This article first appeared in The Edge Malaysia Weekly on December 23, 2024 - December 29, 2024

THE Malaysian Palm Oil Board (MPOB), a government agency under the Ministry of Plantation and Commodities, is entrusted to promote and develop national objectives, policies and priorities for the health of the country’s palm oil sector. The Edge recently asked MPOB’s director-general Datuk Dr Ahmad Parveez Ghulam Kadir (pictured) for his thoughts on the state of Malaysia’s palm oil sector. Here are his emailed responses.

The Malaysian palm oil sector faces several critical challenges that threaten its productivity, global competitiveness and long-term sustainability. Among these challenges, three stand out: decreasing productivity, land constraints and regulatory pressures, and energy efficiency and waste management. Additionally, concerns regarding food safety and nutrition further complicate the landscape.

Decreasing productivity is a significant concern for the oil palm industry. The issue primarily arises from the ageing of oil palm trees. Over the past decade (2013-2023), the area of old palm trees, particularly those over 25 years old, had increased by 5.1% per year. By December 2023, approximately 8.5% or 479,526ha of Malaysia’s oil palm trees were expected to be over 25 years old. These trees, being past their peak production years, lead to a decline in fresh fruit bunch (FFB) yields, making harvesting more difficult and labour-intensive. The replanting rates currently fall short, averaging only 1.9% per year compared to the recommended 4%.

Compounding this issue is the use of suboptimal planting materials in smallholder estates. While high-quality planting materials have been produced through breeding and selection, little attention has been paid to quality control measures to eliminate low-quality material from the supply chain. Based on a census conducted by the MPOB, at least 12.8% of planted oil palm is categorised as non-tenera, indicating poor-quality planting material.

Moreover, the limited adoption of Good Agricultural Practices (GAP) contributes to declining productivity. Many smallholders either skip fertilisation programmes or reduce the amount of fertiliser used due to high costs, adversely affecting FFB yields. Additionally, poor agricultural practices create yield gaps that need to be addressed, such as the suboptimal application of fertilisers.

Pests and diseases present another significant threat to productivity. Uncontrolled outbreaks can lead to substantial yield loss, impacting the overall output of the sector. Key pests such as bagworms, rhinoceros beetles and rodents, along with diseases like basal stem rot, have led to economic losses for the industry amounting to over RM1.8 billion annually. Bagworm infestations alone can result in losses exceeding RM100 million per year if not managed effectively. The recent outbreak of mealybugs in Sabah, which has led to sooty mould disease, underscores the threat of emerging pests. Managing new pests like the mealybug poses a significant challenge for the industry.

Additionally, labour shortages persist despite numerous initiatives to attract local workers. With local participation remaining low, the industry continues to rely heavily on foreign labour, making it vulnerable to shifts in foreign worker policies. This dependence raises operational costs and disrupts productivity, as oil palm harvesting remains highly labour-intensive.

The industry also grapples with land constraints and regulatory pressures that impede its growth. The compliance with the European Union Deforestation Regulation (EUDR) adds new requirements, such as geolocation tracking and stringent due diligence. This regulation is costly to implement, especially for smallholders, making it challenging to maintain or expand current planted areas.

Compliance with EUDR increases the financial and administrative burden on producers, particularly smallholders, who may struggle to meet these requirements. The added costs of compliance, without corresponding premiums for palm oil prices, put additional pressure on the industry.

Land development for agriculture and urbanisation has also encroached into forested areas, raising concerns about human-wildlife conflict. Moreover, high greenhouse gas (GHG) emissions from peatland, if not addressed, may lead to trade barriers in the global market.

EUDR requires full traceability, geolocation information and other detailed compliance documentation, further increasing the complexity and costs associated with production. This regulatory environment places additional strain on producers, particularly those who lack the resources to navigate such requirements.

In the palm oil milling sector, the industry faces significant challenges related to energy efficiency and waste management. The sector heavily depends on energy-intensive systems, which increase operational costs and environmental impact. Additionally, waste management remains an issue, particularly with by-products like palm oil mill effluent (POME) and methane emissions if not properly treated.

In recent years, food safety has garnered significant attention in the oil palm industry. The presence of heat-induced contaminants, such as 3-monochloropropane-1,2-diol esters (3-MCPDE) and glycidyl esters (GE), alongside concerns related to mineral oil saturated hydrocarbons (MOSH) and mineral oil aromatic hydrocarbons (MOAH), have created challenges for the edible oils industry worldwide, including Malaysia.

