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Oiling the wheels of Malaysia’s economic growth

Article - October 4, 2011
Whilst palm oil affords many health benefits and is a potential substitute for fossil fuels, it is also a driver of economic development
THE OIL PALM TREE REACHES MATURITY IN THREE TO FOUR YEARS, WHEN IT IS ABOUT TWO METRES HIGH
Climate change, the depletion of non-renewable resources, the ever-pressing need for more food sources and poverty reduction can all list something in common. They can all be addressed by one tropical tree: the oil palm.

Introduced to Malaysia by the British in the 1870s, the merits of the fruit of this native West African tree were soon discovered and by the late 1910s, the first commercial plantations had been established. The production of palm oil received an extra boost in the 1960s under the Government’s agricultural diversification programme. This initiative was followed by land settlement schemes for cultivating oil palm as a means to fight poverty for the landless farmers and smallholders.

Over the next decade, the sector became more industrialised with the introduction of crude palm oil refining. Refined oil, coupled with the nascent oleochemicals industry, gave passage to a wider range of products and consolidated Malaysia as a world leader in palm oil and oleochemicals. Today, Malaysia is focusing on increasing productivity through expanding the downstream and added-value industries, such as biofuels, a cleaner alternative to fossil fuels.

Fifty-six per cent of the country remains forested (double the average in Europe), and only approximately 4.8 million hectares of land out of a total of 32 million are under oil palm cultivation, according to Tan Sri Bernard Giluk Dompok, Minister of Plantation Indus-tries and Commodities.

Malaysia currently accounts for 39 per cent of world palm oil production and 44 per cent of world exports. In the context of global production of oils and fats, Malaysia accounts for 12 per cent of production and 27 per cent of export, respectively. Over 70 per cent of the four major oils imported into the EU-27 was palm oil, 32 per cent of this came from Malaysia. To date, nearly 40 per cent of the palm oil imported by the UK originated from Malaysia.

One of the oil palm’s greatest advantages over its ‘competitors’ is its output efficiency. To produce one tonne of oil, the oil palm requires on average just 0.26ha of land. Conversely, soybean requires 2.22ha, sunflower, 2.00ha, and rapeseed, 1.52 ha.

Already the most efficient oil-bearing crop in the world, oil palm efficiency is about to double: the Ministry of Plantation Industries and Commodities, working with TSH Resources, has just announced the release of a new clone that promises an oil yield of up to 10tonnes per hectare. Dubbed the Wakuba oil palm, this clone is the product of nearly five years of scientific research aimed at finding ways to improve oil yields. One direct result that can be applauded by even the most pessimistic of pundits is that with greater oil efficiency, lower is the demand for new agricultural lands, and therefore lower is the threat of rainforest conversion.

Palm oil has yet another leg-up on the other oil-bearing crops: it requires less input of fertilisers, pesticides and fuel energy. A study has shown that palm oil’s input-output energy ratio (the gigajoules needed per hectare per year to produce one tonne of oil in relation to the gigajoules of energy per hectare per year its products give back) is 9.5, whereas for soybean it is just 2.5 and for rapeseed oil it is 3.0. Hence, palm oil is a cheap and efficient biofuel and food source that is also highly sustainable.

Malaysia’s palm oil industry, which directly employs nearly a million people, is a highly regulated one that adheres to various laws and regulations concerning environmental protection, wildlife conservation and worker safety. It is also a key participant in the Roundtable on Sustainable Palm Oil (RSPO). The RSPO is the global watchdog of the industry, issuing certification to those companies who have adopted and consistently adhere to the strictest standards of sustainability.

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