The evolution of Malaysian palm oil industry

Malaysia is celebrating the first centenary of its palm oil industry. The first commercial oil palm plantation was established at Tennamaram Estate in Batang Berjuntai, Selangor, in 1917. Datuk Seri Mah Siew Keong, Minister of Plantation Industries and Commodities of Malaysia, has talked about the achievements of the industry in an interview with the Malaysian Palm Oil Council. The interview follows:

Question: Malaysian palm oil has come far to become a successful commodity. Would the planters of 1917 have been amazed by the state of the industry today?

Answer: I think they would be amazed by what Malaysia - not just its palm oil industry - has achieved. So much has changed over 100 years. We were not even an independent nation in 1917. It is a testament to the brilliance and foresight of the palm oil community that it has remained a constant success and a force for good throughout the historical, technological and political changes of the past century. It is a truly remarkable achievement.

I am sure the founders of Tennamaram Estate would recognise one thing about the modern industry - that the commodity and its fundamentals remain the same: a high-yielding, cost-effective, versatile oil that is far superior to any competing oil. In Malaysia we have turbo-charged those fundamentals with world-class R&D (research and development); cutting-edge agricultural techniques; and a strong commitment to responsible and socially beneficial planting.

Question: What have been the major historical turning points for the Malaysian industry over the past 100 years?

Answer: Obviously the establishment of the first plantation in 1917 was a major landmark. Two other key turning points also come to mind.

The first is the development of larger-scale integrated processing and exporting in the 1930s. This involved the transport of fruit to standardised processing facilities designed for the export market. So, the final product was of a higher quality than from African processors, which were still operating small-scale plants. This set a benchmark for palm oil quality globally - and helped the young industry in Southeast Asia get ahead of the curve.

The second was in the 1970s. At this time the Malaysian government pushed for the development of downstream processing industries and the diversification of export products. This included the founding of the Palm Oil Research Institute of Malaysia. This visionary step set the scene for successful collaboration between the private sector and government. It also created the platform from which the palm oil sector could expand: not just exporting a raw commodity, but also leading in higher-value economic activity.

We should not underestimate our place in history. I believe that historians will look back on these years as a golden age for palm oil. And we have tremendous technological advantages that, if harnessed, can take Malaysian palm oil to even greater heights.

Question: If you had to pick the industry's greatest achievement, what would it be?

Answer: A prime achievement is the success of the smallholder programme. This has transformed the lives of millions of Malaysians and brought many people out of poverty.

The Federal Land Development Authority (FELDA) was instituted on the eve of Malaysia's independence. It began planting oil palm in 1961. In 1968, the first settler oil palm project commenced. This was a watershed moment for FELDA and for Malaysia. The idea of granting freehold land titles to participants - rather than making them contract workers - was brilliant.

This concept has set in motion a level of economic security and personal pride for generations of Malaysians. Secure land tenure and titling means families are able to use the land as collateral for loans for improvements, purchase more land, start businesses, finance their children's education, and much more. The FELDA projects have pulled more than 100,000 families out of poverty across 30 years. By one estimate this represents more than 1.0 million Malaysians. Its benefits are still being felt, especially in rural areas.

It's no accident that Malaysia has a significant middle class today and that the country is considered an upper middle-income country. Palm oil has played a major part in this. The success story of Malaysia is linked to the success story of its palm oil industry.

Question: Do you think Malaysian palm oil is sometimes under-appreciated?

Answer: Yes. It is often overlooked that Malaysian palm oil has almost single-handedly changed both the global vegetable oil and oleochemical markets. The work undertaken by Malaysia from the 1970s in terms of research, product development, branding, promotion and marketing established the foundations of a thriving industry.

In 20 years from 1962, the global market for palm oil increased by almost 500 per cent. This was because we tailored products for specific export markets, and did so efficiently. In doing so, we were able to capture a larger share of the world's edible oil market.

When the Malaysian oleochemicals industry was launched in 1979, its impact was also significant. What we sometimes fail to appreciate is that our products were so competitive that they prompted companies in the US and Europe to move away from using feedstocks such as tallow and only use palm oil products. Malaysian palm oil has really changed the world.

The downside is that palm oil was then - and still is - considered a threat by many industries in other countries. This has led to some difficult times, with sustained protectionist campaigns against palm oil, especially in Europe. But the centenary year is a time to remember the successes and to congratulate the industry for its growth and prosperity.

Question: What are the recent developments that have made a difference to the industry?

Answer: A matter of current pride is that Malaysia is a true leader in terms of sustainability. As I mentioned earlier, the inclusivity of the FELDA projects has been a model for sustainable social and economic development. It is so successful that other countries, for example in Africa, now wish to copy the Malaysian model.

Malaysia is also a genuine leader when it comes to environmental sustainability. Our planting and harvesting techniques under the Malaysian Good Agricultural Practices scheme, Malaysian Sustainable Palm Oil standard and that of the Roundtable on Sustainable Palm Oil have set the benchmark for this.

This is something that the private sector generally recognises, although palm oil has come under fire from environmental activists in Europe. This criticism is unwarranted. But informed participants in the debate are beginning to recognise that palm oil is not the environmental bogeyman that it has been made out to be.

Look instead at the deforestation caused by beef - it is nearly 10 times higher than that attributed to oil palm. Yet, there are no anti-beef campaigns in Europe. I believe this will change, and I believe that our good work in defeating anti-palm oil campaigns will prevail.

Question: What do you think the future holds for Malaysian palm oil?

Answer: There is no doubt that vegetable oil demand is going to increase over the medium and long term. The increase in the global population is the main reason for this. Malaysian palm oil companies are well equipped to meet that demand, both in existing and new markets. With innovation, our yields will improve: this will be a critical challenge in the coming years. Mapping of the oil palm genome was only completed in 2013. Through selective breeding we will be able to develop more robust, higher yielding stocks.

Malaysian companies will continue to invest in new markets. Africa is obviously one place that they have gravitated towards as its population grows and becomes more urbanised. There is a pleasing symmetry that, after the oil palm was brought to Malaysia from Africa, we are now exporting our agricultural know-how to assist Africa in developing its oil palm sector.

I also think we will continue to lead the way when it comes to more diversified products. I'm talking specifically about projects such as the SIRIM Bioplastics plant, which produces biodegradable plastics from palm oil by-products. These innovative developments are going to become more significant as populations become more concerned about overcoming environmental problems such as solid waste and landfills, and demand cleaner, greener products and solutions.

However, we must be aware of ongoing challenges. The opponents of Malaysian palm oil would like this to be our last centenary celebration. Their goal is nothing less than eliminating the industry. It is only if we defend our brand - if we spend the time and energy needed to robustly address those opponents - that Malaysian palm oil will continue to thrive.

Innovation is what drives this industry forward, but vigilance and strong campaigning against threats is what keeps it alive. Despite all the challenges, I am pleased that it is in excellent health after 100 years. I strongly believe the next 100 years of Malaysian palm oil will be as innovative, fruitful and productive as the first 100.

This interview was published in the Global Oils and Fats Business Magazine, Issue 1, 2017 published by Malaysian Palm Oil Council as cover story. Fakhrul Alam is Country Manager-Bangladesh,

Malaysian Palm Oil Council. [email protected]