ABOUT

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  1. History and Origin
  2. Where is it grown
  3. What is it used for?
  4. History of the Industry
  5. Small Farmers
  6. Economic Contribution
  7. The Future of Palm Oil
  8. The Sustainable Oil
  9. Conservation Commitment
  10. Wildlife Policies
  11. The Orang-utan
  12. Bio-energy

 

History and Origin

The oil palm (Elaeis guineensis) originated from West Africa, where evidence of its use as a staple food crop dates as far back as 5,000 years. There is even evidence in Egyptian tombs of people being buried with casks of palm oil, reflecting the high societal value attributed to the product. Needless to say, with origins in West Africa and evidence of consumption in Egypt, palm oil can be considered one of the earliest traded commodities.

While palm oil was ubiquitous in West Africa, the use of palm oil in the international market expanded significantly as a result of the British Industrial Revolution and the expansion of overseas trade. From candle-making to industrial lubricants, palm oil was a driving force behind the expansion of industrial production, while nutrient rich red palm oil became a vital asset on long sea-faring voyages. And it was a result of this increased demand that Europeans began investing in palm oil production, first in West Africa and then expanding to Southeast Asia.

A combination of European settlers and entrepreneurs, seeing the opportunity for commercial palm oil production to produce soaps, lubricants and edible oils lead to a dramatic expansion of oil palm plantations throughout Sub-Saharan Africa and Southeast Asia. The first commercial scale plantation in Malaysia was founded in 1917 and established in Tennamaran Estate in Selangor.

 

Where is it grown?

Oil palm is cultivated in 43 countries throughout the World

palm-oil-cultivation-map

 

What is it used for?

Palm fruit oil is consumed worldwide in more than 100 countries. In some parts of the world, palm fruit oil is often still consumed in its unrefined state, as an ingredient of traditional dishes, where it contributes its characteristic golden red color and unique flavor. However, to most users, palm oil is more familiar as a refined vegetable oil product purchased at their local store and incorporated into their everyday foods.

You may be surprised to learn that many of the foods you eat are made with palm oil. Baked goods. Instant noodles. Baby formula. Cake mixes. Breakfast bars. Potato chips. Crackers and other snacks. And restaurant foods such as French fries. Palm oil is abundant, and is increasingly recognized as having a role to play in a healthy balanced diet.

Of the oils and fats on the market, palm fruit oil serves well many of might best meet today’s consumers criteria. It is healthful, abundantly available, relatively inexpensive, and technically suitable for most food products. Perhaps this is why palm oil has become the largest internationally traded vegetable oil in the world proving its acceptance in the global market.

About 90 percent of palm oil currently goes into food and consumer goods applications and the remaining 10 percent goes into non-food applications.

 

History of the Industry

The palm oil industry in Malaysia has evolved dramatically since the first commercial planting took place in Tennamaran Estate in Selangor in 1917, laying the foundations for the industry in Malaysia. The cultivation of oil palm increased at a fast pace in early 1960s under the government’s agricultural diversification programme, which was introduced to reduce the country’s economic dependence on rubber and tin.

In the 1960s, the government introduced land settlement schemes for planting oil palm as a means to eradicate poverty for the landless farmers and smallholders. Development of the industry has been central to increased prosperity and societal advancement throughout the country, from the rural communities that rely on employment from the plantations, to the downstream industries that extend to city centers and export zones.

Today, the industry directly employs more than 570,000 people, and contributed US$21.09 billion to Malaysia’s exports. More than 39 percent of oil palm plantations are owned by small land holders, and has contributed to one of the largest poverty alleviation projects in the world through the Federal Land and Development Authority (FELDA).

 

Small Farmers

Malaysia’s small farmers are a robust and diverse group of individuals contributing to Malaysia’s national prosperity and cultural identity. With almost 40 per cent of the oil palms cultivated by small farmers, Malaysia’s 300,000 + small farmers cultivating plantations between 4 and 40 hectares in size are instrumental in producing over 18 million tonnes of palm oil every year.

