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As we approach the year end, thousands of oil palm farmers and smallholders are relieved at the prospect of palm oil prices being maintained at more than RM 2400 per tonne for December 2009. Although the lucrative prices for 2008, which were partly influenced by high prices of petroleum, could not be repeated, the present year end daily prices of above RM 2400 per tonne signal many positive trends that await the industry in 2010.

Buyers too were happy that palm oil continues to provide them with an abundant supply of affordable raw material for various end-uses. Palm oil is still sold at a discount to soya, rapeseed and sunflowerseed oils. Malaysian palm oil suppliers are able to comply with the needs of the buyers, by adhering to the wisdom that customers are always right. In Europe, even power plant operators are able to use certified sustainable Malaysian palm oil viably to produce electricity and heat. Such power plant operators have limited choice as using locally available rapeseed oil will cause their engines to malfunction because of polymerization problems of the rapeseed oil in the engines during operations.

The EU is beginning to recognize the role of the RSPO in supplying certified sustainable palm oil for its biodiesel requirements. The EU politicians are worried of their green NGOs who would otherwise campaign on banning the use of palm oil for fuel and food. Such campaigns have recently spread to New Zealand and Australia through their Zoo authorities and ”experts’ who claim to be concerned over the orang utans and allegations of deforestation. Sustainably produced palm oil seems to be the solution to resolve the NGOs’ concerns as banning the imports of palm oil is not a real option because it would be against WTO provisions.

Buying certified sustainable palm oil seems a viable option for the EU politicians to recommend in order to avoid being harassed by the green NGOs. For this reason, the RSPO scheme should continue to be improved to meet the needs of the EU importers.

The rest of the world continues to focus on getting enough oils and fats to meet their annual needs. Most countries are net importers of oils and fats. Only Malaysia, Indonesia and Argentina are major or significant net exporters of this commodity, and for countries which are not self-sufficient they have to buy from the three net exporter countries. The EU net imports of oils and fats amount to over 8 million tonnes per year ( equivalent to half the total export of palm oil by Malaysia ), but it is also one of the most ‘demanding’ net importers, insisting that palm oil must be certified sustainable when used for biodiesel. The EU biodiesel standards have some 26 parameters which palm biodiesel exporters must comply with. These pose a daunting challenge for biodiesel producers to do business with EU importers.

Moving forward into 2010, a few issues remain unresolved. I am puzzled at the misinformation still in the minds of many important people in the EU when we recently met them during our visit to Europe.

During a private consultation in London, HRH. Prince Charles in talking to the MPOC Chairman, complained that oil palm is a mono-culture industry and lacks biodiversity. Obviously many people forget that oil palm is an agricultural crop planted on legitimate agricultural land just like soyabean or olive plantations which are also mono-cultures, and it should not be compared to biodiversity in the forests. Why must the green NGOs in the UK and their followers be opposed to the growth of agricultural crops of developing countries such as Malaysia when these crops have been grown responsibly for generations and subjected to various national regulations and laws. For Malaysia, our land use policy is based on the pledge made at the Rio Earth Summit more than 15 years ago to conserve at least 50% of the country under permanent forests (to provide for biodiversity and habitat requirements), while 25% is zoned for agriculture and another 25 % for other industrial uses. With oil palm occupying 13% of the total land area, it means that for every hectare of oil palm, the country conserves 4 hectares of permanent forests. Because land for agriculture is already limited, and the permanent forests are off-limits to agricultural conversions, oil palm plantings have been much reduced. Certainly oil palm cannot be associated with deforestation in Malaysia as it should not happen except in the distant past when the current agricultural land (making up 25% of the country) was first cleared. This was needed for the country to develop, just like other countries. In comparison the UK developed 72 % of its land for agriculture and only has 11 % retained under forest.

During another dialogue in Kuala Lumpur hosted by the Minister of Trade of the UK, he suggested that the RSPO is the right platform for the oil palm industry to engage the environmental NGOs to ensure sustainable certified palm oil can be exported to the EU. He was surprised when I told him that many of the aggressive UK NGOs refused to be members of the RSPO. In fact the palm oil producers were disappointed by RSPO promoters who promised to have the NGOs as members and stakeholders to negotiate a susccessful RSPO certification scheme. Right now the NGOs outside the RSPO are more influential and they campaign against the RSPO to make those NGOs who are members of the RSPO to appear ineffective.

During a meeting with the Economic Minister of the Netherlands we were told to supply sustainable palm oil as this is what the EU wants. We did inform her in reality that there are more than 1 million tonnes of sustainable certified RSPO palm oil potentially available from Malaysia right now, but only 10 % was imported by the EU. It is interesting to note that the EU talked of putting up US$ 2 billion to compensate developing countries to maintain their forests. In reality, RSPO is a scheme that promotes the conservation of forests, but the EU is shying from paying even the US$ 50 per tonne premium for RSPO certified palm oil. At least EU importers should pay the producers to cover the cost of certifying the oil which involves employing auditors some of whom have to fly in from the EU to conduct the auditing process. In other words, the buyers must help pay for the cost of employing the EU auditors and not ask poor farmers and oil palm workers of developing countries to fork out for the extra cost of producing certified sustainable palm oil to meet the European needs.

Many other issues relating to the habitat needs of the orang utans and global warming will continue to be associated with the oil palm industry by some misinformed people and other uninformed followers of the debate. As far as Malaysia is concerned, specialized conferences on orang utans and Green House Gases (GHG) emission and mitigation have been organized during 2009. Experts attending these conferences have no major issues to raise with the Malaysian palm oil industry during the deliberations. In fact no one raised major issues that are not already addressed by the industry. Many of the environmental allegations are not relevant to Malaysia. There were almost no real issues to debate on. On the other hand, some level of satisfaction was expressed by international experts on orang utans and GHG issues in relation to efforts undertaken by Malaysia.

It is time to brand Malaysian palm oil for better public and consumer perception. Some of the brand claims could be that Malaysia is ready to supply sustainable certified RSPO palm oil to the EU market, especially for its biodiesel requirement. The RSPO’s intention to incorporate on a voluntary basis carbon emission saving parameter in its certification criteria would be much anticipated as an important improvement to the RSPO scheme.

In preparing for the climate change meeting in Copenhagen, it was found that oil palm together with other plantation tree crops such as rubber, cocoa and coconut enable Malaysia, in addition to its 56% permanent forest cover, to classify itself as a net carbon sink country despite having industrialized for the last 52 years since achieving independent. Obviously it is the tree crops such as oil palm that have partly contributed to make Malaysia a net carbon sink country, effectively contributing to remove carbon dioxide from the globe when other countries are still haggling especially at the Copenhagen Climate Change meeting on who should be making the first move to reduce emissions given that most of these countries are net co2 emitters.

Getting the facts right has been the theme of this blog. Some readers may continue to question the facts as presented, and some even resort to claiming that these are lies. There must be a way forward where doubters can be assured of an authentic and fair source of information. One other way is for them to visit Malaysia and meet the producers and see the oil palm plantations. We have many plantation resorts where tourists can enjoy their visits to Malaysia. Another approach is to continue commenting and submitting your queries to this blog to exchange views. Malaysian palm oil is already a brand name that is sought after by discerning buyers and consumers. Improvements will continue to be introduced in 2010 and thereafter. Let us know how we can help.

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