RI, Malaysia plan more palm oil-based products

RI, Malaysia plan more palm oil-based products

KUCHING, Malaysia (Reuter): Malaysia and Indonesia plan to expand their oleochemical and downstream palm oil industries in a big way to retain their share of the global vegetable oils market, officials said.

The two oil palm growers, faced with increasing rivalry from other edible oils, are working on various strategies to produce more palm oil-based goods to boost foreign exchange earnings, said officials from the palm oil research institutes of both countries.

"We're suggesting that the export sector of palm oil be optimized by going down to product development such as cosmetics," Mohamed Arif Simeh, senior executive of the Palm Oil Research Institute of Malaysia (PORIM), told Reuter.

Arif, who spoke on the prospects of the Malaysian palm oil industry at an Asian vegetable oils seminar in east Malaysia's Sarawak state, said in an interview that PORIM has recommended incentives to encourage more downstream palm industries under a new five-year industrial masterplan for Malaysia to be unveiled on May 14.

"The government will decide on what exactly the incentives will be," Arif said. "There are viable products which we can make by deepening the oleochemicals industry, instead of letting the Japanese and Europeans take advantage of these."

Arif said what PORIM was suggesting was basically a reversion to the mid-1970s strategy, where Malaysia banned exports of crude palm oil, forcing all exports of the commodity to be in the form of refined oil or finished goods.

"This may have caused the West to be unhappy but we had some value-added material to our palm oil exports," he said.

Although Malaysia produced 7.9 million tons of palm oil last year to retain its position as the world largest grower of the crop, its future in the business could not be guaranteed due to land and labor constraints, said Arif.

"Historically, although production in 1995 was about six times that of 1975 and export earnings higher by seven times, the annual growth in export volumes have declined from an impressive 57.2 percent in the 1976-80 period to 2.9 percent currently," he said.

Arif said the oleochemical sector in Malaysia was relatively small, with marginal foreign investment.

Factories

There are now 11 factories with a combined annual capacity of one million tons, compared to five companies with a capacity of 150,000 tons, when the sector began in the 1980s, he said.

"There is little product diversity and neither are there efforts to invest in new product development," he said.

"The basic oleochemicals are being exported to developed markets for conversion into higher value-added products such as detergents, toiletries, cosmetics, textiles, plastics, rubber products and pharmaceuticals."

Puryobo Guritno, director of Indonesia's Palm Oil Research Institute, said the country's oleochemicals industry was moving slowly, with only six out 15 licensed companies operating due to a lack of technical support and expertise.

"We are now inviting foreign joint-venture partners," he told Reuter.

He said palm oil producers could no longer depend on export of raw material such as crude palm oil and palm kernel oil "as we are competing with 16 other vegetable oils".