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How does Malaysia's palm oil industry play a key role in the economy? Discover the amazing impact of this important industry!
Malaysia is the world's second largest palm oil producer, second only to Indonesia, so the impact of the country's palm oil industry on the economy cannot be underestimated. The Malaysian Palm Oil Board (MPOB) is responsible for promoting and developing the industry, which produces about 90 million tonnes of woody biomass annually, including empty fruit bunches, oil palm trunks and oil palm fronds. Since 2010, the Malaysian government has pledged to limit the expansion of palm oil cultivation and leave at least half of the country covered in forest, in response to concerns about its social and environmental impacts.
History Review
Origins of British Malaya
Palm oil trees were introduced to British Malaya by the British government in the 1870s, initially as ornamental plants. Commercial palm oil cultivation began in 1917 at the Tennamaran plantation in Serago. As the government rapidly expanded plantation areas, associated deforestation led to a major flood event in 1926. By the 1920s, more than 2.1 million acres had been cleared.
The rise of MalaysiaIn the 1960s, Malaysia began a rapid development of palm oil as the government looked to reduce its reliance on rubber and tin. With the implementation of the FELDA land resettlement program, the areas around the palm oil plants have been developed, helping to alleviate local poverty. During this period, Malaysia gradually became the world's largest exporter of palm oil.
Tensions with the EU
In March 2019, the European Commission said the cultivation of palm oil led to excessive deforestation and its use in transport fuel should be phased out by 2030. Former Malaysian Prime Minister Mahathir Mohamad said the EU's policy was unfair and could strain trade relations between Malaysia and the EU.
Export issues with India
India, the world's largest buyer of edible oils, has imposed a de facto embargo on refined palm oil from Malaysia. The move stems from India's antipathy to Mahathir's criticism of its new citizenship law. As a result, Indian traders turned to buying Indonesian palm oil, which affected Malaysia's palm oil exports.
"We are very concerned because we sell a lot of palm oil to India, but on the other hand we need to be honest and if there is a problem we have to make a statement."
Labor Exploitation Issues
In 2020, the U.S. Customs and Border Protection issued a restriction order on Sime Darby's palm oil imports due to forced labor issues. The ban reflects labor exploitation issues in the palm oil industry and hurts Malaysia's market share in the United States.
Support from economic and research institutions
As of 2012, Malaysia's palm oil industry employed approximately 491,000 workers. Sime Darby and Felda Global Ventures Holdings are the two largest palm oil companies in the world, reflecting the economic potential of the palm oil industry. In addition, Malaysian research institutions have also achieved remarkable results in oil palm breeding and nutrition research.
The development of biodiesel
In 2006, the Malaysian government formulated a national biofuel policy and began to implement the B5 directive, requiring diesel in some areas to contain 5% palm oil biodiesel. However, the profitability of the industry has been threatened by rising production costs, and biodiesel production has not grown as expected in recent years.
“Malaysia’s palm oil industry faces many challenges, including trade issues, environmental impacts and improving labor conditions.”
Future Outlook
The future of Malaysia's palm oil industry is full of challenges and opportunities. Although the global market faces trade barriers and environmental policies, the industry is likely to maintain its economic contribution as technological advancement and sustainability efforts advance. How to balance economic growth and environmental protection may become an important issue for the palm oil industry in the future. Against this backdrop, can Malaysia maintain its competitiveness in the global palm oil market?
