Malaysia lays out plans to strengthen palm oil market

Market: Agriculture, Biofuels
06/01/22

Malaysia's palm oil council (MPOC) will focus on expanding into developing markets, cultivating downstream manufacturing demand and promoting regional acceptance of its homegrown sustainability certification in 2022.

Speakers at yesterday's annual MPOC industry seminar agreed on the strategic importance for Malaysia to strengthen its market position regionally, while boosting the fight against negative consumer perception and anti-palm policies which have damaged demand outlook in the EU, UK and US.

MPOC sees food service in Vietnam and the Philippines, consumer cooking oil markets in the Philippines, packed food and oleochemicals in Japan and biodiesel in South Korea as the key growth sectors for Malaysian palm oil in the Asia-Pacific, marketing director Faisal Iqbal said. Vietnam's food service sector should see the strongest growth over the next five years, projected at 8.65pc CAGR, while Japan's packed food industry is forecast to reach the highest value of $204bn at the end of the period.

Developing food service and confectionery sectors in MENA countries including Turkey, Algeria and Egypt were also identified as strong growth markets for Malaysian palm oil, while Kenya and Mozambique are expected to expand as Sub-Saharan African re-export hubs. Both countries have consistently increased Malaysian palm oil imports in recent years, and the African Continental Free Trade Area has lowered barriers to regional palm oil trade since its launch in January 2021.

Alongside promotional events to grow regional markets, MPOC aims to brand and differentiate Malaysian palm oil and build acceptance of the Malaysian Sustainable Palm Oil (MSPO) certification scheme, according to MPOC promotions and corporate communications deputy director Razita Abdul Razak. The council wants ASEAN to officially recognise the scheme within the next two years, so it can then be included in sustainability chapters of the bloc's free trade arrangements, she said.

So far the scheme has failed to garner widespread international market acceptance since its launch in 2015, despite more than 90pc of Malaysia's oil palm planted area being MSPO-certified. A small win came when Japan endorsed MSPO palm products in its sourcing policy for the 2020 Tokyo Olympics. But the country recently rejected the scheme on the basis that it is not stringent enough for certifying palm kernel shell imports under its renewables feed-in-tariff system.

Malaysia is eager to regain control of the sustainability narrative of its palm oil, which government representatives will appear in Brussels in April to defend as part of a WTO dispute panel over the EU's phase-out of palm-based biofuels.

But several participants representing Malaysian palm industry stakeholder groups that took the floor during the seminar's open dialogue segment were critical of the MPOC's approach to-date. Resources funnelled to promoting MSPO through direct talks with regional governments and manufacturers, and at business-facing events like the Dubai Expo, have arguably been outdone by social media campaigns from NGOs spreading anti-palm sentiment amongst consumers, in the west and increasingly closer to home.

Minister of Primary Industries and Commodities Datuk Hajah Zuraida Kamaruddin said she has heard the comments, and that her ministry is working with the MPOC on an updated marketing strategy master plan for Malaysian palm oil. "Currently we have been very defensive… we have to use our limited budget wisely to promote the positive things we're doing and change our palm strategy from defensive to offensive".

The MPIC officially launched one such pro-palm oil programme during yesterday's seminar — a series of "Mari Kenali Sawit" (Let's Get to Know Palm Oil) books which aim to disseminate the socio-economic benefits of Malaysian palm oil among local students.

Kamaruddin said she plans to engage with European NGOs and MPs ahead of the WTO case hearing to present the positive reality of Malaysian palm oil, and invited seminar delegates from the industry to join her congregation.

Palm oil is one of Malaysia's top exports, with sales reaching their highest-ever monthly value of RM7.91bn ($1.88bn) in November 2021, according to the national trade promotion agency. Palm oil-based manufactured products also had the highest value of all manufactured goods exported in November, which totalled RM95.41bn.

Kuala Lumpur has allocated RM20mn to counter anti-palm oil campaigns in its 2022 budget.

By Lauren Moffitt

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