Archive for January, 2014

Wilmar pledge merely wishful thinking?

January 24, 2014 Leave a comment
KUALA LUMPUR: ONLY time will tell if Wilmar International Ltd’s new palm oil sourcing criteria is workable or mere wishful thinking.

Last month, well-funded green group World Wide Fund for Nature (WWF) arranged a signing ceremony for Wilmar, the world’s biggest palm oil trader, and food giant Unilever Plc to undertake “No Deforestation, No Peat, No Exploitation” terms in their palm oil trades. 

“It is Wilmar’s decision to undertake whatever brand promise it wants to promote,” said Malaysian Palm Oil Council (MPOC).

“But only time will tell if its new terms of trade can be accepted,” said its chief executive officer Tan Sri Yusof Basiron, referring to the fact that Roundtable on Sustainable Palm Oil-certified palm oil, which is also being promoted by the WWF, had only received half-hearted purchases.

He was responding to a question on whether Wilmar’s pledge with Unilever and WWF amounted to unjustified trade barriers that will severely curtail oil palm farmers’ earning ability.

Last week, Sarawak Oil Palm Plantation Owners Association (Soppoa) strongly rejected the deal as discriminating against the state’s palm oil supply. 

Soppoa manager Melvin Goh reportedly said Wilmar’s pledge is the start of a stranglehold on oil palm farmers being coerced into a path that will kill the industry’s growth.

“Well, Soppoa has registered its protest. What MPOC thoroughly disagrees with is Wilmar’s green activist partners’ relentless smear campaign against the entire palm oil industry,” he told Business Times on the sidelines of an industry seminar, here, yesterday.

Skillful in communication and blackballing tactics, these activists harass oil palm planters into submitting to the standards and criteria that they dictate. 

Unknown to many, the environmental activists’ strident criticisms have created trade barriers to the global palm oil trade under the pretext of environmental activism. 

Indeed, Yusof said this sits oddly with the fact that oil palm is one of the world’s most sustainable crops.

Oil World, a Hamburg-based trade journal, noted that oil palm is the world’s most efficient oil crop as it can produce five tonnes of oil per hectare. This is 10 times more productive than soyabean planted in the United States and five times more than rapeseed, Europe’s main oil crop. 

Should alternatives to oil palms be grown, more land would be needed to produce an equivalent volume of oil to replace palm oil, likely resulting in further deforestation.

Wilmar’s sourcing criteria will hit farmers’ income

January 23, 2014 1 comment
Melbourne: WILMAR International Ltd’s new sourcing criteria has triggered unexpected political risks of curbing oil palm farmers in developing nations from exporting their produce at market price, said World Growth, a lobby group for poverty alleviation.

“Although it looks like a business deal, it has far-reaching political implications,” World Growth chairman Alan Oxley said.

“If this deal is allowed to be executed, the income earning ability of oil palm farmers in Malaysia and Indonesia will be severely curtailed,” he told Business Times in a telephone interview from Melbourne, Australia, yesterday.

Last month, well-funded green group World Wide Fund for Nature (WWF) arranged a signing ceremony for Wilmar, the world’s biggest palm oil trader, and food giant Unilever Plc to undertake “No Deforestation, No Peat, No Exploitation” terms in their palm oil trades. 

All this while, oil palm farmers in developing nations, like their soya, rapeseed and sunflower rivals in developed nations, export their produce to the global market and accept commodity booms and bust. 

But this deal, Oxley explained, will subject oil palm farmers’ livelihoods to unjustified trade curbing criteria. 

Last week, Sarawak Oil Palm Plantation Owners Association (Soppoa) strongly rejected the deal as it sought to discriminate against the state’s palm oil supply. 

Soppoa manager Melvin Goh reportedly said the imposition of “No Deforestation, No Peat, No Exploitation” terms is the start of plantation companies being coerced into a pathway that will kill the oil palm industry’s growth.

Although Soppoa only represents oil palm planters from Sarawak, its protest is just as relevant in other parts of Malaysia as the “No Deforestation” pledge is narrowly defined from what one would normally expect. 

Millions of oil palm farmers in Malaysia and Indonesia garner US$40 billion (RM133 billion) in palm oil trade by collectively exporting around 40 million tonnes a year. This amount makes up almost 60 per cent of the world’s vegetable oils market. 

Malaysia, which benefits from US$20 billion palm oil exports annually, has a lot to lose if such unjustified barriers to palm oil trade by Wilmar, Unilever and WWF are allowed to be executed.

While some may argue this business deal is voluntary, oil palm farmers are essentially price takers because they do not have much bargaining position compared to financially-strong traders.

Oxley, who was former chairman of the General Agreement on Tariffs and Trade, the predecessor of the World Trade Organisation, concurred with this observation. “It’s no longer free trade but that of managed trade. In fact, this market interfering deal could quite possibly be in breach of competition laws. 

“I’m not surprised if the governments of Malaysia and Indonesia are looking to take action against perpetrators of unhealthy competition,” he added. This means shareholders of Singapore-listed Wilmar should be concerned of the political risks this deal has triggered.

‘Wilmar hurting palm oil exports’

January 17, 2014 1 comment
KUCHING: MALAYSIA will lose billions of ringgit in palm oil exports should Wilmar International Ltd be allowed to discriminate against Sarawak’s palm oil supply.

Sarawak Oil Palm Plantation Owners Association (Soppoa) strongly rejected attempts by Wilmar, Unilever Plc and World Wide Fund for Nature (WWF) to discriminate against the state’s palm oil supply and, in the same process, jeopardise Malaysia’s palm oil exports.

“We are very disappointed with Wilmar’s unilateral action to discriminate against palm oil harvested from oil palm trees grown on peat soil,” said Soppoa manager Melvin Goh.

“This is not acceptable. It will have a devastating impact on the oil palm industry here, given that Wilmar’s refinery operating under Bintulu Edible Oil Sdn Bhd source 1.7 million tonnes of crude palm oil (CPO) from millers in a year,” he told Business Times yesterday.

The sacrifice of 1.7 million tonnes of CPO at a conservative pricing of RM2,500 per tonne works out to be RM4.25 billion.

In December 2013, well-funded green group World Wide Fund for Nature (WWF) arranged a signing ceremony for world’s biggest palm oil trader Wilmar International Ltd and food giant Unilever PLC to undertake “No Deforestation, No Peat, No Exploitation” in their palm oil trades. 

Although this looks like an ordinary business arrangement, it is actually the start of a stranglehold on plantation companies being coerced into a pathway that will kill the oil palm industry’s growth.

Activists like WWF, Greenpeace and Wetlands International, and their local affiliates, claimed that oil palm planting on peatland causes tremendous pollution in the form of greenhouse gas (GHG) emission when water is drained from the soil. These groups, however, fail to provide any credible scientific evidence to support their allegations.

“It defies logic for Wilmar to surrender to coercion and harrassment. Why should we accept claims that does not have any scientific basis that can be verified?” Goh said.

“Sarawak is Malaysia’s final frontier in oil palm planting. Although Wilmar’s pledge to Unilever and WWF is a business-to business arrangement, this move goes against Malaysia’s national interests,” he said. 

In highlighting the significance of Soppoa’s protest Goh noted the oil palm is an economic security crop for Malaysia and made reference to the annual US$20 billion palm oil exports, which support some two million jobs and livelihoods along the sprawling value chain.

Many assume that Wilmar’s pledge will only hurt the profits of plantation companies and that of oil palm farmers. But it is actually more than that, Goh said. 

“Employees of plantation companies are at risk of not being able to exercise their deserving share options in the stock market if the companies fail to export the critical amount of palm oil and bring in the profits,” he said.

“Apart from small time investors like you and me, there are also pension funds like the Employees Provident Fund, the Armed Forced Superannuation Fund, Kumpulan Wang Persaraan (KWAP) which are heavily invested with plantation companies,” he added.

EU’s protectionism harms free trade

January 12, 2014 Leave a comment

EU farm protectionism continues to threaten market access and harm international trade and development.

Frits Bolkestein, the former Dutch EU Commissioner for Internal Markets, argued that French agricultural protectionism poses significant dangers to global development, particularly undermining farmers in developing nations.

Published in Economie Matin and, Bolkestein indicated that French protectionism is a danger to free trade in Europe and growers in developing countries. He noted undeserving harm done to oil palm growers in developing countries like Malaysia, Indonesia and Papua New Guinea.

Bolkestein pointed out political campaign against palm oil is aimed at boosting French rapeseed industry, presumably threatened by palm oil products that are processed in the Netherlands. This is because Netherlands is a major hub for palm oil imports and processing in Europe.

