Yes Minister! Palm oil drives GDP growth, rural wealth creation

SARAWAK holds the record for being the state with the largest land areas planted with oil palm.

In 2023, the size of the planted area for oil palm in Sarawak was approximately 1.62 million hectares, a slight increase compared to the number recorded in 2021.

The acreage accounts for 8.6 per cent of the total Malaysian oil palm-planted areas, followed by Sabah with 1.51 million hectares, or 26.6 per cent. Oil palm-planted area in Peninsular Malaysia amounted to 2.54 million hectares, or 44.8 per cent.

The oil palm industry in Sarawak contributes significantly to the state’s gross domestic product (GDP). In 2021, oil palm contributed 68 per cent of Sarawak’s GDP in the agriculture sector.

It is expected to add US$3.6 billion to the state’s GDP by 2030. It is also expected to create up to 70,000 new jobs in Sarawak.

Since 2015, Malaysia’s oil palm industry’s performance has remained stable and positive. Malaysia exported around 25 million tonnes of palm oil and palm-based products in 2022 and the country’s palm oil industry was valued at around RM137 billion, contributing RM35 billion to the total GDP.

Malaysia is currently the second largest producer of palm oil in the world, and it currently accounts for 23 per cent of world palm oil production and 31 per cent of world exports. In all this, Sarawak oil palm industry takes centrestage and is a key driver in strengthening and stabilising the sector’s contribution to the GDP.

Oil palm is regarded as the most efficient oil-bearing crop in the world, requiring only 0.28 hectares of land to produce one tonne of oil, compared to 2.24, 1.49, and 1.37 hectares for soybean, sunflower, and rapeseed, respectively. This was based on the findings of several studies revealed by the Malaysian Palm Oil Council (MPOC).

In addition to its superior economic competitiveness, oil palm’s high yield qualities may be viewed as a guarantee of successful returns. They characterise the economics of the oil palm industry.

Rural wealth creation

Since wealth is the stock of assets that can contribute to people’s well-being, increasing wealth is important for increasing well-being.

However, wealth creation in aggregate may not improve the well-being of all people in a community. This depends upon the distribution of wealth ownership and benefits among community members and whether the social benefits of the investment exceed the social costs.

Although increases in aggregate wealth may not be sufficient to improve the well-being of everyone in a community, increasing wealth is necessary to sustainably increase well-being. The philosophy of ‘wealth creation’ is generally central to the plantation development policies and plans that seek to diversify income and business opportunities for the rural community, especially longhouse communities with significant Native Customary Rights (NCR) land assets, and contribute to enhancing their living standard and ushering them into the mainstream of modern economy.

Yes, Minister! Increasing wealth is crucial for boosting social and economic well-being since it is derived from locally produced assets like land and agricultural products, which may enhance people’s quality of life.

Furthermore, long-term solutions to poverty and the rising desire for higher social pursuits necessitate the efforts to develop and use money efficiently, as people’s income and consumption prospects are dependent on their wealth.

Participation in oil palm plantations has also caused many rural populations to abandon traditional agricultural methods, which were largely ineffective and did not previously offer a steady source of revenue.

The independent cultivators in particular have been willing to forgo their traditional way of farming, including dependence on ecosystem services such as river water supply and natural forest products, in return for substantial economic returns from oil palm cultivation.

With growth and development of these rural centres, the state benefitted from the ever increasing economic wealth generated, both directly and indirectly from the palm oil industry’s rise.

Hence, what unfolds is the planned growth of the rural economy and the palm oil contribution to the wealth of the rural community.

The Sarawak government has assisted to the growth of the palm oil industry through joint ventures with private companies and also infrastructures like roads, airports, ports and other amenities

In return, the sale of palm oil from Sarawak generates revenues for the state through sales tax, land tax and corporate taxes.

The benefits arising from the cultivation of oil palms are numerous, both directly and indirectly, especially from the spillover effects like increasing demands for goods and services, which are all contributing to the growth of the rural areas and the state in general.

Departure from traditional livelihood

Long before the availability of infrastructure and public utilities and the arrival of oil palm, the living conditions might not be not favourable and much of this was attributed to geographical disadvantage faced by the longhouse community.

But the conditions turned out to be a motivation of sorts that drove the local residents to venture beyond their traditional sphere and seek new opportunities in order to earn higher income and upgrade their living standard.

Oil palm arrived about two decades ago and offered new hope. It emerged as a gamechanger and paved the way for a prospective future.

The experience of the longhouse community in Sebauh, Bintulu, bears testimony to this.

The oil palm plantation development in Sebauh is managed by Ta Ann Pelita Silas Sdn Bhd (TAPS), a joint-venture company where the shareholders are Ta Ann Pelita Silas Plantation Sdn Bhd (60 per cent), Land Custody and Development Authority or PELITA, the acronym in Bahasa Malaysia (10 per cent), and the participants from the Sebauh longhouse community (30 per cent).