As a net trading nation, it is crucial for Malaysia to adhere to food safety and quality standards to maintain its reputation among local and international traders, as well as to uphold consumer trust. Failure to comply with food safety regulations could tarnish Malaysia’s image and jeopardise the nation’s economic revenue from palm oil exports.

On the nutritional front, the debate surrounding palm oil’s saturated fat (SFA) content, which is about 50% — higher than most soft oils like soybean, sunflower and rapeseed — has raised concerns regarding its health implications. However, it is important to note that palm oil has a balanced ratio of saturated to unsaturated fats, making it suitable for consumption and various food preparations.

Emerging studies and findings have begun to challenge the traditional view linking saturated fats to increased cardiovascular disease and mortality. Increasingly, meta-analyses and systematic reviews indicate that there is insufficient evidence to establish a direct relationship between the consumption of saturated fats and the incidence of heart disease. This shift in understanding is essential to reshaping public perception and dietary recommendations concerning palm oil.

To effectively tackle the challenges confronting Malaysia’s oil palm industry, a multifaceted approach is essential. This approach should encompass key areas such as replanting, sustainability, integrated pest and disease management, cost efficiency, food safety, nutrition and market diversification.

Continuous replanting of ageing oil palm trees with high-yielding seeds is critical for boosting yields and maintaining productivity. The government’s allocation of RM100 million to support replanting, particularly for independent smallholders, is a positive step forward. This funding aims to encourage the use of advanced planting materials and accelerate the replanting process. Additionally, it is imperative that estates adhere to their replanting schedules to avert further declines in productivity.

To enhance productivity, utilising modern and elite planting materials is crucial. The MPOB’s SureSawit DNA diagnostic assay can serve as a quality assurance tool for seed production, which is expected to yield gains in oil production of RM4.1 billion to RM6.5 billion.

Empowering smallholders through cooperatives like Koperasi Penanam Sawit Mampan (KPSM) can significantly aid in this effort. KPSM can purchase chemicals and fertilisers in bulk to secure lower prices, which are then sold to smallholders at more affordable rates, thus controlling production costs effectively.

Malaysia has demonstrated a strong commitment to sustainability through the Malaysian Sustainable Palm Oil (MSPO) Certification Scheme, which enforces environmentally friendly practices across the supply chain. This certification emphasises environmental management, biodiversity conservation and social responsibility. Continued investment in research and development (R&D) focused on green technologies, including zero-waste strategies and efforts to reduce greenhouse gas emissions, will position Malaysia’s oil palm industry as a leader in sustainability.

Adopting sustainability practices is vital. Planters should embrace GAP and implement sustainable agricultural methods, such as zero-burning techniques, the use of cover crops to minimise soil erosion and efficient water management systems. These practices will enhance resilience against climate change and shifting weather patterns.

Ongoing research by MPOB is aimed at developing drought-resistant oil palm varieties and optimising planting densities. Additionally, Malaysia’s commitment to sustainability is evident in policies such as No Deforestation, No Peat, No Exploitation (NDPE). These policies cap oil palm cultivation at 6.5 million hectares, halt planting on peatlands and prohibit the conversion of forest reserves for oil palm cultivation.

The implementation of the Sawit Intelligent Management System (SIMS) further enhances the traceability and transparency of palm oil product transactions, addressing traceability issues in the industry.

Improving energy efficiency is essential for the industry’s sustainability. Malaysia should adopt advanced technologies, such as energy recovery systems, to convert biomass waste into renewable energy. While biogas production from POME offers a viable solution, broader implementation will require significant investment and government support.

The MPOB’s ongoing R&D in pest and disease management has developed over 70 technologies available to the industry. The adoption of Integrated Pest Management (IPM) strategies, along with the continuous refinement of standard operating procedures (SOPs), provides a robust framework for managing both existing and emerging pest threats.

Enhancing cost efficiency through mechanisation is vital for maintaining competitiveness. Promoting mechanisation and automation in plantation and milling processes will reduce reliance on manual labour and improve productivity. Extensive training and capacity-building programmes for smallholders and industry players are necessary to ensure the adoption of best practices in cultivation and processing.

Food safety is a shared responsibility involving government agencies, industry players, food business operators and consumers. As palm oil is widely used as an ingredient, it is essential for the industry to effectively manage contamination to ensure acceptance by consumers and traders, especially in importing countries. The industry must focus on managing contaminants such as 3-MCPDE and GE, which are now considered manageable due to established processes that mitigate these issues. The investment required to enhance food safety measures is justified by the long-term benefits of providing safe and high-quality palm oil.