Bolkestein points out that although the French lobby claimed they are forewarning the negative effects of palm oil consumption on public health, “the real reason was probably that the palm oil imported via our country was competing with French rapeseed oil.”

Such protectionist campaigns are not limited to France. Over at Ukraine, a lawmaker has reportedly proposed that parliament ban the use of palm oil in the production of foodstuffs in the Ukraine based on alleged health concerns.

Ukraine is one of the largest exporters of competing vegetable oils, raising concerns that the proposal is aimed at protecting domestic industry against more competitive palm oil rather than genuine concern for public health.

Ukraine is the biggest global exporter of sunflower oil, shipping out more than 3 million tonnes a year to the world market. Ukraine is also the largest rapeseed supplier to the EU, with shipments of close to a million tonnes a year.

Isn’t it ironic?

January 11, 2014 4 comments
Rapeseed and sunflower farmers in the EU receive billions of euro dollars in subsidies to plant their crops. Over in Malaysia, oil palm planters have to pay a slew of taxes imposed by both the federal and state governments.

Oilseed farmers in the EU, rivals of oil palm farmers in Malaysia and Indonesia, are big recipients of Common Agricultural Policy (CAP) subsidies. The CAP acts like a tariff wall around the EU by blocking agricultural imports out while keeping prices higher in the EU.

Here’s a video of a British lawmaker explaining how the CAP is selfish in protecting farmers in the EU. At the same time, it is enabling EU-based multi-national food companies to price their way out of competition at grocery shelves of developing nations. The EU’s CAP subsidies is hurting farmers in developing nations, like Malaysia and Indonesia.

Below is a 6-minute documentary by Jack Thurston, co-founder of , led by a group of European journalists, bent on identifying and tracking the amount of CAP subsidies amount going to “farmers”.

Among financial institutions and food giants, classified as “farmers” (because they are landowners) and receiving direct subsidy amounting to hundreds of million euros under the CAP are Rabobank, ING Bank, HSBC Bank, Deutsche Bank, Nestle, Unilever, Danone and Friesland Foods.

The EU farm subsidies is not limited to European multi-nationals. American multi-nationals like Cargill and Kraft Foods, which own land in the EU, also receive hundreds of millions euros in subsidies under the CAP.

Malaysia’s policy makers must open their eyes wide and lend their ears to the palm oil trading community. Similarly, oil palm planters need to unite and adapt to the fast-changing world of ruthless vegetable oil politics if they want to remain relevant in this market.

It’s pertinent for oil palm planters to be aware that the EU’s farm and export subsidies to their farmers and food companies and the EU government’s FTA negotiation with developing nations are actually two sides of the same coin.

Over in the USA, landowners also receive big amounts of subsidies from taxpayers money. Between 1995 and 2012, the USA government paid out US$11.3 million in taxpayer-funded farm subsidies to 50 billionaires or farm businesses. Direct payments, promoted as a safety net for working farm and ranch families, are in reality annual cash giveaways to the most profitable businesses in farm country. Recent amendments to the Farm Bill being weighed by USA lawmakers could well increase their take.

According to Environmental Working Group (EWG’s) analysis at  more than 40 billionaires own properties that grow crops that are likely to be insured through the federal crop insurance programme, include corn, soybeans, wheat, cotton and sorghum. 
From 1995 to 2012, these five crops account for nearly US$44 billion in premium subsidies – about 82 per cent of total crop insurance subsidies and more than two-thirds of all agricultural land enrolled in the crop insurance program.
Early this month, the USA farm bill negotiators, had been warned, in enlarging these crop insurance subsidies might also run afoul of international trade agreements, which place a US$19.1 billion annual limit on trade-distorting subsidies.
With the cost of these trade distorting or “amber box” subsidies potentially topping US$20 billion a year, the World Trade Organization (WTO) may no longer consider USA crop insurance subsidies to be de minimis, inviting a legal challenge from trading partners in developing Asia.

Every year, Malaysia exports some US$20 billion worth of palm oil to more than 150 countries. In negotiating the terms of  the Trans-Pacific Partnership (TPPA) Agreement  with the USA — the lead negotiator of  TPPA, it is the right thing to do for Malaysia’s Ministry of International Trade and Industry policymakers to include the interests of oil palm planters and exporters. Keen attention must be focused on dismantling trade distortion measures oil palm planters face. After all, Malaysian government officials must remember that their salaries are derived from hard-pressed taxpayers’ money …. and Malaysia’s biggest taxpayers, on a sectoral capita basis, are the oil palm planters.