Malaysia’s small farmers are not the biggest players in the palm oil industry, and are consistently overlooked by non-governmental organizations in the wider international debate over palm oil. But come to Malaysia and the small farmer is not only applauded, but widely recognized for their importance not just to palm oil production but to creating a more prosperous and just society. Further development of small farmer plantations is a key component of Malaysia’s effort to achieve high-income status by 2020, as indicated by the Government’s Economic Transformation Programme.

To learn more about the daily life of Malaysia’s small farmers, take a look at our video interviews with block leaders, plantation managers, small farmers and local small business owners to learn how palm oil has positively affected their lives and the lives of their families.

For further information, please visit our small farmer resource The Human Faces of Palm Oil.

 

Economic Contribution

The Malaysian palm oil industry is significant contributor to Malaysia’s overall economy, providing both employment and income from exports. In 2011, the sector was the fourth largest contributor to Malaysia’s economy, accounting for RM 53 billion (USD 16.8 billion) of Malaysia’s Gross National Income (GNI).

The Malaysian palm oil industry directly employs more than 600,000 people, including both high-skilled and low-skilled labor. Research and innovation are adding new jobs to the Malaysian economy every year, while significant investment in the development of new downstream sectors and harnessing palm oil biomass. Under Malaysia’s 1Malaysia Biomass Alternative Strategy (1MBAS), the country will create more than 66,000 new jobs and increase the industry’s contribution to Malaysia’s GNI by RM 30 billion (USD 9.5 billion).

This reflects the extent to which every Malaysian benefits from the palm oil industry’s growth and profitability. Through employment and development, downstream industries and tax receipts, the Malaysian palm oil industry has benefitted everyone in Malaysia. Meanwhile, palm oil exports, which benefit Malaysia financially, provide a vital vegetable oil to the rich and poor alike throughout the world.

 

The Future of Palm Oil

On September 21, 2010, the Government of Malaysia launched The Economic Transformation Programme (ETP), a comprehensive programme to assist Malaysia in achieving its goal of achieving high-income status by 2020. A number of industrial and economic sectors were identified under the ETP as National Key Economic Areas (NKEA), through which Malaysia will achieve prosperity and economic growth. The palm oil industry is one of those NKEAs.

In recognition of the palm oil industry’s significant contribution to the Malaysian economy, the ETP outlines eight entry point projects (EPP) to improve industry practices and increase incomes from palm oil cultivation. The impact of these projects will be an increase of the palm oil industry’s contribution to Malaysia’s GNI of more than 237 percent to RM 178 billion (USD 56.5 billion) by 2020.

1. Accelerating the replanting of oil palm

Malaysia currently holds a backlog of 365,414 hectares of oil palm trees older than 25 years old, reflecting oil palms that have exceeded their prime production age and will need to be replaced with higher yielding oil palms.

The Malaysian Palm Oil Board will assist smallholders in replanting 100% of this backlog within 3 years, through a combination of a binding replanting policy with smallholders, providing financial assistance to small farmers due to loss of income during unproductive years, and providing farmers with quality planting materials.

This replanting will contribute to an increase in palm oil’s contribution to Malaysia’s GNI of RM 6.4 billion (USD 2 billion) by 2020.

2. Improving fresh fruit bunch yield

Significant potential remains to improve average yields of fresh fruit bunches (FFB), with a 25 percent increase being targeted in average national yields of FFBs by 2020.

This is to be accomplished through a combination of providing better services to smallholders from MPOB’s guidance and counseling officers (TUNAS) and assisting independent smallholders to participate in cooperatives to improve cooperation and collaboration with nearby producers.

This project is expected to create an additional 1,600 jobs and improve the income of more than 161,000 independent small farmers by 47 per cent.

