Flooding in the East Coast

December has always been the monsoonal flooding season for Peninsular Malaysia’s northern East Coast states (Kelantan and Terengganu). This year’s flood is reportedly “extraordinary” as the rainfall intensity was 627mm in a day. This is the highest in 55 years. It broke the record of 608mm logged in Kota Baru in 1967.

By 21 December 2022, 32,089 people in Kelantan were displaced to relief centres. In Terengganu, at least 40,000 people were affected at the height of the disaster.

Also memorable were the year-end floods in 2014 - 2015 where over 200,000 people were affected and 24 killed. Over a period of three days (21-23 December 2014), a record-setting 1295mm fell, equivalent to 64 regular days of rain. 

These images show the 30-day accumulated precipitation and anomalies of the region from CPC Unified data. In the 30 days to 1 Jan 2023, accumulated precipitation on the East Coast was estimated at 900mm (see the red zones in the image on the left) which was 270mm above typical (see the blue zone in image on the right). These are very high readings. Kelantan is now preparing for a possible second wave of flood.

Note:

• “Southeast Asia is globally considered one of the most vulnerable regions to climate change. Countries across the region will face rising sea levels, heat waves, floods and droughts, and increasingly intense and unpredictable weather events” (USAID, Jul 2022). The conversation is turning toward a fair approach to funding efforts on climate change.

• In Khazanah Research Institute (2022) recent Climate Strategy report: "Nationally and locally, we should be focusing on climate adaptation measures: urban greening to tackle urban heatwaves, flood mitigation and better planning to minimise the impact of the great rains, mangrove restoration and engineering works to combat coastal erosion. These measures are not rocket science, we have the local expertise and technology to pull much of this off, unlike with energy transition measures. However, we need to tap into more national and international financing to bring these solutions online. It can be done. Think City in Penang has recently secured US$10 million in climate adaptation financing to tackle heat and floods."

  Comment: Although there is no specific mention of East Coast flooding and the cost of mitigation there, we should expect more focus on this to come.

• Here are some recent initiatives by the Malaysia government for flood mitigation on the East Coast:

  • Under the 12th Malaysian Plan, RM9.19 billion was allocated for flood mitigation projects nationwide with Kelantan receiving RM1.3 billion for four projects and Terengganu receiving RM450 million for nine projects (TheStar, 2021).

  • In 2022, there will be 15 works to be implemented in Kuala Krai with an estimated cost of RM 1.1 million (TheMalaysianReserve, 2022).

  • 40 ongoing and planned flood mitigation projects in the East Cost for 2023. One of the major projects, the Sungai Kelantan Integrated River Basin Development Project (PLSB), is estimated to be at RM 2.156 billion (TheStar, 2022).

In our coverage at PalmTrack, we also monitor rainfall in the region. This has a focus on the core oil palm growing regions of Indonesia and Malaysia.

research@segi-enam.com | 4 Jan 2023

Interview - Strengthen Labour Rights, Cut the Red Tape for Foreign Workers

BFM interviewed Segi Enam’s Khor Yu Leng for her perspective and policy prescription on strengthening labour rights and reducing bureaucracy for foreign workers.

Some of the questions asked were:

• What were the main obstacles to the movement of foreign labour this year? To what extent were these obstacles caused by internal rather than external factors?

• How prevalent are the issues caused by unscrupulous middlemen?

• How can we simplify the process of applying for foreign labour?

• Would any misalignment be caused by the lack of coordination by the agencies involved?

• How the foreign labour shortage will impact the various sectors in Malaysia?

• There are calls for various industries to reduce reliance on foreign labour. How can we do so?

• What policy recommendations would you give to the new government?

Listen to her answers here.

Interview - Malaysian Prime Minister cements his legitimacy (China Daily)

China Daily recently interviewed Segi Enam’s Khor Yu Leng on her thoughts on the stability of Anwar’s government. This is after the vote of confidence motion tabled on 19 December 2022 where we saw Anwar receiving the support of 148 Members of Parliament through a voice vote. During the same sitting, the Speaker and its Deputies were appointed as well.

