To encourage Malaysia’s palm oil industry to move downstream and add value to end-products, the government has allocated RM280 million in grants under the 11th Malaysia Plan (11MP).
Apart from targeting the big players, the government is assisting small and medium enterprises (SMEs) by dedicating RM50 million of the grants to this group for the first time.
Plantation Industries and Commodities Minister, the Hon. Datuk Seri Mah Siew Keong, said the grants are aimed at encouraging domestic manufacturing of palm-based food and health products, as well as chemicals or high-value palm oleo-derivatives.
“We want to invite the industry to work with us, and take up these grants,” he said in an interview.
Of the grants, RM100 million is allocated for the manufacture of high-value palm oleo-derivatives or chemical products; RM100 million for food and health products; RM30 million for clinical trials; and RM50 million for SMEs.
SMEs are not expected to produce oleo- derivatives, as this involves costly technology, but could incorporate the derivatives into products, Datuk Seri Mah said.
For example, adding red palm olein to a food product would enable the business operator to add value and market the item as a health food.
In 2015, 68.6% of Malaysian palm oil exports were within the upstream and midstream segments, consisting of CPO and processed oil. The export value of CPO was RM12 billion, while processed oil brought in RM28.2 billion.
The downstream sector, although accounting for only 30.1% of total exports, saw oleochemicals raking in RM14.9 billion. Exports for finished products were valued at RM1.7 billion.
The Minister noted that the export value of finished products is significantly higher and stressed that industry players have the potential to earn much more by moving further downstream.
“We really need to add value to our exports, and that is why we are offering these grants. If we want to be a game-changer and to increase our export value, we have to shift our focus to downstream and end-products. This is the strategic shift that we want to see,” he said.
In 2015, the export of commodities and commodity products generated RM117.16 billion, the second-largest revenue earner after electronics. Palm oil exports were valued at RM63.2 billion.
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