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On the afternoon of EPOC 2017, Datuk M. Nagarajan gave a presentation on “Inclusive, sustainable palm oil policies in Malaysia” under agenda item “Building on existing initiatives and increasing cooperation between industry, government, and NGOs to achieve a fully sustainable palm oil food supply chain.”

Mr. Nagarajan is the Chairman of the Malaysian Palm Oil Certification Council (MPOCC). In that capacity, he oversees what many consider to be a big leap forward on the road to achieving 100% certified sustainable palm oil: the Malaysian Sustainable Palm Oil certification standards, MSPO.

Malaysia needs palm oil

The Chairman first provided the audience with a helpful overview of the state the Malaysian palm oil industry is in.

Malaysia started to cultivate palm oil 100 years ago. Today, the sector is made up of a variety of agricultural production models: private estates exist alongside independent smallholders, and together they account for almost 80% of the planted area. The rest goes to public agencies and smallholders organized, for instance, by FELDA, the Federal Land Development Authority.

The contribution of palm oil to the Malaysian economy is momentous. On average an annual export volume of more than 16 billion US dollars is recorded, accounting for a share of agricultural GDP of 43%. Over one million people directly or indirectly derive their income from palm oil.

Throughout his presentation, the MPOCC Chairman made it clear that the fate of the Malaysian small farmer is close to his heart. An average planted area of no more than 3.9 hectares – for perspective: that is a square which sides are only 197 meters long – earns a rural family an income of 500 US dollars per month. The development of rural infrastructure and additional multiplier effects into the wider economy are instrumental in alleviating rural poverty in Malaysia and closing the welfare gap to urban areas

And it will be sustainably produced

Looking ahead, the Chairman pointed towards four key areas that will be at the core of the Malaysian palm oil industry in the foreseeable future

  1. There is a growing demand for certified sustainable palm oil and Malaysia responds to this need by making its MSPO scheme mandatory for all growers and processing facilities;
  2. Issues such as biodiversity loss, deforestation, protection of high conservation value areas, or planting on peatlands are now front and center of the global agenda;
  3. Consequently, there is a need to professionalize the palm oil sector further and to introduce best practices to enhance the productivity and raise the income levels of small farmers;
  4. All this has to be achieved despite a lack of suitable land for further expansion of planted area in Malaysia.

Chairman Nagarajan pointed out that Malaysian authorities – mindful of the points above and after extensive consultation with all industry stakeholders – decided on the need for a pragmatic and inclusive certification standard that applies to all links in the supply chain. To do justice to the complexities of that chain, a crucial component was added: the inclusion of smallholders.

The way forward is the MSPO

The MSPO standard centers around seven core principles.

A well-defined timeline for its implementation exists as well: those entities that today are RSPO (Roundtable of Sustainable Palm Oil) certified will have to obtain MSPO certification by the end of 2018. And all those not certified at all to date must come on board by mid-2019. Finally, all independent, as well as organized smallholders, must have their MSPO certificates by December 31st, 2019.

Mr. Nagarajan reiterated his conviction that these measures will not only bring Malaysia a decisive step closer to achieving a fully sustainable supply chain. It also will significantly enhance the socioeconomic conditions of small farmers throughout rural Malaysia.

The positive impact of MSPO particularly will be felt in these three areas:

  1. Enhanced productivity
  • optimized yields and profits
  • more effective cost management
  • better waste management
  1. Traceability
  • The origin of fresh fruit bunches (FFB) will be known
  • Farm details and yield records will be available
  1. Operational advantages
  • enhanced compliance with all legal requirements
  • introduction of best agricultural practices
  • reduced workplace accidents
  • enhanced competitiveness of Malaysian palm oil

In the words of chairman Nagarajan:

”Introducing the MSPO has been a challenging process for all parties involved. But I’m proud to say that we have come a long way. When MSPO becomes mandatory in two years’ time, it will be a game changer in the international market for sustainable palm oil. We will have a national sustainability certification standard that has the full buy-in of all industry players in Malaysia. That is because we developed it through an inclusive and broad stakeholder engagement process.

Not only will the MSPO meet the international demand for sustainable palm oil. It will also strengthen the adherence to and enforcement of our national laws and regulations protecting our natural heritage.”

No small feat indeed.

Datuk M Nagarajan,
Chairman MPOCC

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