Toward reforms in the Malaysian Palm Oil sector
December, 2021 in Issue 4 – 2021, Cover Story
MPOC sat down with Malaysia’s new Plantation Industries and Commodities Minister, the Hon. Zuraida Kamaruddin, to discuss the state of the palm oil sector; opportunities for market expansion in Asia; ongoing global regulatory threats; and claims of forced and child labour on plantations.
How do you assess the state of the Malaysian Palm Oil sector?
In a nutshell, it is a strong, resilient and innovative industry that is of strategic importance to the country. The industry is the key driver of Malaysia’s agriculture and agro-based sectors. Malaysian Palm Oil and its products are now sold in more than 200 countries, generating about RM73.3 billion in export revenue in 2020.
Malaysia has steadfastly worked towards promoting the important message that palm oil is a nutritious and affordable food for all. Our scientists – who also collaborate with renowned research institutions worldwide – continue to explore new technologies to ensure that the industry remains dynamic, spawns high-income jobs and entrepreneurial opportunities, and raises export earnings. At the same time, the government is striving to establish a zero-waste industry that is sustainable, well-regulated and mindful of the needs of end-users.
Malaysian Palm Oil has had an overwhelmingly positive impact at home by decreasing rural poverty, increasing employment, and improving the quality of life of small farmers and their families by bringing infrastructure, education and healthcare services to even remote areas. It is a decades-long story of achievement and social progress. This is an unassailable fact that has been documented by the United Nations and World Bank, among leading international bodies.
What is your view of the palm oil trade in the Asia-Pacific region, especially China and India?
I look forward to working with the industry to strengthen our position in these fast-growing markets, which hold out much promise. It helps that these countries are already our allies and regional neighbours. By stepping up trade ties with them, we can reduce reliance on certain legacy markets, especially those that have launched regulatory campaigns against Malaysian Palm Oil in recent years.
In 2020, India and China imported a total of 5.5 million tonnes of palm oil. From January to October 2021, they imported 4.3 million tonnes, which accounted for 34% of the Malaysian Palm Oil exported over this period.
China and India are expected to become the largest markets for Malaysia’s palm oil industry in the foreseeable future. A vast population of 1.44 billion in China and 1.39 billion in India will support increased imports of vegetable oil. Malaysian Palm Oil products, which are readily available and competitively priced, are poised to meet the growing demand.
Malaysia is already right at the doorstep of the Chinese consumer market with the establishment of the Palm Oil Research and Technical Service Institute of Malaysia (PORTSIM) in 2005. It provides testing and analytical services related to the quality, handling and usage of palm oil, while undertaking technical promotion and marketing activities for the Malaysian Palm Oil sector.
PORTSIM will enhance collaborative opportunities for R&D, in order to intensify and consolidate the use of Malaysian Palm Oil in the formulation and manufacture of China’s food and non-food products.
When we talk about regulatory threats, the discussion usually veers to actions initiated by Brussels. What can you tell us about your plans to address the ongoing legislative and regulatory threats from the European Union (EU)?
The EU is an important market for many of our largest exporters. Some of the biggest customers of Malaysian Palm Oil are based in Europe. At the same time, the global supply chain is interconnected.
The main challenge is that the European Commission and European Parliament are seeking to regulate Europe’s imports of palm oil. This is associated with the trade protectionism agenda of the EU as a rapeseed oil producer. However, the production of rapeseed oil is not as competitive as that of palm oil. There is no doubt that Malaysia has a superior product in terms of productivity, versatility and price.
It would be better to have a relationship based on trust and fair trade rather than geo-political tensions. This is what I will seek to build. Malaysia has always adopted a diplomatic approach in addressing trade issues relating to palm oil. We will therefore continue to engage the EU constructively to resolve issues.
Malaysia’s environmental stewardship has already been acknowledged by the EU. Brussels should therefore also accept the progress made toward sustainability of the Malaysian Palm Oil sector. If improvements are deemed necessary, the EU should consider offering assistance – technical or financial – to move matters forward.
As for Malaysia, the consultation process over the upcoming EU Due Diligence proposals will provide an opportunity to ensure that our trade interests are incorporated into regulations. We will also utilise various avenues to exchange unambiguous information with the EU on the sustainability of our palm oil industry. These include the ASEAN-EU Joint Working Group on Palm Oil and other collaborative projects.
