The Oil Palm

Obama’s Attack on Clean Energy, Sustenance and Job Creation

US President Barack Obama has tried to increase his political and economic bona fides in Southeast Asia. And for that reason he is always welcome in the region.

Yet he has a propensity for displaying purposeful ignorance whenever he visits Malaysia. At a youth event during his visit in November, he stated:

“The most polluting industries are typically the old-fashioned industries, the old ways of doing business. I know that people here, for example, have been dealing with smoke from the peat fires that are coming over from Indonesia.

Well, the palm oil industry, that’s not a high-value industry. I mean, that’s not something that’s going to develop a strong middle class and business opportunities over the long term. It’s just a classic extractive industry or commodity industry.

And in the modern economy, you want to be inventing new products and services rather than just figuring out what you can take out of the ground. And so I’m encouraging both governments and businesses to start thinking about the opportunities of clean energy.”

There are five points where President Obama is plainly wrong.

First, he calls the palm oil industry “not a high-value industry”.

While he sees a “commodity industry”, he sees only the palm oil itself. He doesn’t see what it contributes to. He doesn’t see the massive global market in oleochemicals that has emerged from palm oil. Nor does he see its value in food manufacturing or in cosmetics.

Or the value chain for palm oil in the Asian region. Malaysian palm oil and oleochemicals aren’t just used for local manufacturing; they’re used across ASEAN and north and east Asia.

Contrary to what President Obama thinks, “new products and services” have emerged over the past 50 years.

More to the point, consider the reaction if he had described soybean farmers in the US in the same way.

Second, Obama states that palm oil hasn’t developed “a strong middle class and business opportunities over the long term”.

We beg to differ, as do 300,000 smallholders across Malaysia. Palm oil has been a major contributor to the development of Malaysia’s middle class.

In the 1960s and 1970s, with the backing of the World Bank, Malaysia embarked on a scheme that provided landless Malaysians with land for growing oil palm. The land allocated was then used by smallholder families as collateral for loans, to make productivity improvements and investments in other industries.

The contribution of manufacturing – which includes chemicals and oleochemicals – to Malaysia’s GDP is now around 24.7%. This would not be possible without palm oil; and Malaysia’s middle class – now making up one-third of the population – would not be as large without it.

Baffling remarks

Third, the US President calls oil palm an “extractive industry”. The last time we checked with dictionaries and UN agencies, ‘extractive’ means taking things out of the ground – not growing them in the ground. And palm oil isn’t mined – it comes from plants: it is agriculture.

That Obama could somehow confuse growing food with mining is, frankly, completely beyond us. Palm oil is used for cooking around the world and feeds billions of people. The cash gained from oil palm provides financial security and allows smallholder families to feed and educate their children

The US President’s obsession with the world’s mining industries – coal, gas and oil – appears to have allowed him to simply conflate ‘mining’ and ‘fossil fuels’ with anything he finds objectionable.

Which leads us into our fourth point – what Obama refers to “opportunities of clean energy”. Biofuels – from palm oil, soybean and corn ethanol – are now an essential part of energy policy around the world.

Perhaps Obama should give the same speech to US corn farmers and see what the response is.

Fifth, the US President, at one point in time, made much of his so-called ‘Asian pivot’. Much of this strategy rests on the ability of the US – and the president – to show leadership in the Asian region.

But Asia will not follow blindly; particularly when the supposed leader is clearly ignorant of how the region works, and when he attacks such an important job creator.