Food and fuel; fuel and food – these are the two essentials that humanity has sought to produce, and provide for, since time immemorial.
Palm oil – first cultivated by the ancient Egyptians, then more recently in west Africa and latterly in Malaysia and Indonesia – is a valuable source of both. Whether as a cooking oil, food ingredient, biofuel or feedstock for energy generation, the world is truly powered by palm oil.
A new study by the consultancy Europe Economics measures, for the first time, the benefits that palm oil brings to the global economy – billions of dollars in GDP benefits; millions of jobs created and sustained; and downstream industries nourished. The scale and reach of palm oil’s positive impact on the global economy is stunning.
In Malaysia, we know all about the benefits of palm oil. Oil palm cultivation is a source of income and pride for 300,000 small farmers in Malaysia, bringing investment and prosperity to previously desolate rural communities. Over 1 million Malaysians are engaged in the palm oil sector, and the tax revenue for producer countries is invaluable.
What is different about this groundbreaking new work by Europe Economics is that it does not measure those impacts in producer countries. Rather, it measures purely the impact that palm oil has on countries that import the commodity – China, India, European Union (EU) member-states and the US, among others.
Insidious reason for criticism
It is no secret that campaigns are underway in some countries to restrict the use of palm oil – often on the basis that it is harmful to the environment (it isn’t) or that there are ‘possible’ health concerns (there aren’t).
Malaysia has strict and well-enforced environmental laws and regulations, and its government protects over 50% of the land area as forest, a unique environmental commitment recognised by the United Nations.
As a food ingredient, palm oil is a balanced fat, typically used as a replacement in food for dangerous industrially-produced trans fats. The phasing out of trans fats and other less-efficient fats explains much of the increase in palm oil exports, which have quadrupled since 1997.
The real reason for the ongoing criticism of palm oil is far simpler, and far more insidious. The protectionism that stalks world markets is readily apparent in the rhetoric of palm oil’s opponents.
The simple fact is that a lower-cost, more efficient, more versatile oil from Asia is gaining market share in Europe and elsewhere, and domestic competitors are worried. They are right to be: in an open marketplace, palm oil has been consistently proven as the best option for businesses and consumers.
Domestic lobbies, though, are politically powerful, and have pushed governments around the developed world to tilt the market in their favour – whether through restrictions in Italy, taxes in France or the straitjacket of NGO-led certification systems. The palm oil industry faces all of these challenges and yet continues to succeed.
When the next lobbying to restrict palm oil comes – which, surely, it will – governments must consider the whole picture. The same competitive advantage that endears palm oil to producers, brings with it the range of benefits outlined by Europe Economics: jobs, growth, investment, tax receipts.
Taxing palm oil – as recently proposed in France – hurts the economy; restricting use for protectionist reasons – as proposed in some Italian regions – hurts the economy. This is before we even mention the knock-on effects of palm oil’s use, such as lower costs leading to lower food prices for consumers.
Restricting or demonising palm oil imports is an economic strategy headed for disaster. This is true not only intuitively, but now quantitatively, as proved by this latest research. Almost every major economy benefits from palm oil imports, often to the tune of thousands of jobs and millions of dollars.
Palm oil has been a blessing for Malaysia for many decades, bringing development, employment and hope. Those benefits, in the era of globalisation, are now being shared with everyone.
Dr Yusof Basiron
CEO, MPOC