3. Improving worker productivity

Oil palm plantations by their nature are unable to rely heavily on mechanization, relying primarily on a combination of high-skilled and low-skilled labor. This is both a strength of the industry as a poverty alleviation mechanism, but also reflects a weakness when there is a shortage of labor, as the industry is currently experiencing.

In response to these pressures, palm oil laborers will be provided with a combination of training and tools to assist in their work, including the use of a motorized harvesting pole, CantasTM, to improve harvesting productivity, a diamond sharpening tool, and the use of buffalo-assisted collection of FFBs.

The result will be an additional 28,000 jobs and will generate an estimated RM 1.7 billion (USD 539.9 million) in GNI.

4. Increasing the oil extraction rate

The national oil extraction rate (OER) has not made significant improvement in a number of years, providing an opportunity for Malaysia to increase the national average through a combination of monitoring and quality control.

With an objective of increasing the OER from the current rate of 20.5 percent (2009) to 23 percent by 2020, all participants in the supply chain, from plantation to consumer, will benefit from higher rates of extraction and therefore greater efficiency of production.

This project is expected to generate an addition RM 13.7 billion (USD 4.35 billion) in GNI and create 10,000 jobs through the opening of 84 new mills to meet the increased supply of FFB.

5. Developing biogas at palm oil mills

Palm oil mill effluent (POME), which is waste generated from the processing of fresh fruit bunches and palm fruits to extract palm oil, is the most significant contributor of greenhouse gas emissions from the processing of palm oil. As a result, Malaysia will capture POME and use GHG emissions from the waste to power mills, local communities, and even feed excess energy into the national grid.

Under this EPP, Malaysia will construct biogas capture facilities at 500 mills over the next ten years, thereby significantly reducing the already low levels of GHG emissions and establishing a carbon negative means of energy generation.

With only incremental Government funding, this EPP will generate an estimated RM 2.9 billion ($ 921 million) in GNI by 2020 and create 2,000 new jobs.

6. Developing oleo derivatives

Recognizing the value of increasing downstream segments of the palm oil supply chain in Malaysia to increase the value of products produced from Malaysian palm oil, the Government will support the development of downstream processing of palm oil to harness a larger share of the oleo-derivatives market.

This will include supporting local oleo derivatives companies expand domestic production, assist domestic companies in establishing joint ventures to establish local plants and incentivizing investment from international conglomerates in Malaysia.

Through these efforts and others, Malaysia will generate an additional RM 5.8 billion (USD 1.8 billion) in GNI and create 5,900 jobs.

7. Commercialising second generation biofuels

With the industry producing more than 80 million tonnes in biomass, and with production expected to exceed 100 million tonnes by 2020, the industry holds tremendous potential to contribute to global demand for second generation biofuels.

Under this EPP, Malaysia will assist companies in fast tracking commercialisation of new technologies, such as the production of bio-oil through the pyrolysis process. Already two companies are close to commercialisation of this technology.

By 2020, this EPP is expected to generate an additional RM 3.3 billion (USD 1 billion) in GNI and create 1,000 jobs.

8. Expediting growth in food- and health-based downstream segments

In addition to next generation technologies and harnessing waste and biomass from the palm oil sector, there also remains tremendous potential in establishing more food and health based downstream segments. Doing so will increase the value of Malaysian palm oil to domestic industry and increase the value of palm oil related exports. And with new research finding incredible health benefits of palm oil, Malaysia is poised to be an incredible source of nutrients and health products for the world.

The Government of Malaysia will be providing tax incentives for Malaysian companies to aquire foreign food producers and undertake research and development and new product development.

This EPP is expected to create 74,900 local high skilled jobs and generate RM 4.9 billion (USD 1.6 billion) in additional GNI.

 

The Sustainable Oil

Land Use Policy

Malaysia observes strict regulations governing expansion of oil palms, with agriculture expansion limited to land zoned for agriculture. 23.95 percent of Malaysia’s land bank is zoned for agriculture development. In contrast, more than 50 percent of Malaysia’s land is identified for permanent conservation. This balance ensures that Malaysia’s economic development does not come at the expense of the environment and the nation’s biodiversity. The oil palm’s high yields ensures that even with only 6 million hectares of land under cultivation, Malaysian small farmers are able to prosper.

Less Land

Only 0.26 hectares of land is required to produce one tonne of oil from palm oil while soybean, sunflower and rapeseed require 2.2, 2 and 1.5 hectares, respectively, to produce one tonne. Palm oil producers also expect to increase their yield per hectare. In Malaysia, as part of the country’s National Key Economic Areas (NKEA) to achieve high-income status by 2020, the government is looking to support increased efficiencies, such as increasing yields by 90 percent.

World Area of Oil Crop (mil ha)

Palm Oil occupies only 14.7 mil ha, while accounting for almost 1/3 of globally traded vegetable oils.

Carbon Facts

The EU and the US have both attributed inaccurate and discriminatory GHG savings values (19 percent and 17 percent, respectively) to palm oil, thereby denying access to both countries’ biofuels markets.

Independent research carried out by the Malaysian Palm Oil Board (MPOB) and unaffiliated experts demonstrate that the values should be much higher. MPOB attributed 60.4 and 74.7 percent GHG savings to palm produced with and without methane capture. Drs Pehnelt and Vietze found more accurate values to be between 38 and 41 percent for palm oil produced without methane capture, and 85 percent when produced with methane capture.

These assessments do not reflect the most recent findings on deforestation and emissions. According to research by Winrock International, a US consultancy, emissions from deforestation are between 50 and 25 percent of previous estimates. These findings would significantly lower the emissions associated with land conversion, thereby further improving the GHG savings impact of palm oil.

Innovation

Processing palm oil yields high volumes of byproducts, particularly biomass. While historically these were used to support fertilizing of oil palms, other applications are also being discovered, particularly in the form of second generation biofuels.

Empty fruit bunches (EFB) are being processed to produce bio-oil, a substance similar to crude oil. Bio-oil has the potential to be refined much like crude oil, yielding basic materials necessary for bio-diesel, bio-gasoline, and bio-jet fuel. The process of refining also has the potential for generating electricity through co-generation.

Palm oil mill effluent (POME) is already yielding enormous benefits for the industry and local communities. By capturing the effluent and trapping methane emissions, the industry is further limiting its GHG emissions (already low by the vegetable oil sector’s standards), and is using the emissions it captures to power their mills.

Excess power, which is abundant, is then fed into local community electricity grids, providing critical power to rural communities, and offering an alternative to coal powered generation.

As of today, only 12 mills in Malaysia have embarked on the development of biogas plants. Biogas plants will be developed at the 500 mills over the next 10 years, with 250 mills targeting to supply electricity to the national grid by 2020.

 

Conservation Commitment

The palm oil industry adopts and implements sustainable and good agricultural practices, yet is has been accused of unsustainable practices including the destruction of rainforests and wildlife habitat, particularly the orang utan. These accusations driven by campaigns, primarily led by the European NGOs have resulted in misunderstanding among some traditional palm oil end users who have in turn taken drastic steps to reduce their palm oil usage in consumer products. The negative publicity perpetrated by the NGOs sometimes has led to calls to boycott palm based products in several European countries. These negative campaigns have similarly dented the use of palm oil as a renewable fuel requiring the need to prove that it is sustainably produced.

The Malaysian palm oil industry, backed by more than 90 years of responsible plantation practices on legally approved agricultural land in accord with legislations in the country, has similarly not been spared these accusations, despite numerous efforts to portray the correct efforts and information. The idea for the setting up of the Malaysian Palm Oil Wildlife Conservation Fund (MPOWCF) was therefore mooted by the Malaysian Palm Oil Council (MPOC) in 2006 coinciding with the period when the Malaysian palm oil industry was facing one of its biggest challenges in the form of these negative campaigns.