Additionally, managing MOSH and MOAH should focus on preventive measures through proper plant maintenance to minimise contact with lubricants. Collaboration among industry players is crucial in addressing the ongoing food safety challenges and maintaining Malaysia’s relevance in the global palm oil market.

Palm oil possesses a unique and balanced composition of saturated and unsaturated fats, eliminating the need for hydrogenation, thus avoiding trans fats. Moreover, palm oil is rich in beneficial phytonutrients such as carotenoids, tocopherols, tocotrienols, sterols, squalene and coenzyme Q10. Ongoing research by MPOB aims to address health concerns related to palm oil consumption and highlight its nutritional benefits.

To navigate market fluctuations, Malaysia should actively pursue market diversification by exploring new export destinations and expanding the use of palm oil in non-food sectors such as biofuels and oleochemicals. Additionally, implementing price stabilisation mechanisms, such as tariffs and trade policies, can help regulate imports and exports, thereby mitigating price volatility and ensuring fair returns for producers.

The Ministry of Plantation and Commodities, through MPOB, is working to enhance the competitiveness of Malaysia’s downstream palm oil industry by promoting R&D and increasing the value addition of palm oil products. Establishing the country as a hub for oleochemical production and sustainable practices is crucial for future growth. Malaysia possesses the solutions and capabilities to address these challenges effectively. The government’s commitment to providing financial support for replanting, the establishment of cooperatives for smallholders and the implementation of sustainability certifications showcase proactive measures being taken.

Furthermore, the ongoing R&D efforts by MPOB highlight the industry’s focus on developing innovative solutions to enhance productivity and sustainability. The establishment of comprehensive policies to govern sustainable palm oil cultivation indicates that Malaysia is taking meaningful steps toward meeting both domestic and international demands for responsible production practices. However, successful implementation of these strategies will require collaboration among stakeholders, including government, industry and smallholders, as well as investment in new technologies and education to facilitate the adoption of best practices. By fostering public-private partnerships and ensuring alignment between regulatory policies and industry needs, Malaysia can navigate its challenges and emerge as a leader in sustainable palm oil production.

The oil palm industry has made significant progress in addressing climate change, but further efforts are needed to fully prepare for its impacts at the operational level. Ongoing research is particularly focused on pests and diseases, which are expected to become more prevalent as climate conditions change. Rising temperatures, shifts in rainfall patterns and extreme weather events could create favourable conditions for new and existing pests and diseases, posing a serious threat to productivity.

Innovative solutions, such as predictive modelling based on environmental factors, are being explored to anticipate outbreaks and inform management strategies. These models pave the way for AI applications that can enhance decision-making and adaptive measures to ensure sustainable production under changing climate conditions. However, translating these research efforts into effective, on-the-ground practices will require sustained investment and commitment.

Another area of concern is the potential risk to pollinators and beneficial insects, which could be affected by climate change. It is essential that planters are educated and well prepared to manage the risks associated with these shifts, as informed decision-making is crucial to maintaining sustainable production.

The industry, including MPOB, is investing in breeding trials to develop climate-resilient planting materials, leveraging the world’s largest oil palm germplasm collection. This initiative is key to creating more resilient varieties that can withstand the adverse effects of climate change.

Malaysia has also demonstrated leadership in sustainability by mandating the installation of biogas trapping and methane avoidance facilities in all new mills established after January 2014. This policy underscores the country’s commitment to reducing greenhouse gas emissions and mitigating global warming.

The National Initiatives for Sustainable and Climate-Smart Oil Palm Smallholders (NI-SCOPS) Programme, funded by the governments of the Netherlands and the UK, aims to support oil palm smallholders by promoting sustainable management practices, improving productivity and livelihoods, enhancing traceability and ensuring deforestation-free palm oil. The programme also focuses on implementing adaptation measures for climate change and adopting innovative emissions reduction strategies across the supply chain.

For over five decades, the oil palm industry has been a cornerstone of Malaysia’s economy and will undoubtedly continue to play a pivotal role in the nation’s future economic growth. As the third-largest contributor to Malaysia’s GDP, the sector’s outlook remains promising, primarily due to the versatility of palm oil and its applications across a wide range of industries, including food products, pharmaceuticals, cosmetics, detergents and oleochemicals. This diverse set of uses ensures continued global demand for Malaysian palm oil.