Yu Leng opined that “the stability of Anwar's government will also depend on the strength of his cabinet, and the reforms and policies enforced under his term”. She also mentioned that the election of Johari Abdul as the speaker shows that currently there is majority support for Anwar.

Read the full article here.

At Roundtable (RT) 2022 - Day Two

On the second day of #RT2022, we attended a few presentations which focused on the topic of enhancing workers' rights and reducing climate change. Segi Enam’s Khor Yu Leng was also invited to present the future of consumption and production patterns of palm oil. Day One observation can be found here.

The presentations were on “Enhancing Human Rights and Labour Rights, Adapting to Future Due Diligence and Deforestation Legislation”, the panels spoke about the proposed EU Deforestation Legislation. Key points from this is that EU businesses will need to know where the product comes from and that RSPO certification is not sufficient. The panel also shared on the EU future plans for supply chain legislation, Corporate Sustainability Due Diligence Directive and Forced Labour Regulation.

Source: RSPO (2022)

In the presentation on “Operationalising Labour Standards in the Palm Oil Sector”, the panel discussed how companies can do better to improve labour standards. The speakers were from industry and they shared how grievance mechanisms are important but the moderator also stressed the importance of the need to balance the power between workers and employers for it to be effective.

Segi Enam’s Khor Yu Leng spoke on “Future Proofing the RSPO - The State of Palm Oil 2050”. She curated findings about the future of consumption and production patterns of palm oil (in the context of other vegoils) with major forecasts for expansion according to key end uses. This is led by volumes from liquid biofuels (renewable diesel, sustainable aviation fuel), an uptick in oleochemicals (think hand wipes, sanitizers and the cleanliness drive of the Covid pandemic; and also for animal feed), but with more muted expectations for the rising food use of vegoils. See screenshots and comments in (I) and (II) below.

Source: Presentations at RSPO RT, annotated by PalmTrack, yuleng@segi-enam.com, 2 Dec 2022

The key narrative for palm oil’s yield per hectare needs to be replaced by a comparative on palm oil’s carbon footprint. The presentation by Jannick Schmidt (see III, IV above) highlights:

• A certified palm oil benchmark is almost as good as sunflower oil, but rapeseed oil is significantly better on a CO2e per kg oil measure.

• This certified palm oil benchmark is a bit better than diesel on a CO2 per km measure.

In the question and answer was a point about the lack of a business model for nature conservation. In that regard, readers should note how conservation is a notable part of United Plantation’s transition to a lower carbon footprint and also refer to the large-scale conservation project of the Rimba Collective for 500,000 hectares of conservation and restoration.

Yu Leng was also invited to speak at two side events.

At the Rimba Collective’s “Delivering on Half a Million Hectares of Forest Conservation & Restoration”, where she talked about the multi-year journey of palm oil to reach a large-scale conservation mindset. She emphasized data (transparency), scale and governance.

Rimba Collective, “Delivering on Half a Million Hectares of Forest Conservation & Restoration”: From the left: Neil Judd (Senior Advisor at Lestari Capital), Reuben Blackie (Manager, Sustainable Agriculture at PepsiCo), Girish Deshpande (Global Sustainability Director at Proctor & Gamble), M R Chandran (Advisor to RSPO), Khor Yu Leng (Segi Enam)

At Fortasbi’s 3rd Appreciation Event, she gave her insight into China’s Palm Oil Market.

Khor Yu Leng of Segi Enam speaking at Forstabi’s 3rd Appreciation Event.

Asked to speak about China market opportunities for Indonesia independent smallholder (ISH) RSPO Credits, we referred to two key reports in which Segi Enam was author/co-author:

• Business Case for Certified Sustainable Palm Oil, (WWF,2022)

• Sustainable Palm Oil Uptake in Asia: Where do we go from here? (WWF, 2021)

Source: Presentations at FORTASBI event, referring to two WWF reports on sustainable palm oil market, compiled by PalmTrack, yuleng@segi-enam.com, 2 Dec 2022. Link to the presentation.

