Malaysia is a country that is built for business and trade. We are relatively small geographically and in population terms; but we have a dynamic economy, a skilled and educated workforce, and we are situated at the crossroad of strategically important trading routes.

It is therefore natural that Malaysia’s trade, as a percentage of GDP, is 133% – compared with a global average of just 56%.

As Malaysia’s business leaders look around the world, it is clear that there is a lack of leadership in international trade. The US, China and the European Union (EU) are locked in bitter bilateral and trilateral disputes over trade, and other countries risk being caught in their lines of fire.

For a global exporter such as Malaysia, and for our strategic national commodities, this is potentially highly damaging. If and when this impacts Malaysia, we will need to take decisive action.

Prime Minister Tun Dr Mahathir Mohamad has identified the importance of Malaysia standing up to those who wish to undermine our overseas exports.

Recently, the Prime Minister stated that Malaysia must “fight their argument that the palm oil industry is behind deforestation and has a bad impact on climate”. He rightly pointed out that “this is not true at all”.

Dr Mahathir was referencing the EU, which has spent much of the past 12 months attempting to ban palm oil biofuel exports.

Dr Mahathir is right, not just in his analysis of the EU’s flawed arguments – it is a scientific fact that palm oil is far more efficiently produced than competitor oils, and therefore has a significantly lower environmental footprint, but also in his strategic approach. Malaysia should not wait for others to lead or to continue making claims before we respond.

The private sector has an important role to play. The Prime Minister and the government cannot be expected to shoulder the burden of leadership alone. Those of us in the industry must be ready and willing to do our share of the work.

After all, Malaysia’s palm oil business leaders have daily interactions with customers, suppliers, traders, multinationals, NGOs, multi-stakeholder groups, certification bodies and journalists.

In each of these encounters we must strongly defend Malaysia’s record of environmental and social stewardship.

The recent EU attempt to ban palm oil biofuels was an excellent example of how Malaysians utilising this approach can defeat a major threat to our exports. The small farmers of Malaysia led a strong campaign that ultimately won the day in Brussels.

The palm oil biofuels ban is no more. But new threats are already surfacing, however, and will require immediate action in Europe.

What are these new threats facing the palm oil sector in the weeks and months ahead – the issues where, as the Prime Minister states, we will need to “fight the argument”?

First, the EU is now considering whether to classify palm oil biofuels as ‘high risk’. They will use unproven scientific methodologies – Indirect Land-Use Change (ILUC) and High Carbon Stock (HCS) – in their attempt to install a de facto ban. Despite Malaysian oil palm being grown on lands largely converted from coffee, cocoa and rubber which were planted since the earlier part of last century, there have been calls from the EU to disqualify palm oil using the ILUC methodology.

This fight will unfold quickly: between July 2018 and February 2019, the EU will determine whether Malaysia’s palm oil biofuels are high risk. If this happens, it will provide the EU with a convenient ‘justification’ to discriminate against palm oil biofuels imports.

Secondly, the EU is pursuing a ‘deforestation regulation’ (known in Brussels as the Action Plan on Deforestation). This seeks to regulate and restrict all palm oil imports into the EU. It has the potential to wholly undermine the Malaysian palm oil industry, regardless of Malaysia’s excellent track record in maintaining its forests.

This is not a secret. European leaders, including the ambassadors of France, the UK and the EU itself who are stationed in Kuala Lumpur, have signalled clearly that the new efforts to restrict palm oil are coming. The deforestation regulation will target not only palm oil from Malaysia, but potentially almost all commodities and crops from developing nations.

The opportunity is there for cooperation with our friends and allies across the developing world, to build a mutually beneficial stance against this regulation. The Council of Palm Oil Producing Countries can take a leading role in defending the industry.

However, our first duty must be to Malaysia. We must protect our model of oil palm development, our small farmers, and our exporters. This will require both defending Malaysia’s track record, and also proactively communicating the positive differentiators that make Malaysia the world’s gold standard for oil palm cultivation.

We know from experience that this will not be easy, nor without complications. That, though, is what leadership entails.

The Prime Minister is right that Malaysia must counter the EU’s arguments. It is time for the private sector and Malaysian citizens at large to do our part once again.

Datuk Lee Yeow Chor
Chairman
Malaysian Palm Oil Council

(The article appeared in The Star, Aug 17, 2018)


 

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