To ensure the long-term relevance and sustainability of the palm oil sector, Malaysia must focus on diversifying its product offerings and moving beyond crude and semi-processed products, which have limited value compared to refined and specialised goods. The Malaysian oleochemical sector, which already contributes 20% to global production, demonstrated robust growth with a 4.55% increase in exports in 2023, driven by rising demand for renewable, eco-friendly and bio-based chemicals.

The expansion of downstream industries is key to increasing value creation. Instead of focusing solely on raw material exports, Malaysia has already begun to capitalise on the production of palm-based biofuels. Continued investment in this area, as well as the shift towards renewable energy and decarbonisation, offers significant opportunities for the sector to align with global sustainability goals and broaden its contributions to new markets.

As the global market evolves, the Malaysian oil palm industry can transition from being a commodity producer to a leader in high-value consumer goods. The ongoing development of palm-based oleochemicals, biofuels and green technologies reflects the industry’s capability to move up the value chain. By making the right investments in technology and innovation, Malaysia’s palm oil sector is well positioned to produce more high-value products, bolstering domestic growth and enhancing competitiveness in global markets.

Furthermore, the adoption of circular economy practices is allowing the sector to achieve higher productivity without expanding land use. By optimising the use of palm biomass (such as palm fronds, empty fruit bunches and kernel shells), the industry is generating bioenergy, reducing dependence on chemical fertilisers and minimising waste. For instance, palm oil mills are increasingly using biomass to generate electricity, thereby reducing dependence on non-renewable energy sources. This aligns with the industry’s overarching goal of sustainable growth.

MPOB continues to be at the forefront of R&D, focusing on innovations that enhance the nutritional benefits of palm oil in line with global trends in nutritional science. With a strong track record in developing health-promoting products from palm oil, particularly its rich phytonutrient content, MPOB has successfully transferred 238 technologies to industry players and strategic partners, with many more expected to be commercialised in the near future.

As consumer preferences shift towards healthier options, there is growing interest in products rich in micronutrients. MPOB’s exploration into nanotechnology for nutraceuticals and functional food products is an innovative approach that will further enhance palm oil’s value as a health product. For example, red palm oil, which is rich in antioxidants, presents exciting opportunities for commercialisation in the form of red palm oil chocolate spread, sauces, candies, ice creams and beverages.

Palm oil will remain one of the most preferred oils for food companies due to its unique properties. Its solid content profile, excellent oxidative stability and high nutritional value — free from trans fatty acids and cholesterol and rich in micronutrients — make it ideal for food production. Palm oil is particularly well suited for margarine, shortening and vanaspati products due to its semi-solid form at tropical room temperatures, which enhances its performance in creaming and baking.

Additionally, palm kernel oil (PKO), derived from the kernel of the oil palm fruit, is rich in lauric acid and offers a sharp melting profile, making it suitable for use in confectionery fats. Palm oil and its derivatives are also widely used in the manufacture of dairy, meat and coconut milk product analogues. Examples include ice cream, mozzarella cheese analogues, vegan meat and vegan mayonnaise, as well as coconut milk replacer (santan sawit). These products facilitate the shift to low carbon footprint diets, replacing dairy-based products and offering great potential in both the vegan and halal markets.

While palm oil production has stabilised, its by-products and biomass can play a critical role in Malaysia’s National Food Security agenda. For example, palm-based ingredients such as palm fats, palm kernel expeller (PKE) and empty fruit bunches (EFB) are being used in animal feed, providing cost-effective solutions for livestock such as cattle, broiler chickens, goats and fish. PKE, which is a common protein source for ruminant diets, is now being processed using advanced techniques such as fermentation to improve its nutritional value. Furthermore, research into EFB and palm fatty acid distillates (PFAD) as feedstock for ruminants and energy sources for non-ruminant animals is ongoing. MPOB has already commercialised oil palm-based beef cattle feed, using over 80% of oil palm ingredients, further solidifying the industry’s contribution to food security.

The oil palm industry is undergoing a transformation from being a primary and semi-processed commodity producer to an innovator in high-value consumer goods. Through strategic diversification, circular economy practices and a focus on sustainability, Malaysia’s palm oil sector will continue to be a vital contributor to the nation’s economic progress. By balancing productivity with sustainability and leveraging innovative technologies and new market opportunities, the sector is well equipped to drive growth while addressing global challenges such as climate change and food security.  

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