Still, the ‘softly-softly’ approach may not always work out, and Malaysia must be prepared to take firm action whenever required. This happened with our attempt to engage the EU over its stance against the use of palm oil in biofuels from 2030.
The consultation process via the WTO did not produce a mutually-acceptable solution. On April 15, 2021, therefore, Malaysia requested the establishment of a panel through the WTO Dispute Settlement Body to counter discrimination against palm oil under the recast Renewable Energy Directive and its delegated regulation.
Malaysia is a recognised leader in palm oil sustainability. However, there has been criticism that there has not been enough progress on the rights of workers. How will this be redressed?
Do we have challenges related to labour issues in the palm oil sector? Yes, but we are working to improve governance and enforcement practices. The government has the tools to do so under the Malaysian Sustainable Palm Oil (MSPO) certification standard, and I will be considering the best way forward.
The MSPO standard is built on seven principles that form the general requirements of a management system framework. This, in turn, promotes the three pillars of sustainability – to be economically viable, socially acceptable and environmentally sound.
The principles cover:
Each of the seven principles also has specific criteria and indicators that the Certification Bodies use during the audit process, to determine compliance and award certification.
In addition, the Ministry of Human Resources (MOHR) launched the Working for Workers (WFW) application on May 3, 2021; this is a platform for 15.7 million workers, including foreign workers, to submit complaints related to labour issues. The WFW is a medium to protect the rights and welfare of workers affected by employers’ misconduct. This indirectly ensures compliance with our labour laws.
The WFW application enables workers to report 17 types of complaints online, via a system managed by 80 Labour Offices nationwide. The nature of complaints covers contract disputes; late payment of salary; being forced to work during leave; unfair dismissal; failure to report the employment of foreign workers; improper treatment; and employees being prevented from working from home while the Covid-19 Movement Control Order was in place. I have full confidence that the MOHR will succeed in resolving any problems that arise.
At the same time, our largest exporters and government-linked companies have signed up to a range of standards and commitments to protect the interests of employees.
The US State Department demoted Malaysia to Tier 3 in its Trafficking in Persons Report 2021. Is this a fair assessment?
No, it is unfair and an overly simplistic assessment. We will continue to work with the US government to address its concerns and set the record straight. At this juncture, any intervention from the Malaysian government should be focused on improving workers’ rights through legislation, enforcement and labour policies.
We hope for cooperation and goodwill from all parties, especially since Malaysia has demonstrated a strong commitment to addressing labour-related issues.
You have dedicated a substantial part of your career to the advancement of women. Are you planning to extend this to the plantation sector?
Improving the rights of women – in particular, expanding female participation in Malaysian life – has been a key objective of my political career. I am proud to have founded the Institut Wanita Berdaya (Institute of Empowered Women) and the Women’s Institute for Research, Development & Advancement. I also serve as President of the Council of Malaysian Women Political Leaders and as Malaysia’s Country Ambassador for Women Political Leaders.
I look forward to working with Ministry officials, the private sector, civil society and other key stakeholders to ensure that women working throughout the palm oil sector supply chain have the same rights and opportunities to succeed. I have also said that I would like to see more women leaders appointed to corporate boards and as heads of various agencies. Let me set an example that others can follow.
Since the palm oil industry has traditionally been a male-dominated one, I foresee some resistance to my ideas. However, the management consulting firm McKinsey – in a study themed ‘Delivering through Diversity 2018’ – has revealed a positive correlation between having a big proportion of women leaders in large companies and the corporate financial performance. This was particularly so in senior executive roles, where the majority of strategic and operational decisions are made. Similarly, I believe the palm oil industry will reap the results of women’s participation and gender mainstreaming.
How do you see these priorities applying to your role as Minister of Plantation Industries and Commodities?
The plantation sector has made wonderful advancements for Malaysia, over many decades now. It has lifted millions out of poverty in rural areas and created jobs, generated tax revenues and rendered economic growth. In my considerable experience founding NGOs and charitable groups, especially the ones focused on women’s rights, I feel that we have an opportunity to bring some new ideas to the plantation sector.
I feel very heartened and encouraged already from my initial conversations with palm oil companies and Ministry officials. There is clearly a strong collective willingness to support reform where needed. This will provide a durable basis for all stakeholders to work together to implement changes. Improving the palm oil community can only lead to the industry thriving at every level.
