SUSTAINABILITY OF PALM OIL

SALMIAH AHMAD, NIK AZIZAN, ROSIDAH

RADZIAN AND M.BASRI WAHID
Malaysian Palm Oil Board
3 NOVEMBER 2009
PRINCE HOTEL, KUALA LUMPUR

Presentation Outline
Snapshot of Oil Palm Industry

Malaysian Perspective on Sustainability 3Ps

Sustainable Practices Adopted
by the Malaysian Palm Oil Industry
Current and New Initiatives
within the Industry

Conclusion

Global Production and Export of Palm Oil

(000 tonnes)
Countries

Production

Export

2007

2008

2007

2008

Indonesia

17,270

19,200

13,747

14,612

Malaysia

15,823

17,735

12,650

15,413

Thailand

1,020

1,120

289

373

PNG

384

400

368

446

Nigeria

835

830

Colombia

732

778

316

310

Ecuador

396

418

172

171

Total Palm Oil*

38,673

43,097

29,876

33,753

Total Oils/Fats

153,996

160,366

58,123

60,651

* Include other producers and exporters

Source: Oil World & MPOB

Major Exporters of Palm Oil (000 tonnes)

Country

2008

2009F

Malaysia*

15,413

15,700

45.39 %

Indonesia*

14,612

15,500

44.81 %

Thailand*

373

190

0.55 %

PNG

446

400

Colombia

310

200

Ecuador

171

166

33,753

34,588

Total (inc. other

countries)

Source: Oil World Statistics Update September 18, 2009

90.75 %

* South East Asia

CPO Production for Malaysia

(million tonnes)

Million tonnes

25
20

17.73
14.96

15
10.84

15.82

13.35

10
6.10

2.57
0.43

0
1970

1980

1990

2000

2003

Year

Forecast (in
Y2010
Y2013
Y2015

million tonnes)
19.5
20.5
21.5

2005

2007

2008

Importance of Palm Oil

Oils/Fats is one of the human
basic nutrients needs
(Carbohydrate, Protein and Fats)
Palm oil is an important source
of oils/fats for the world.
Palm oil is consumed in more
than 150 countries in the world

Presentation Outline

Malaysian Perspective on
Sustainability 3Ps

Brundtlands Commission (1987) Sustainable

development seeks to meet the needs of the
present generation without compromising the
ability to meet the needs of those of the future

Malaysian Oil Palm and

Sustainability
Striking Balance between
Social responsibility,
Environmental health and
Economic profitability

People

Planet

Profit

People
The oil palm industry : a major source
of employment
Eradicated poverty
Narrowed income gap
between town&rural folk
Created rural townships workers reside & enjoy good
quality of life
Contributed to social security
& peace and
Reduced migration of labour
force from rural areas
9

People
MALAYSIA
Smallholder Farms: ~40% of Oil Palm hectarage
State Schemes
7%
RISDA
2%
FELCRA
4%

Smallholders
11%

Private Estate
60%

FELDA
16%

Total Hectarage: 4.48 mil hectares (2008)

Private Estate

FELDA

FELCRA

RISDA

State Schemes

Smallholders

People
In the 60s, giving land to landless, increasing
income levels, eradicating poverty and
diversification were the main concerns
Year

Felda settlers
Income

National Poverty
Line

2006
2007

RM 1,356 ~ US$ 377

RM 2,221 ~ US$ 617

RM 526 ~ US$ 146

RM 817 ~ US$ 227

2008

RM 3,278 ~ US$ 911

RM 856 ~ US$ 238

112,000 settlers and 850,000 hectare of oil palm

11

People
Oil Palm Plantations in Malaysia :
Source of Employment
Year

Area (ha)

1980

1,203,306

People Employed
(person)
92,352

1990

2,029,464

115,285

2000

3,376,664

251,039

2007

4,304,913

420,000

2008

4,480,000

500,000

12

People
Generator of better quality of life
Good housing and amenities for oil palm workers/farmers

13 Plantations Berhad
Source : United

People
Nutritional Attributes of Palm Oil
Major saturated fatty acid in palm oil is palmatic acid
which is neutral like oleic acid (mono) with adequate
linoleic acid (poly) in the diet
Fatty acid composition replacement for trans fatty
acid
Variety of carotenoids (Vit-A)

Presence of tocotrienols (Vit-E)

Red palm oil is on the trail
against Vitamin A deficiency in
South Africa Red Palm Oil
Muffin Program
14

Planet
The Regulatory Framework
Land Matters:
National Land Code 1965
Land Acquisition Act 1960
Environmental Matters:
Environmental Land
Conservation Act 1960 revised
in 1989
Quality Act 1974
(Environmental Quality)
(Prescribed Premises) (Crude
Palm Oil) Regulation 1977
Environmental Quality (Clean
Air) Regulation 1978
Environmental Quality
(Prescribed Activities)
(Environmental Impact
Assessment) Order 1987

