Reality Check for Malaysian Palm Oil

Malaysian brand and new technology

Datuk Franki of Sime Darby Plantations agreed that it is no longer business as usual for plantation companies.

He said 2015 was undoubtedly one of the toughest for the industry, with El Nino hitting production and prices falling in the second half of the year. Increasing demands related to sustainability have become another area of concern.

“We have earned RSPO certification but it is not enough, as Green NGOs, social NGOs, human rights NGOs and many other groups continue their attack or make more sustainability demands on palm oil, and this will only get more intense.”

He suggested that the Malaysian brand should be positioned as the preferred global supplier of sustainable palm oil.

“The big companies are already RSPO-certified. The Malaysian Palm Oil Certification Council could accelerate the certification of smaller companies and smallholders. In that way, we can go out and declare that Malaysia produces 100% sustainable palm oil.”

He further said there are opportunities in moving towards premium oil and differentiated products, which would help mitigate the impact of low commodity prices.

On dealing with labour costs, Franki said plantation companies need to mechanise, automate and move to digital technology to enhance productivity and operational efficiencies. However, labour will still be required; as such, associated problems will have to be overcome.

“Every time there is an issue with labour recruitment and approval, operations get delayed and this has an impact on the company’s bottom line,” he said.

“We contribute some RM60-70 billion to the GDP. The government should make it easier for the industry to bring in workers and reduce the levies, as it is currently a very expensive process.”

Another major challenge is getting those of ‘Gen Y’ to take up careers in the industry upon graduation, as many now do not find this an attractive proposition.

“We have to think about how to attract them to join the industry. We need to go out and attract the best brains from universities,” he said.

He noted that adopting new technology, mechanising and automating certain procedures could draw young people into the industry.