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Palm Oil Will Drive Malaysia’s Growth

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According to Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani, the palm oil industry will continue to be a key driver of Malaysia’s economic growth.

According to Johari, global demand for palm oil increased as borders reopened and economic sectors recovered, boosting consumption in importing countries for both food and non-food based industries.

“The Malaysian palm oil industry continues to exert significant influence on the global oils and fats market – which is becoming increasingly competitive,” he said yesterday in his keynote address at the Palm Oil Economic Review and Outlook Seminar 2024.

Furthermore, Johari praised the industry’s resilience in the face of significant challenges, both domestically and globally, such as unpredictable weather, environmental concerns, and geopolitical unrest.

In terms of industry outlook, he stated that the palm oil market remains optimistic for 2024. Expectations of robust palm oil demand from key export destinations such as India, China, and the European Union (EU) fuel this optimism.

“The demand is further supported by interests in replenishing stocks to ensure food security and the overall viability of business activities, making 2024 appear very promising,” he went on to say.

Johari stated that the government is committed to ensuring the efficient management of foreign workers in the future in order to address the critical labour situation in the plantation sector.

He noted that the industry’s ongoing labour shortage has resulted in production losses and low yields, preventing palm oil production from reaching its full potential in 2022 and 2023.

“For instance, the freeze on the hiring of foreign workers had resulted in a shortage of 55,000 workers in the palm oil sector in December 2022,” he told reporters.

Nonetheless, despite the challenges, Johari stated that the labour situation gradually improved with the reopening of Malaysian borders, resulting in a slight increase in crude palm oil (CPO) production in the latter part of 2023.

According to the minister, the government has proposed expanding the scope of automation tax incentives to include the plantation sector in order to reduce labour dependence through mechanisation and automation.

“This is a great opportunity for oil palm growers to reinvest their profits in technologies that will increase productivity and support workers, especially in the harvesting and collection of fresh fruit bunches.”

“The transition towards automation and mechanisation is now a necessity given the high dependence on foreign workers,” he added.

Johari believes that the ongoing projects led by the Mechanisation and Automation Research Consortium of Oil Palm (Marcop) will significantly advance the industry’s mechanisation and automation.

“Marcop is poised to undertake programmes that include exploring “low hanging fruit” opportunities, such as adopting the latest technologies particularly for harvesting or spraying pesticides and spreading fertilisers,“ he said.

He added that Malaysia must maintain its position as a global leader in sustainability, particularly given the growing global emphasis on committing to sustainability goals.

“Extreme weather and worker welfare have had a significant impact on the palm oil industry.” Following this, the EU and, in particular, the United States imposed stringent environmental regulations, with a focus on deforestation and forced labour.

“Hence, multilateral platforms such as the Council of Palm Oil Producing Countries (CPOPC) play an essential role in addressing these issues, as the legislation has become a trade barrier to palm oil along with other selected commodities,” the minister said.

Johari stated that MSPO certification programmes were being expanded with ongoing support from the ministry, related agencies, and various parties to ensure that smallholders fully adopted sustainability requirements.

As of December 2023, the MSPO certification rate had reached 94.22%, implying that 5.35 million hectares of Malaysia’s total 5.67 million hectares of oil palm planted areas had been certified under the MSPO. Furthermore, approximately 94.16%, or 435 of the country’s 462 mills, have been certified under the MSPO.

“Integrating the Sawit Intelligent Management System with the MSPO certification will not only enhance operational efficiency, but also contribute significantly to meeting the EUDR requirements,” Johari told reporters.

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