Fortasbi also awarded their top 12 buyers at the event. They were:

• Unilever

• PepsiCo 

• ACT Commodities

• Proctor and Gamble

• Saraya

• Nestle

• Estee Lauder

• Werner & Mertz

• Blommer Chocolate

• KAO Corporation

• Give and Go Prepared Foods Corporation

• Johnson and Son

There were also exhibition booths by various NGOs and other palm oil-related organisations promoting their sustainable initiatives.

Proforest

Rainforest Alliance

High Carbon Stock Approach (HCSA)

Sime Darby Plantations

Palmoil.io

Fortasbi

We will post further views for PalmTrack (subscribers only).

research@segi-enam.com | 2 Dec 2022

At Roundtable (RT) 2022 - Day 1 Observations

From 28 to 30 November 2022, the Segi Enam team attended the RSPO’s Roundtable (RT) 2022 #RT2022 at the Shangri-La Hotel, Kuala Lumpur, Malaysia. The theme was “Scaling up the sustainable palm oil value chain through collective action.”

We contributed to the judging effort for the conservation and smallholder segments of the RSPO Excellence Award, with Yu Leng as one of the three judges, alongside conservationists Dr Erik Meijaard and Dr Nadine Ruppert. The awards were given out at the evening event preceding two full days of conference proceedings on 29-30 November.

Day one kicked off with a celebration of smallholder certification:

Palm Oil Smallholders receiving certification

Professor Tan Sri Dr Jemilah Mahmood gave the keynote speech. In her down-to-earth address, she touched on issues related to the palm oil industry and stressed that more needs to be done. The open questions about palm oil include those on zoonotic diseases, air and water pollution, floods and impact on indigenous people.

There were 13 discussion sessions (over two days) covering issues related to sustainability, conservation, certification and labour rights. We attended presentations on “The Asian Dialogue - Catalyst for Sustainable Palm Oil”, “Balancing the Needs of People, Planet and Prosperity in Sustainability Standards” and “Ensuring the Development of Sustainable Palm Oil Drives Smallholder Inclusion at Scale”, and had numerous meetings on the side lines, which covered diverse topics from labour issues to smallholder inclusion. We also looked in at evening events hosted by Musim Mas and WWF.

The Asian Dialogue - Catalyst for Sustainable Palm Oil. Key points on the businesses in Asian countries are promoting sustainable palm oil products. SuperIndo is the first business to promote RSPO certified palm oil in Indonesia.

Balancing the Needs of People, Planet and Prosperity in Sustainability Standards. Key points on how to achieve sustainability and not leaving certain stakeholders out.

Please, view the list of discussion sessions and speakers here, and presentations can be accessed here. RSPO also published its Impact Report 2022. Below are some excerpts from it. We will post further views for PalmTrack (subscribers only).

Indonesia and Malaysia remain the largest producers, collectively 80% of the CSPO volumes.

Growth in RSPO Certified Area. Stark increase in RSPO Certified Area in Africa.

Certified smallholders (scheme and independent), 22,000 globally with 65,603 hectares and FFB production at 1.2 million Biggest is in Indonesia, where there are 10,953 farmers, with an area of 26,839 hectares.

research@segi-enam.com | 2 Dec 2022

MTCC Stakeholder Dialogue

Segi Enam attended a Stakeholder Dialogue at Tamu Hotel & Suites Kuala Lumpur organised by the Malaysian Timber Certification Council (MTCC) from 31st October to 1st November 2022. Former Minister of Plantation Industries and Commodities opened the dialogue emphasising the need to focus more on the upstream market with concerted efforts to comply with US and EU regulations. The keynote address by Dr Michael Berger, CEO of Programme of the Endorsement of Forest Certification (PEFC) was focused on the recent policy change by Forest Stewardship Council (FSC) on the cut-off date. During the FSC General Assembly in Bali on 13th October 2022, the members passed Motion 37/2021 which changes the cut-off date for authorised forest conversion from November 1994 to December 31 2020. Read more about it here.  

