Malaysia - Sarawak palm oil concerns

Khor Reports blog exclusive: Sarawak palm oil has expressed concerns about the new TFT-Wilmar procurement policy which states that come 2016, it will only buy from planters who commit to no development on peat of any depth. Sarawak has several peat zones and several plantations have some land bank on peat. Malaysia palm oil watchers are looking out this month for other plantations to sign up to more rigorous pledges than RSPO; either signing on with TFT-Wilmar or proposing something similar.

Khor Reports attended at MPOC's forum at Kuching, Sarawak on Monday 10 February 2014 where we listened to the speeches and spoke to knowledgeable people on the side-lines:

1)  A keynote address by the Deputy Chief Minister, Alfred Jabu, expressed strong concern over new policies affecting the Sarawak palm oil sector: a barrage of new policies from developed countries is said to be tantamount to stifling (state) government programs on peatland abodes and native-customary right (NCR) areas with secondary forests. Jabu pointed out that Sarawak still has a good percentage of tree cover and that it has a right to economic development, just as other developed countries have substantially deforested to do likewise in the past. Palm oil development has been used as part of the state's poverty alleviation and high income generating project. Sarawak has 46% of its population or 1.15million people in rural areas. In peatland abodes there are 236,000 people and in NCR areas there are some 380,000 people. So, a "selfish boycott" would impact these people. Jabu said that it is time to "question the NGO lobby... some key criticisms are flawed.. well-meaning sentimentality can impact those working their way out of poverty." He worried that "commercial rivalries and jealousies are fertile ground for NGOs to create havoc from far away." Thus, Sarawak authorizes are engaging with Europe-based think tanks and policy makers to bring them the facts of the situation. He also pointed to the good work of SALCRA, which has paid dividends of some RM635 million to 22,000 landowners (time period not indicated). SALCRA has a policy of zero-burning and it has been asked to expand these activities in oil palm development.

2) Khor Reports was also interested to ascertain if there were any socio-political risks. We spoke to a socio-political analyst who explained that the peatland zone (coastal) is inhabit by ethnic groups who are mostly followers of Islam. The interior mineral soils of NCR areas are mostly inhabited by Dayaks, most of whom are Christians. As always, Malaysian politics has an ethnic-religious dimension. Malaysia is a plural society where big business-economic changes can trigger socio-political concerns.

3) A question was also raised during the Q&A on the competition act; what if there are unfair trade practices by dominant players? It is apparent that the Malaysia industry and policy makers have looked into the act and its market access impact clause. In a separate conversation with an industry group, we also found that some new projects have been designed so that collaboration by several commercial companies do not fall on the wrong side of the act.

The palm oil supply chain is facing significant changes as its dominant players shift to meet buyer's requests on sustainability. We are entering a phase of heightened supply-chain change. Regulatory and socio-political questions are starting to be asked. These bear watching.


Updated at 4pm for news: Wilmar "will no longer buy palm oil from firms planting in cleared forest and peat swamp from next year out of environmental concerns. Sarawak Land Development Minster Tan Sri James Masing said Singapore-based Wilmar International Ltd conveyed its decision to the state in December. “Since most of the state's oil palm are grown in cleared forests and peat swamp, (that means) they won't be buying from us....Wilmar said from next year, it would buy CPO from oil palm grown in “areas with high carbon content” and from oil palm planted in forests before 2005. Masing said Wilmar buys 45% of Sarawak's crude palm oil (CPO) and refined it at its 10-year-old Bintulu refinery... “It's pure economics and Wilmar is being used by the sunflower and soya bean producers to bully Sarawak.” (Masing said)" newslink

Updated 5.20pm for Bernama newslink: