Palm oil to remain key driver of Malaysia’s economic growth: Johari

The palm oil industry is expected to remain a key driver of Malaysia’s economic growth, said Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani.

Johari said global demand for palm oil escalated with the reopening of borders and the recovery of economic sectors boosted consumption in the importing countries, both for food and non-food based industries.

“The Malaysian palm oil industry continues to exert significant influence on the global oils and fats market – which is becoming increasingly competitive,” he said in his keynote speech at the Palm Oil Economic Review and Outlook Seminar 2024 yesterday.

Furthermore, Johari acknowledged the industry’s resilience amid substantial challenges, both domestically and globally, such as unpredictable weather conditions, environmental considerations and geopolitical unrest.

On industry outlook, he said the palm oil market maintains an optimistic outlook for 2024. This positivity is fuelled by expectations of robust palm oil demand from key export destinations, such as India, China and the European Union (EU).

“The demand is further supported by interests in replenishing stocks to ensure food security and the overall viability of business activities, making 2024 appear very promising,” he added.

Going forward, Johari said, the government is committed to ensuring the efficient management of foreign workers with the aim to address the critical labour situation in the plantation sector.

He noted the persistent issue of labour shortages in the palm oil sector has resulted in production losses and low yields which has restrained palm oil production from reaching its full potential in 2022 and 2023.

“For instance, the freeze on the hiring of foreign workers had resulted in a shortage of 55,000 workers in the palm oil sector in December 2022,” he said.

Nonetheless, Johari said that despite facing obstacles, the labour situation gradually improved with the reopening of Malaysian borders resulting in the slight increase in crude palm oil (CPO) production in the latter part of 2023.

The government has proposed to expand the scope of automation tax incentives to include the plantation sector, in order to reduce labour dependence through mechanisation and automation, said the minister.

“This is a valuable opportunity for oil palm growers to reinvest their gains into technologies to increase productivity and support workers, particularly in the harvesting and collection of fresh fruit bunches.

“The transition towards automation and mechanisation is now a necessity given the high dependence on foreign workers,” he said.

Johari believes that the ongoing projects led by the Mechanisation and Automation Research Consortium of Oil Palm (Marcop) will make significant progress in increasing mechanisation and automation in the industry.

“Marcop is poised to undertake programmes that include exploring “low hanging fruit” opportunities, such as adopting the latest technologies particularly for harvesting or spraying pesticides and spreading fertilisers,“ he said.

He added that Malaysia must continue to position its palm oil industry as a global leader in sustainability especially considering the growing global emphasis on committing to sustainability goals.

“Extreme weather conditions and workers’ welfare have significantly impacted the palm oil industry. Following this, the EU and the US in particular, have imposed strict environmental regulations, focusing on deforestation and forced labour.

“Hence, multilateral platforms such as the Council of Palm Oil Producing Countries (CPOPC) play an essential role in addressing these issues, as the legislation has become a trade barrier to palm oil along with other selected commodities,” he said.

Johari said that MSPO certification programmes were intensified with continuous support from the ministry, related agencies and various parties to ensure full adoption of sustainability requirements among the smallholders.

As of December 2023, the MSPO certification has reached 94.22%, which indicates that 5.35 million hectares out of a total 5.67 million hectares of oil palm planted areas in Malaysia have been certified under the MSPO. Additionally, about 94.16% or 435 of the 462 mills in the country have also been certified under the MSPO.

“Integrating the Sawit Intelligent Management System with the MSPO certification will not only enhance operational efficiency, but also contribute significantly to meeting the EUDR requirements,” Johari said.

Tags: Outlook, Malaysia, palm oil, Market, economic growth, consumption, demand