The modernising experience of the Sebauh longhouse community reinforces some of the existing literature that oil palm development plays a significant role in alleviating poverty and providing a better standard of living to many rural communities.

However, the processes of inclusion and exclusion from this development depend on the ability of the local villagers to adopt oil palm cultivation as a new livelihood strategy – an issue that had been amicably resolved following consultations among the stakeholders.

There do not appear to be many viable alternative livelihood pathways besides the oil palm sector for the impacted longhouse community.

The main drivers for development are road constructions to these rural communities where oil palms are cultivated, resulting in accessibility and spur even more agricultural activities as well as support industries for these developments.

The emergence of several sizable estates in Sarawak’s rural regions has led to the quick expansion of the nearby rural centres, which serve as the primary suppliers for the mills and other new estates’ needs.

To meet the ever-increasing need of the estate workers, new complementary enterprises have also appeared in these rural centres.

UN SDGs

Yes Minister, we are proud that Sarawak is in the forefront of consistently implementing advancements in oil palm agriculture and palm oil processing, aimed at making palm oil production more sustainable and environmentally friendly.

As stated in Malaysia’s national development roadmap, the 12th Malaysia Plan (12MP), Sarawak complies with the country’s commitment to the United Nations Sustainable Development Goals (UN SDGs) Agenda 2030 to promote and achieve greater sustainability commitment within the oil palm business.

Plantations, independent and organised smallholdings, as well as palm oil processing facilities, must all be certified sustainable under the Malaysian Sustainable Palm Oil (MSPO) certification programme, which was launched in 2015 in accordance with the UN SDGs.

The MSPO, which became mandatory on Jan 1, 2020, tackles important issues like deforestation, biodiversity loss and conservation of high biodiversity value areas, climate change, planting on peatlands, fire, haze, and greenhouse gases (GHG), employment and working conditions, child and forced labour, communal NCRs, land and ownership rights, and employees’ health.

The MSPO standards were redesigned and simplified in 2022 to five principles: social, health, safety, and employment conditions; transparency; management commitment and responsibility; compliance with legal and other requirements; and the environment, natural resources, biodiversity, and ecosystem services.

The oil palm sector in Sarawak has been able to follow the route that offers a balance between environmental sustainability and human profitability by adhering to and respecting the MSPO’s core values.

Yes Minister, there is a common resolve to confront the various obstacles the palm oil sector faces, especially in adjusting to stricter environmental rules, in the government-industry interaction targeted at tackling important concerns within the business.

Zero-waste crop

Oil palm is a zero-waste crop, according to research, which puts the business in line with the 12MP, which lays out objectives to make the country carbon neutral by 2050.

Shells, fibre, empty fruit bunches (EFB), and palm trunks are examples of oil palm biomass. After being collected and crushed to extract the oils, oil palm fruits yield oil palm fibres, palm kernel shells, and EFB.

The palm trunks may be used for organic fertiliser, mulching, particleboard, fibreboard, plywood, papermaking, and other purposes.

Ultimately, the commitment to zero-waste production results in maximum utilisation of the tree from the kernels, to the trunks and leaves.

Yes Minister, nothing goes to waste.

Switching to alternative vegetable oils would not reduce the impacts given that other oil-bearing crops have much lower yields per hectare than oil palm.

New innovation to brave challenges

A typical large oil palm estate will need hundreds of workers during the early stage of planting, and the number of workers continues to grow as the estates develop including machinery’ servicing, roads maintenance, estates upkeep, spreading of fertilisers, pests controls, and drivers for trucks and other machines.

One of the critical issues faced by the players is the industry’s need for more advanced technology to meet regulatory standards, especially in areas like by-product management and emissions control.

Many current processes lack the necessary technological solutions to align with environmental expectations, placing additional pressure on operators.

In mitigating this, the industry players should engage the relevant IT application or even employ experts to develop innovations and applications specific to their needs.

Meanwhile, Sarawak Plantation Agriculture Development Sdn Bhd’s executive chairman Datuk Amar Abdul Hamed Sepawi has revealed a recent success story with the invention of a cutter, including the incorporation of remote control to facilitate easier positioning of the cutter on the tree, contributes significantly to the issue of workers who are mostly from neighbouring countries.

Designed and built by Sarawak Plantation Agriculture Development in collaboration with its partner from China, the machine-operated harvester with digital remote control, named ‘Lipan’, may well be the answer to the issue of labour shortage and also a gamechanger to the plantation business.

As of right now, the machine can harvest 38 bunches each hour, or 300 bunches every day.

Considering that each fruit bunch weighs an average of 10kg, this translates to a daily production of three metric tonnes of fruits.

* Toman Mamora is ‘Tokoh Media Sarawak 2022’, recipient of Shell Journalism Gold Award (1996) and AZAM Best Writer Gold Award (1998). He remains true to his decades-long passion for critical writing as he seeks to gain insight into some untold stories of societal value.