CEO of MTCC, Siti Syaliza Mustapha spoke about Malaysia’s commitment to maintaining 50% of forest cover. Currently, approximately 5.6 million ha is certified by Malaysian Timber Certification Scheme (MTCS), which is also looking to expand certification to non-timber forest plantation products, primarily natural rubber, bamboo, rattan and honey/honeycomb - essentially rubber and NTFPs gone industrial. There is also ongoing work to maintain its status with PEFC every 5 years and plans to look into the European Union (EU) new deforestation regulation.

The dialogue was separated into a few different sessions, each with its own focus. Stakeholders from various groups were invited to speak and share their thoughts, and the meeting was convened primarily on the new non-forest certification draft titled “Guidelines on Application of Requirements for Non-Timber Forest Products Certification in MTCS ST 1002:2021 Malaysian Criteria and Indicators for Sustainable Forest Management under the Malaysian Timber Certification Scheme”. 

Source: MTCC (2022)

In the first session, “Policy and Direction of Forest Plantations in Malaysia”, the Malaysian Timber Industry Board, Forest Development Sarawak and Sabah Forestry Department shared about the current status of Malaysia’s forest plantations and the latest goals for forest plantations. There are concerns about the lack of workers and the lack of markets. 

The second session focuses on the current and future trends of timber. As reported by MTC, Malaysia's total timber trade for 2022 (up till August) is at RM23.5 billion (Export: RM17.4 billion; Import: RM6.1 billion). Exports to the USA, Japan, Singapore and Australia grew at double digits; dominated by (45%) wooden furniture. 

Source: MTCC (2022)

Source: MTCC (2022)

The various challenges in obtaining certification include labour, the previous cut-off date by FSC and land dispute issues. 

Green Building Index (GBI) presented a brief of its rating tool which was launched in 2009 to assess and recognise buildings that meet the green standards; unfortunately, use of certified product is only one out of its 100 indicators, which is hardly encouraging of its use!

Source: Green Building Index Assessment Criteria for Non-residential New Construction (2009)

During the panel discussion, the main focus was on how stakeholders are affected by forest certifications, whether the 2010 cut-off date is still relevant and what are the impacts of any changes in the cut-off date. Seems that forest certification to some extent greatly affects businesses due to compliance but certification also helps to protect native people’s way of life. However, it seems new players in the timber industry find it difficult to be certified due to the 2010 cut-off and will benefit from the changes in the cut-off date.

The second day of the dialogue was on non-timber products. Main focus on bamboo, herbal plants and Agarwood. Global Platform for Sustainable Natural Rubber (GPSNR) also presented its involvement in the natural rubber industry and its future plans to develop the Knowledge Sharing Platform for Smallholders. In 2021, GPSNR published the Good Agriculture Practices which can be found here.

The final presentation of this session created much buzz. The Malaysia Forest Funds (MFF) introduced the country's REDD Plus plan, to help Malaysia’s commitment to achieving net neutrality under the Paris Agreement. Read more about it here, and in our upcoming blog post on it.

Source: MTCC (2022)

Source: MTCC (2022)

MTCC discussed further details of the draft guidelines on the Certification of Non-Timber Forest Products (NTFP), asking participants to provide feedback. From the floor, this included comments about the need for a more defined term as to “appropriate safety and operational equipment”, more commitment to help smallholders, to expand the coverage to plantations outside of forest areas and not to affect the rights of indigenous people. A remark was also made by SIRIM that guidelines cannot be audited. This means that MTCC needs to develop principles, criteria and indicators. 

research@segi-enam.com | 25 Nov 2022

Interview: Malaysia's hung parliament sees markets slip, but unlikely to affect growth trajectory: Observers - CNA

Segi Enam’s Research Principal, Khor Yu Leng, was recently interviewed by Channel News Asia (CNA) on her thoughts on Malaysia's economy due to the political situation as a result of Malaysia’s 15th General Election, which resulted in a hung parliament, the first in Malaysia’s history.

She shares her thoughts on the current status of the Budget 2023 and what are the policy changes Malaysia can expect to see.

Read the article here.

