The sustainability of oil palm

Sabri Ahmad and M.R. Chandran, New Straits Times, Kuala Lumpur

The benefits of the last technological leap, the so-called Green Revolution, are about exhausted. There are about six billion people in the world, some 800 million of whom do not receive adequate nourishment because they have too little money to buy food and too few resources to produce it.

By 2020, only 16 years from now, the world population will grow to almost eight billion. Most will have enough income to afford adequate diets if sufficient food is available at reasonable prices. If, however, supply constraints lead to a significant rise in the price of food, widespread hunger and malnutrition will follow.

The meaning of these numbers is clear. The world's output of food will have to expand dramatically in the next quarter of a century and this will require one of two things -- either the land area devoted to agricultural production will have to increase substantially, or yields will have to increase on the same amount of land.

There is serious and justifiable concern about the environmental impact caused by the cutting of forests to expand cropland and by desertification. However, the task of increasing crop yields on existing cropland also poses a great challenge.

Over the past few years, the oil palm industry has been increasingly pressured from stakeholders, namely from environmental NGOs over allegations that the industry is driving deforestation in important tropical ecosystems. While there is a need to ensure conservation of biodiversity like the tropical forests, there is an equal need for economic and social development in countries where oil palm is grown. The Malaysian palm oil industry has been caught in the crossfire, being seen on the one hand as one of the perpetrators of deforestation while it is also seen by many foreign governments as the key to injecting much-needed economic growth and rural development.

The Roundtable on Sustainable Palm Oil (RSPO) was set up to meet this new challenge from NGOs and corresponding demands from consumers. With a simple but daunting goal of promoting the production and use of sustainable palm oil (see: www.sustainable- palmoil.org for more information), this entity was set up as a business-to business initiative between a few companies along the supply chain, including producers in association with the World Wide Fund for Nature (WWF).

With the recent second Roundtable in Jakarta, the path has been set for the palm oil industry to face the challenges of this millennium.

At this meeting, the Malaysian industry had an impressive 14 members, in addition to the Malaysian Palm Oil Association, who signed on to be full ordinary members of the RSPO.

This represents 83 per cent of the producer-members of the RSPO. This also shows that MPOA members are committed to environmental protection as well as sustainable development. The MPOA was one of the founding members of the RSPO, together with other companies that represent producers, processors, consumer goods manufacturers and retailers of palm oil and its derivatives in association with the WWF. Being a major provider of employment and the second largest export revenue earner for Malaysia, contributing some RM27 billion last year, any threat to this industry presents an immediate concern to the entire country's economic outlook.

The Malaysian industry has, for some years now, adopted and institutionalized good agricultural and best management practices on the estates. They include:

o Integrated Pest Management to minimize the use of toxic pesticides through the promotion of beneficial plants, natural enemies and bio-controls like barn owls.

o Recycling and re-use of waste materials from palm oil mills as fertilizer, thus minimizing the demand for inorganic fertilizers while maintaining soil fertility.

o Zero burning for land clearing and replanting, which has become mandatory in Malaysia.

o Planting of leguminous crops as a cover to mitigate and minimize soil erosion.

o Terraced plantings as a soil and water conservation measure.

But the industry is still faced with new challenges.

MPOA believes that it has played a significant role in protecting the interests of the palm oil industry. Its engagement with other stakeholders like WWF has also been part of the process of educating others about the industry's environmental responsibility.

As the RSPO's commercial side materializes, one added benefit would be a premium for palm oil from Malaysian producers who already meet the criteria or standards for sustainable palm oil.

However, any discussion of sustainability must be within the context of the true global market. Distortions caused by agricultural subsidies in developed countries like the United States continue to make efforts towards sustainability difficult.

In direct contrast, Malaysia's palm oil industry is not only free of subsidy but pays a substantial direct income to the State through numerous taxes, cesses, fees and levies. A Malaysian planter would find it hard to understand the concept of subsidies. In the global marketplace, competing edible oils from developed countries like those from the EU and U.S. are heavily subsidized by their governments, which means there is an unfair trade advantage and flow of trade. Supplementary minimum prices subsidies are the backbone of the soy bean farming system in the U.S.

In fact, MPOA made it clear at RT2 that while there is commitment towards sustainable palm oil from producers, the issue of distortions to the proper trading of agricultural commodities caused by subsidies, threatens the entire process by undermining global trade.

Ultimately, price will be the determinant in a commodity trade like edible oils. If as those at the RSPO generally believe, the long-term prices for sustainable palm oil will be the same as normal supplies, the need for a level playing field becomes even more critical.

Sabri Ahmad and M.R. Chandran are Malaysian Palm Oil Association chairman and chief executive, respectively.