European Union funding £90m green lobbying con

January 10, 2014 2 comments

The EU government’s covert use of taxpayer money to fund environment activists to lobby against the growth of oil palm plantations, in the name of “saving rainforests”, is a blatant violation of international norms, particularly developing nations’ sovereignty in deciding land use for food production.

By vilifying the virtues of oil palm planting and ignoring the evidence that economic development leads to better environmental protection, it is questionable whether these activists’ true commitment is to the environment or to erection of trade barriers to benefit European rapeseed farmers who are already heavily-subsidised by the EU government.

About three weeks ago, the UK’s Telegraph newspaper reported that green activists are given more than £90 million from EU “cash carousel”. Here’s the link

Last year, the European policy office of the World Wide Fund for Nature (WWF), which is based in Brussels, received £7.4 million, while Friends of the Earth Europe (FoE), also based in Brussels, is the third highest recipient with £6.4 million.

According to,  Italy-based Libertiamo, which takes a different view on environment, released a report titled “Disarming The Greens” detailing the EU government funding campaigns that mislead the public to believe that developing nations’ environmental protection efforts are weak and that wood-based and oil palm companies are purveyors of forest destruction.

This immoral arrangement of the EU government paying green activists to spark smear campaign against oil palm planting is fostering agricultural stagnation and perpetuated poverty that undermine the financial resources of developing countries located along the tropical belt like Malaysia, Indonesia and Papua New Guinea.

IOIPG set to be top property stock

January 9, 2014 Leave a comment
PUTRAJAYA: IOI Properties Group Bhd (IOIPG), an IOI Corp Bhd’s spinoff, is poised to be the biggest property stock on Bursa Malaysia upon its listing next week, thanks to the optimism seen among the investing circles.

Although IOIPG’s market capitalisation is reported to add up to RM8.13 billion at the RM2.51-per-share reference price, there is good chance of it overtaking UEM Sunrise Bhd’s top spot. Currently, the RM10.8 billion UEM Sunrise is the most valuable property counter in the stock market.

Maybank Investment Bank Bhd analyst Ong Chee Ting, when contacted by Business Times, said: “Post-listing, IOIPG could potentially be the next property sector leader and the largest property stock.”

Applying a 20 per cent discount to independent valuers’ RM18 billion market value for IOIPG, he believes there is a high probability the company could be re-rated to above RM12 billion within the next one year.

Meanwhile, at a briefing here yesterday, IOI Corp executive chairman Tan Sri Lee Shin Cheng announced the appointments of his sons Datuk Lee Yeow Chor and Lee Yeow Seng as chief executives of IOI Corp and IOIPG, respectively.

When asked if he’s retiring, the 75-year-old Lee replied: “No, I’m not retiring yet. I’m still strong and I think I can serve for another 10 years.

“As executive chairman, I’ll be monitoring their progress. I’ll see if they do their jobs properly. If they do, then maybe I can retire earlier,” he added.

Asked if any of his four daughters could later be appointed to the IOI Corp and IOIPG boards, he said: “I don’t deny that possibility … my daughters are capable at what they do.”

Three months ago, under the 2014 Budget, the government raised the real property gains tax (RPGT) imposed on profits made when properties are sold within five years.

Starting this year, the Finance Ministry will be collecting 30 per cent tax on profits made from properties sold within three years, followed by 20 and 15 per cent in the fourth and fifth year, respectively. No tax is imposed if a property is sold after six years.

Asked if the higher RPGT rates will affect property sales, Yeow Seng said the new rates are to curb speculation. “This year, we’ll be launching several projects. We expect demand for affordable housing to drive sales,” he said. When pressed for an estimate, he replied the group has set out an internal target to achieve RM3 billion sales.

Following the spin-off of its property arm into IOIPG, IOI Corp will be left with RM4 billion cash. On the possibility of big payout for shareholders, Yeow Chor said: “After the exercise, IOI Corp will have a smaller profit base. To match previous years’ dividend payout, the ratio will have to be higher”.

He added that a portion of the RM4 billion will be used to pare down the group’s RM7 billion long-term borrowings. “Our gearing is in the region of some 40 per cent. In time, we would like to bring it down to around 10 per cent.”