---

Interview: Tight Election Leaves Malaysia in Limbo - China Daily

Segi Enam’s Research Principal, Khor Yu Leng, was recently interviewed by China Daily regarding Malaysia’s 15th General Election results, titled “Tight Election Leaves Malaysia in Limbo”. Below is an excerpt from the interview:

The hung parliament is the result of feuding among political elites and a highly polarized electorate, said Khor Yu Leng, director of Segi Enam Advisors, a consultancy in Singapore. Election Day produced "surprise upsets as big names were easily toppled by the green Islamic wave", she said.

She was alluding to PAS, which has adopted green as its party color, and how linking up with PN has "harnessed youth support" and won among swing voters.

PalmTrack—Sep 2022 Wrap Up

Here is a wrap up of the some of the issues PalmTrack covered in Sep 2022:

1. Malaysia plantation labour issues seem to be escalating. There is now worrying talk about destination market checks and signs that at-risk suppliers are facing buyer jitters. Indonesia suppliers may gain. This is amidst heightened problems for authorities to deal smoothly with migrant labour recruitment compliant with Indonesia, Bangladesh, and other requirements.

2. Going by Malaysia’s palm oil production in the last 15 years, it is clear that yield-productivity management is in a major rut, a warning to producers in other countries. The more recent ups-and downs seem to be driven more by the climate cycle of El Niño dry/La Niña wet than anything else, at least at the aggregate level. Read more on PalmTrack.

3. HCPO or high FFA CPO is the big new trend at palm oil mills. The processing of loose and rejected fruits gives a product with 35-40% FFA that suits HVO and more. But Malaysia’s unfavourable pricing for loose fruit is likely to hinder its supply. Indonesia prices a premium for loose fruits and buyers should see better prospects here. We talked to specialists to find out more.

4. BOM officially declared a La Niña on 13 Sep 2022. However, the meteorological agency has stated that projections indicate this third dip to be short-lived and is expecting the phenomenon to peter out by early 2023.

5. The EU Parliament has adopted the proposal on deforestation-free products. The regulation aims to eliminate deforestation in the import supply chain for the EU for several key commodities and products, including palm oil and soy.

---

Khor Reports’ PalmTrack is an independent research service that tracks palm tanker movements and reports trade of palm products (and shipments, upon request) for selected trade routes. It features a forward-looking market topic and sharp analysis every quarter, e.g. palm biofuels issues & opportunities for Jan–Mar 2022. Subscribe now!

• Yearly
• Monthly

$380.00

Every year

$38.00

Every month

Subscribe to PalmTrack!

Subscribe to PalmTrack!

Boba Boom - Part 2: Rise of the Health-Consciousness

Back in November 2019, Khor Reports studied the bubble tea (Boba) trend in Malaysia and the sugar level in the beverages. Click here to read it.

Momentum Works and qlub recently published a report, “Bubble Tea in Southeast Asia”. It is estimated that the 2021 market size for Boba in South East Asia alone is US$3.66 billion. Clearly, this Boba trend is not dying out anytime soon. With newer brands launching, this is still an ever-growing market.

Khor Reports previously tracked the sugar level of beverages in Malaysia and found out that one serving of bubble tea is double the amount of the daily recommended sugar intake. In 2019, 1 out of 5 adults in Malaysia has diabetes and about 3.9 million people are above the age of 18. This is a worrying trend. The prevalence of diabetes is also an upward movement from 2011 to 2019. So, what measures can be taken to tackle this issue?  

Source: Malaysia Ministry of Health

Looking at Singapore, the Health Minister recently announced that Food & Beverages (F&B) outlets preparing freshly brewed beverages are to include a nutritional label on their menu to indicate the sugar level of the beverages and certain beverages are not prohibited from being advertised. Beverages falling under Grade C or D, such as Boba, will be affected by the advertising prohibition as most of their beverages have high sugar content.

Source: Singapore Health Promotion Board

As consumers become more health conscious, they may soon start opting for beverages with Grade A or B. Shops will need to revamp their menu or change the amount of sugar used in their beverages in order to attract those consumers. To reverse the trend of diabetes incidences, Malaysia should adopt this policy to encourage its citizens to choose healthier beverages option.

Wong Ivan, Guest Writer | 4 Oct 2022