Labour and Employees Matters:

Labor Law
Workers Minimum Standard
of Housing &
Amenities Act 1990
Occupational Safety &
Health Act 1977
Factories & Machinery
(Noise Exposure)
Regulations 1989
Pesticide Use:
Pesticides Act 1974
(Pesticides Registration)
Rules 1988
Pesticides (Licensing for
sale & storage) Rules 1988
Pesticides (Labeling)
Regulations 1984
Wildlife Matters:
Protection of Wildlife Act
1972

Total Planted Area of Oil Palm in Malaysia

(million hectares)
6

Total Agricultural Land: 7.9 mil ha

Oil Palm: 4.48 mil ha ~ 56.7 % Agricultural Land

3.38

3.5

3.79 3.88

4.05 4.17

4.3

4.48

2.54
1.98

1.48
1.02

0.26

Year
Source: Malaysian Palm Oil Board

08
20

07
20

06
20

05
20

04
20

03
20

01
20

00
20

95
19

90
19

85
19

80
19

70

0
19

Million Hectares

Planet
Country
France
Sweden

Germany
Malaysia
UK
Brazil
Argentina
USA
Denmark

% Forest
Area
28.3
66.9

Total Forest
Area (mil. ha)
15.55
27.53

Total Land
Area (mil. ha)
55.01
41.16

31.7
63.6
11.8
57.2
12.1
33.1
11.6

11.08
20.89
2.85
477.7
33.02
303.09
0.5

34.9
32.86
24.09
835.56
273.67
915.89
4.31

Total Planted Area of Oil Palm in Malaysia

(million hectares)
6

Government stopped
new forest land being
opened up for crops,
including oil palm.

4.48

3
1.98

2
1

08
20

07
20

06
20

05
20

04
20

03
20

01
20

00
20

95
19

90
19

85
19

80
19

70

0
19

Million Hectares

Land use change

Year
Land Development/Settlement and conservation Programs are
delicately balanced

Planet
Conversion of lower productivity crops to high yielding
oil palm
Year

Palm Oil
(million ha)

Rubber
(million ha)

1990

2.029

1.836

0.393

0.314

4.572

2000

3.377

1.431

0.076

0.159

5.043

2002

3.670

1.348

0.051

0.155

5.224

2004

3.880

1.282

0.044

0.147

5.353

2005

4.051

1.250

0.033

0.144

5.478

2006

4.165

1.225

0.033

0.142

5.565

2007

4.305

1.248

0.028

0.117

5.698

2008

4.480

1.247

0.021

0.115

5.863

19

Cocoa
Coconut
Total
(million ha) (million ha) (million ha)

CPO Production for Malaysia

(million tonnes)
Million tonnes

25
20

17.73
14.96

15
10.84

15.82

13.35

10
6.10

2.57
0.43

0
1970

1980

1990

2000

2003

2005

2007

2008

Year

Forecast (in
Y2010
Y2013
Y2015

million tonnes)
19.5
20.5
21.5

Planet
PRODUCTIVITY IMPROVEMENT

Palm Oil
CPO
YIELD/
HA
(million Production
Year
(million
ha)
tonnes)

1990 2.029

6.10

3.00

2008 4.480

17.73

3.95

21

PRODUCTIVITY PALM VS OTHER OILS

Oil Tonne/Hectare/Year

4
3.5
3
2.5
2
1.5
1
0.5

0.38

0.48

0.68

Soybean

Sunflower

Rapeseed

Palm Oil

Source: Soybean, sunflower and rapeseed from Oil World

Palm oil from MPOB

Planet
CPO Yield
( tonnes/hectare/year)
Biological Potential of Oil Palm

18

National Average for Malaysia

Best Managed Oil Palm Plantation

New Varieties of Oil Palm

10

Oil Palm
The most productive oil crop
23

Planet
30

Tonne fresh bunches/Ha/Yr

Oil palm plantation

perennial crop 25 years
of productive cycle

25
20
15

Non-productive Period
Palm too tall difficult to
harvest
Old palms replant

10

New variety : greater yield

slower growth

Age (year after planting) of palms

24

39

37

35

33

31

29

27

25

23

21

19

17

15

13

11

MALAYSIAN PRODUCTION OF PALM

OIL & PALM KERNEL OIL (in tonnes)
Crude Palm Oil

Crude Palm Kernel Oil

20,000,000
18,000,000
16,000,000
14,000,000

12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

25

DIFFERENT SECTORS OF PALM OIL PROCESSING

CPO AND CPKO
TRANSESTERIFICATION
CRUDE ME

PFAD
PKFAD

REFINED, BLEACHED &

DEODORIZED PO OR PKO

DISTILLATION
CRUDE
VITAMIN

DISTILLED
ME

REFINING

FRACTIONATION
RBD POLEIN &
RBD PKO
STEARIN
FOOD USES

FATTY CIDS
FATTY ALCOHOLS
GLYCERIN

RBD P STEARIN &

RBD PKO OLEIN

TRANSESTERIFICATION
DISTILLATION

CRUDE &
DISTILLED
ME
26

SOME ADVANTAGES OF PLANT

DERIVED PRODUCTS
Plant derived products
linear structure easily
biodegradable
Acceptable to all religions
Good cost performance
ratio (less sensitive to
water hardness)

