KEEN ON SUSTAINABILITY
OBG Talks to YB Datuk Peter Chin Fah Kui, Minister of Plantation Industries and Commodities

What considerations have shaped government policy in the sector over the last few years?

YB Datuk CHIN: The main thrust has been to increase productivity and efficiency, mostly through accelerated replanting, use of higher-yielding seedlings, consolidating fragmented land, mechanisation and better agronomic practices. We also sought to enhance collaboration between big companies, the government and smallholders. We put a greater focus on research and development into value-added products and came up with innovative materials. Marketing has also been foremost in our mind. We are gearing towards penetrating and capturing new markets so we don’t need to rely on traditional markets too much.

What are the challenges to this strategy?

YB Datuk CHIN: The biggest challenge is production cost management. We need to maintain our costs, if not lower them – otherwise lower cost competitors will undermine us in the market. The key here is productivity and efficiency. If you look at palm oil, we averaged RM600 ($163.70) per tonne of crude palm oil (CPO). Another challenge, however, is market access. While India has raised tariff barriers to Malaysian CPO there have been concurrent international price agreements, such as the recent one with Indonesia.

How will that play out? Are more on the way?

YB Datuk CHIN: Unfortunately, some countries are still resorting to tariffs as a measure to protect local agriculture. As a major producer, we feel it is important there is a return on our investments in the sector. It is not just about labour efficiency, it is also about research capabilities for developing the market. We do not want other countries to deliberately depress prices for our oil through artificial tariffs. I am one for laissez- faire and free trade, but other nations have not really been fair to producers like us. I hope it will not come to a point where importers and exporters stand on different sides of the fence with a confrontational attitude on pricing and supply. If our palm oil is the best in the world, let it be traded thus. People should be able to buy and sell palm oil in the manner that it should be traded – as a commodity.

How do land use issues factor into your strategy for the sector?

YB Datuk CHIN: Limited land is another challenge for us. The total arable land in the whole country is estimated to be about 12m ha. Palm has already taken nearly 5m of that. While palm is a food crop, it is not a food staple for Malaysia, it is just one kind of oil. Crops like rice are more important as food. We cannot turn Malaysia into monocrop agriculture. We have to balance our needs, and by definition palm grows better on flat, well-irrigated soil. This means there are certain tracts of arable land not suitable for palm, so we have to discourage smallholders from planting palm even though they may like it. We tell them it is
better to grow rubber or food crops because the land may be unsuitable for palm.

We have introduced capping on land for various crops. For rubber, the cap is 800,000 ha and we estimate that the maximum area for oil palm should be around 6m ha, bearing in mind that some states will be more suitable than others due to their terrain and irrigation.

How is the ministry addressing environmental issues, and how are you addressing negative perceptions of the industry?

YB Datuk CHIN: The growing concern about environmental issues has resulted in the introduction of stringent international standards for environmental protection. To some degree these constitute non-tariff barriers from importing countries, especially the EU. We realise that sustainability is not just about pacifying environmental pressure groups, it is also about ensuring the economic sustainability of our industry and hence our future. We practice sustainable production. The environmental issues associated with plantations in Malaysia are merely perceptions from parties with their own agenda.

There are compulsory Environmental Impact Assessments, or EIAs, to ensure that development is carried out in a wise manner.