The implementation of the European Union Deforestation-free Regulation (EUDR) will not affect Malaysia’s palm oil growth and revenue as European Union imports are insignificant compared to other countries.
Malaysian Palm Oil Board (MPOB) chairman Mohamad Helmy Othman Basha said Malaysia exported about 1.5 million tons to the EU from a total production of about 20 million tons last year. Therefore, the amount is small.
“We know the consumption growth of palm oil is not coming from EU but it will be from India, China, Africa, Middle East and other places. Hence, if we look from the revenue perspective, even if we sell less to EU, we could still sell to other countries,” he told Bernama during the 10th International Planters Conference.
In 2022, the EU imported about six million tons of palm oil.
Furthermore, Mohamad Helmy said that it is hard for new areas to be developed for oil palm plantations, which means potential palm oil growth is very limited while consumption will keep growing.
Fixing the growing narrative
While revenue will be affected by the EUDR, there are concerns about the narrative being created about various issues – the environment, labor and deforestation – in Malaysia’s palm oil industry which have to be cleared.
“We want to counter this upfront because these issues will influence other consumer countries going forward, even India at some point in the future. So, we want to put a stop to this. Otherwise, it will generate and spread a bad image about our palm oil industry,” he explained.
For instance, he said big western multinational companies operating in Malaysia such as Nestle will still buy palm oil (to manufacture their products) for the domestic market, but not for export purposes, as guided by its corporate policies and procedures.
“Public opinion shapes the way policies are being formulated in their country and this is why we really need to intervene before it starts spreading. Otherwise, it will be too late.
“Of course, we are not going to fix the problem and change perception overnight but if we do it now, hopefully next generation and even the current generation will learn (a different narrative) about our palm oil industry,” he said.
Deputy Prime Minister Datuk Seri Fadillah Yusof recently led a highly successful mission to meet key EU lawmakers to seek solutions regarding the bloc’s unjust deforestation law, called EUDR, which could dampen the palm oil industry.
The EU mission, in collaboration with Indonesia under the Council of Palm Oil Producing Countries (CPOPC), was successful in getting assurances of more engagement with the EU before the EUDR, aimed at reducing global deforestation, is enforced.
Within 18 months after coming into force, the European Commission will announce which producer countries – including EU member states – are deemed low, medium, or high risk based on their rate of deforestation and forest degradation, and the existence, compliance with, and effective enforcement of laws protecting human rights, the rights of indigenous peoples, local communities, and other customary tenure rights holders, among other criteria.
Moreover, Malaysia had also pledged to maintain at least 50 per cent of forest cover during the Rio Earth Summit in 1992. Malaysia’s forest cover is currently at 55.3 per cent.
Local palm oil quality competitive
While the first collaboration between Malaysia and Indonesia under one CPOPC umbrella to fight against EU’s narrative was successful, the local consumption in the neighboring country is strong with domestic market obligation and B30 biodiesel mandate.
“However, Malaysia does not have the same advantage like Indonesia,” he said.
Mohamad Helmy said Malaysia has the competitive advantage of better-quality production with well-organized government and industry management.
“We also have credible data to be published to back up our production and stock data. To some extent, this has proven to be an advantage,” he said.
He said the relationship between both countries has developed over the years with Malaysia having developed its plantation sector much earlier.
“The recent EU mission shows that we – being the two biggest producing countries – are countering the narrative and negative campaigns. At the same time, it would be better if we do it jointly,” he said.
Malaysia and Indonesia are major contributors to the world’s palm oil market with both countries accounting for 80 per cent of the market.
He said the common interest between both countries was to protect smallholders as the new EUDR would affect smallholders significantly compared to big companies.
“The message we are trying to convey is whatever they are doing over there is really hurting millions of smallholders here,” he said.
Smallholders, despite accounting for between 35 per cent and 40 per cent of global production currently have only a small share of the EU market.
He added that Malaysia has about 250,000 registered smallholders with another 215,000 independent smallholders while Indonesia has millions of them.