90
80
70
60
50
40
30
20
10
0

Good biodegradation characteristics

4

12

16
LAS

20

24

28

MES

90
80

90

70

80

60

70

50

60

40

50

30

40

20

30

10

20

0
C12

C14

C16

C18

LAS

AS

10
0

C12

C14

C16

C18

LAS

AS

Performances vary depending

on chain lengths

C12

C14

C16
54ppm

C18

LAS

AS

270ppm

More tolerance to water hardness

LCA OF PALM PRODUCTS PRODUCTION

Land Preparation
Palm Seedling

Oil Palm (immature)

Palm based products

Oil Palm (mature)

Biomass

In Estates

Upstream
Midstream

Palm Fruit Bunches

Agro-based Products

Biomass

Renewable Energy

Kernel

Crude Palm Oil

Compost (as soil

Conditioner/fertiliser)

Palm Kernel Cake

Mulch (Estates)

Refined Oil

Palm Kernel Oil

Animal Feed

Downstream
Export

Processed
Food
(Cooking
Oil etc.)

Processed
Non food
(Biodiesel,
Alpha SME etc.)

Processed
Food

Processed
Non food

Export

Abundance of Oil Palm Biomass

PALM KERNEL CAKE

OIL PALM FRONDS

SHELL, 5.5%

FRESH FRUIT BUNCH

EMPTY FRUIT BUNCH, 22%

10% oil
90% biomass

POME
FIBRE, 13.5%
OIL PALM TRUNK

29

Planet
Increase Plantation Hectarage in a Responsible Manner

It is grown on legitimate
agricultural land

Permanent forests, covering

55.6% of Malaysias land is devoted
to wildlife habitat and biodiversity
conservation
Malaysia practices responsible
agricultural and land management

Minimizes waste and pollutant

generation
30

Planet
Preserving Biodiversity
Malaysian Palm Oil Wildlife
Conservation Fund
(MPOWCF) US$ 5.6 million
managed by MPOC
Activities
1. Jungle patrol to protect wildlife
surrounding oil palm plantations
2. Survey of orang utan population in
Sabah
3. Establish Orang Utan Island infant
care centre
4. Improving riparian reserves
Source: van Zutphen 2008

Profit
Importance of oil palm to Malaysia
Palm oil contributes
about 5-6 % of
Malaysian GDP
Provides employment
to 0.5 million workers
in the industry and those
related to it
Source: World Development Bank
Indicator 2007.
$: USD
GNI: Gross National Income

USA

GNI per
Capita
$ 44,970

UK

$ 40,180

Belgium

$ 38,600

World

$ 7,439

Malaysia

$ 5,490

Indonesia

$ 1,420

Country

EXPORT EARNINGS FROM

MALAYSIAN PALM OIL
RM BILLION
70

62

60
45

50
40
26.2

30

30.4

28.6

31.8

2004

2005

2006

19.6

20

14.9

14.2

2000

2001

10
0

Source:MPOB

2002

2003

2007

2008

MALAYSIAN EXTERNAL TRADE

(2006 & 2008)
2006
EXT.TRADE = RM 589 BILLION
OTHERS, 30.20%
E&E, 47.70%

2008
EXT.TRADE = RM 663.5 BILLION

PALM&PALM
PROD, 5.40%

OTHERS, 31.30%
TIM&TIM PROD,
4%

E&E, 38.50%

PET&PET PROD,
12.60%

PALM&PALM
PROD, 9.80%
TIM&TIM PROD,
3.40%

PET&PET PROD,
17.00%

Profit
Importance of oil palm to Malaysia
Year

Palm oil
export value
(RM billion)

Export value of all Percentage of palm

commodities
contribution in the
(RM billion)
overall export value

1980

2.89

48.80

6.1 %

1990

5.50

20.70

26.6 %

2000

14.94

42.72

35.0 %

2007

44.71

88.70

50.4 %

2008

64.80

112.43

57.6 %

Re-distribution of wealth among the rural population

35
contributed
to peace and stability in the country

Profit
Among other functions, licenses all critical activities
of the Malaysian Palm Oil Sector and enforces its orderly conduct