Conservation

Malaysia has always benefitted from unprecedented environmental and natural wealth. Rainforests team with life that cannot be found anywhere else in the world, while millions of tourists throughout the year come to Malaysia to experience our natural bounty of wildlife and tropical beauty. In recognition of these assets, Malaysia has supported conservation and wildlife protection since its independence, establishing a network of regulations and laws to ensure the preservation of our natural endowment.

And with the palm oil industry, these conservation efforts are possible alongside strong economic growth and mutual prosperity. The oil palm’s superior efficiency allows for significant production on minimal land, contributing to Malaysia’s forest conservation commitment of 50 percent. But while Malaysia continues to preserve close to 56 percent of the nation’s forest cover, officials remain careful to ensure that development does not come at the expense of Malaysia’s environment. As a result, through collaboration with the private sector, non-governmental organizations, local communities and the government, environmental conservation remains a priority for all, and a key element in Malaysia’s quest for high-income status.

Industry Cares

The palm oil industry adopts and implements sustainable and good agricultural practices, yet is has been accused of unsustainable practices including the destruction of rainforests and wildlife habitat, particularly the orang-utan. These accusations driven by campaigns, primarily led by the European NGOs have resulted in misunderstanding among some traditional palm oil end users who have in turn taken drastic steps to reduce their palm oil usage in consumer products. The negative publicity perpetrated by the NGOs sometimes has led to calls to boycott palm based products in several European countries. These negative campaigns have similarly dented the use of palm oil as a renewable fuel requiring the need to prove that it is sustainably produced.

The Malaysian palm oil industry, backed by more than 90 years of responsible plantation practices on legally approved agricultural land in accord with legislation in the country, has similarly not been spared these accusations, despite numerous efforts to portray the correct efforts and information. The idea for the setting up of the Malaysian Palm Oil Wildlife Conservation Fund (MPOWCF) was therefore mooted by the Malaysian Palm Oil Council (MPOC) in 2006 coinciding with the period when the Malaysian palm oil industry was facing one of its biggest challenges in the form of these negative campaigns.

Objectives

MPOWCF was thus launched with an initial funding of RM20 million of which RM10 million is a grant from the Malaysian government and the balance of RM10 million is provided by the palm oil industry. The fund is administered by the Malaysian Palm Oil Council (MPOC), which also has the overall responsibility to manage the various conservation projects funded through MPOWCF.

The MPOWCF serves the following purposes:

  • Helps to portray the good image of Malaysian palm oil by providing concrete assurances that its cultivation does not cause deforestation or loss of wildlife and their habitat through a focused conservation research program to be undertaken by experts from the academia, government agencies and NGOs.
  • Provides funds for studies on wildlife, biodiversity and environmental conservation while factoring the overall impact of the palm oil industry on these parameters.

 

Wildlife Policies

The Government of Malaysia has also been a long-time supporter of wildlife conservation, consistently passing legislation that ensures the protection of critical wildlife. As early as 1976, the Third Malaysia Plan established 15 conservation areas covering over 5,600 km². Conservation efforts have consistently increased since, with stronger regulations governing industries and a consistent focus on sustainable development.

The Government, and specifically the Department of Wildlife and National Parks, supports a number of programs to maintain and improve conservation areas and the protection of critical species, such as rehabilitating preserves and enforcing conservation laws. These efforts are funded, in part, by the palm oil industry.

The Wildlife Conservation Act of 2010 has increased penalties against poaching and illegal killings and established a robust legal framework within which Malaysia can protect biodiversity and support individual conservation efforts.

Malaysia is also an active participant in international conservation organizations and forums, including the Convention on Biological Diversity where it promotes sustainable development and biological conservation.

 

The Orang-utan

The Sabah and Sarawak State governments have identified a number of forest areas known to contain higher populations of orang-utans as wildlife sanctuaries, national parks or forest preserves. Ulu Segama – Malua Forest Reserve in Sabah, spanning over 0.236 million hectare, has been shown to be inhabited by about 6,000 – 7,000 orang-utans, the most populated orang-utan area in Sabah. The Lanjak-Entimau Wildlife Sanctuary in Sarawak has been shown to be inhabited by about 1,400 orang-utans. All these areas are permanently protected from development.

