was the day the Indonesian government announced its intention to widen the tax gap between crude and refined palm oil.
This made CPO and crude palm kernel oil very cheap for downstream businesses in Indonesia. On top of that, processed palm oil in the form of cooking oil, soaps and detergents shipped out from Indonesian shores are tax free.
The Indonesian government’s move, since October 2011, created an unfair playing field, rendering refiners in Indonesia to reap fat profits while those in Malaysia suffered losses.
It had been more than a year of headache and heartache for Poram members, particularly independent refiners who do not own any estates to balance out their losses.
In protecting its members’ interest, Poram suggested to the Malaysian government to lower the current 23 per cent CPO export tax and do away with duty-free CPO. It suggested that by mirroring the tax margin between Indonesia’s CPO and refined palm oil, Malaysia’s refiners can at least stand a chance to compete based on existing infrastructure and plant efficiency.