STATUS OF LICENSEES MARCH 2009

Nursery
Estate

564

4,260

Smallholders

142,540

Dealer of FFB

1,972

Palm Oil Mill

416

Palm Kernel Crusher -

59

Palm Oil Refinery

57

Palm Oleochemicals -

54

Dealer of Palm Oil

Dealer of PFA

- 1,053
- 18

Exporter

- 72

Importer

- 77

Chemist

- 27

Surveyor

- 61

Bulking Installation

- 36

Others

- 495

Total of Licensees = 151,743

37

Presentation Outline
Sustainable Practices
Adopted by the
Malaysian Palm Oil
Industry

Sustainable Practices Adopted by the Industry

Good Agricultural Practices Estates &
Smallholders:
Good water management
Maintain riparian reserves
Maintain soil fertility
Integrated pest management (IPM)
Waste Management

39

Sustainable Practices Adopted by the Industry

Integrated Pest Management
decreased reliance on harmful chemical
pesticides
Increasing use of Biological Control
microbial pathogen
Barn owl to control rats
Beneficial plants e.g. Cassia cobanensis to
control parasitoids

Satellite monitoring of diseases

40

Sustainable Practices Adopted by the Industry

Conserve natural
resources, reduce waste
and plant cover crops

Sustainable Practices Adopted by the Industry

ZERO BURNING POLICY

Open Burning is NOT Tolerated during Oil Palm Replanting in
Malaysia

Sustainable Practices Adopted by the Industry

Reducing greenhouse gases by converting

EFB and POME into compost
43

Sustainable Practices Adopted by the Industry

Biogas Plant
Converting
POME (waste
water) into
Biogas
United
Plantations, Kec
k Seng, Kim
Long, Sime
Darby etc

Mitigating CH4 emissions by ~ 80 %

Presentation Outline

Current and New

Initiatives within
the Industry

New Initiatives Within the Industry

United
Plantations

First company to be awarded RSPO Certification

(2008)
Second company to be awarded RSPO Certification
Contribute 6% of the global output for palm oil

RSPO Certified PO
(million tonnes/year)
Targeted: 1.5
Achieved to date: 1

4 Other Malaysian companies being certified

and two from Indonesia (PT Musim Mas & PT
PP London Sumatra Tbk) & one from PNG

Our industries commitments toward

continuous improvement

New Initiatives Within the Industry

Codes of Practices &
Sustainability Manual
Launched in August 2007 by Minister
Plantation Industries and Commodities
Five Codes of Practices (CoPs):
Good Agricultural Practice for Oil Palm Estates & Smallholdings
Good Milling Practice for Palm Oil Mills
Good Crushing Practice for Palm Kernel Crushers
Good Refining Practice for Palm Oil Refineries
Good Practice for the Handling, Transport and Storage of
Products from the Oil Palm
Preparation of the Sustainability Manual for the oil palm
industry
47

New Initiatives Within the Industry

LCA Study throughout the oil palm supply
chain
Establishment of Tropical Peat Institute. 3
areas of research are:
Inventory of peatland cultivation in Malaysia
Review on working program of GHG flux
studies
Best management practice (BMP) of oil palm
on peatland
Collaboration with the Ministry of
Housing, Environment and Spatial Planning
and University of Wageningen in the
Netherlands on the tropical peatland project
Collaborative projects on biodiversity with the
Netherlands
Collaborative projects on carbon emission
studies
48

Current Initiatives Within the Industry

HIGH YIELDING MATERIALS

50

Presentation Outline

Conclusion

Conclusions

Palm Oil Sector in Malaysia

Most important agriculture sector
Vital to the Well Being of Rural Population

Major Export Revenue Earner

Its viability is vital

Export oriented sector

Domestic consumption <10% of production
Highly Responsive to market demands

Conclusions

Response to Consumers Needs

Year

Issue/Need

What Have We
Done?

Discovery

1980s

Anti-Tropical
Oil Sentiment

Nutritional
studies

Neutrality of palm oil

Carotene
Tocotrienol
SN2

1990s

ISO 9001

Implement

Quality Improvement

Mid 1990s

ISO 14000

Implement

GAP

21st Century

Sustainability

Implement

CH4 capture
Biomass
Productivity
COP

Conclusions
Sustainable agriculture
is not just
environmentally sound
land management
practices, but an
integration of the three
main goals of social
responsibility, environ
mental health &
economic profitability.

54

In pursuing the
objectives of
sustainability, Malaysia
welcomes a fair and
balanced view on issues
related to sustainability
of palm oil.
Malaysia is on track
towards fulfilling the
sustainable business
triple bottom line of
PEOPLE, PLANET &
PROFITS

Thank You
for your kind
attention
www.mpob.gov.my