Major Locations of Orang-utan in Sarawak

No. Location Total area (hectare) Estimated Orang-utan Populations
1 Lanjak Entimau Wildlife Sanctuary 168,758 1,400
2 Batang Ai National Park 24,040 300
3 Ulu Sebuyau National Park 27,275 300
4 Semenggoh Nature Reserve 653 35
TOTAL 220,726 2,035

Source: Sarawak Forestry Council (2007)

Major Locations of the Orang-utan in Sabah

No. Forest Reserve(s) Land Status Approximate Orangutan Number
1 Sabah Foundation Forest Concession Area Commercial Forest Reserve (CFR) 2600 – 3000
2 Danum Valley Conservation Area Protection Forest Reserve (PFR) 425
3 Forest of Upper Kinabatangan (South) CFR 1700 – 2100
4 Tabin Wildlife Reserve Widlife Reserve 1200
5 Lower Kinabatangan Floodplain Virgin Jungle Reserve, Wildlife Sanctuary and Privately Owned Land 700 – 825
6 Kulamba Wildlife Reserve Trusan Kinabatangan Wetlands – RAMSAR site Wildlife Reserve, Mangrove Forest Reserve 480
7 Ulu Kalumpang, Mt. Wullersdorf and Tawau Hills PFR, National Park 144 – 605
8 Trus Madi CFR, PFR 282
9 Sepilok Virgin Jungle Reserve 200
10 Crocker Range Park Sabah Parks 181
11 Bonggaya CFR 111
12 Lingkabau CFR 100
13 Silabukan PFR 58
14 Kinabalu Park Sabah Parks 50
15 Ulu Tunggud CFR 29
Total 8260-9646

Source: Sabah Wildlife Department (2012)

A conference was held in 2009 on the island of Borneo to address the risks and challenges facing the future of orangutans. At the conference, experts noted that the primary threat to orangutans was not the legitimate agriculture expansion illustrated by the palm oil industry, but poachers, hunting by local peoples, poor enforcement of existing laws and mining.

In fact, far from being the leading threat to the future of orangutans, the industry is a leading supporter of their preservation. A number of initiatives have been announced in between industry, the Government and NGOs to support the establishment of large wildlife preserves and conservation zones. This demonstrates but one such initiative among many that are supported by the industry, through efforts such as the Malaysian Palm Oil Council Wildlife Fund, which funds conservation projects and rehabilitation centers.

 

Bio-energy

The palm oil industry is a critical source of energy, both for transportation as well as electricity generation. And it is not simply relying on palm oil to produce energy, but rather, on a number of by-products.

Palm Oil Mill Effluent (POME) of which more than 60 million tonnes is produced every year, is both a waste and a significant energy source. Through the implementation by methane capture, whereby POME is retained in enclosed facilities wherein methane emissions from the POME are captured and burned, entire mill operations and neighboring communities can be provided with consistent and reliable energy. And this can be achieved by removing emissions, making the technology carbon-negative. As part of Malaysia’s National Key Economic Areas, 500 methane capture facilities will be constructed before 2020, contributing to the national energy grid as well as providing energy to the processing of palm oil.

And biomass, which has been used for years by palm oil mill operators to fuel their boilers, offer a tremendous opportunity to improving the sustainability of energy generation and reducing emissions through the replacement of coal in power plants. Through pelletization of empty fruit bunches (EFB), palm fronds, palm trunks and saw dust, palm biomass will be able to generate more energy and produce fewer emissions. And with more than 100 million tonnes of biomass expected to be produced by the Malaysian palm oil industry in 2020 alone, harnessing the value of biomass will allow producers and their communities to benefit even more.

To learn more, visit these sites.