Monday, May 5, 2008

Don't bank everything on palm oil

Written by arimi sidek

Sabah became the country's main palm oil producer on 1.24 million hectares of the total 4.3 million hectares, Plantation Industries and Commodities Deputy Minister Datuk Anifah Aman said Saturday (DE 17.02.08).

palm oil tree

It is more actually, to the excitement and joy of palm oil industry. At present, it contributes about 16pc to the State’s GDP. It also provides employment to about 60,000 people, representing about 5.4pc of the state’s total workforce. Oil palm is currently Sabah’s main agriculture crop.

Note: This is a reproduction of my article that was published in Daily Express newspaper [Sabah], aims to cater wider and more serious audience on the matter.

There is something else about the news that interests me. The statement somewhat lures us to think that palm oil industry in the State focuses on 14,346 smallholders, which I suspect is not. If we divide 1,240,000 hectares by 14, 346 the average will be 86.43 hectares - about 213.58 acres. There is no way plantation of this size fit into small holders category.

The real industry players not even mentioned. So let get, it straight. Palm oil industry in the state actually focuses on big plantation companies, not smallholders. Peninsular-based companies are among the key players. Hence, the smallholders figure is simply cosmetic more or less, to my thinking.

The locus of palm oil industry is big plantations – more than 80pc are located in Sandakan, Tawau and Lahad Datu. POIC Sabah Sdn Bhd, a state-run company, managed clusters of designated areas in Lahad Datu, Sandakan and Kimanis, known as Palm Oil Industrial Cluster (POIC).

palm oil authorities in malaysia

Another thing. The average age of small holders, which is at 54, is also very interesting. This is an average figure so I presume that majority of them are older than 54. The golden aged small holders actually pose more questions than answers.

Since palm oil plantation is relatively new to the state, I really wonder who are these small holders. For example, they probably were in agricultural sector such as cocoa or rubber before switching to palm oil. Or, they can be new comers who ventured into palm oil after retirement from public service I.e. pensioners.

But, with average “small” holding of 213 acres, they certainly are dubious kind of "average" pensioners. If that being the case, perhaps government will shed some light on the matter.

Whatever the answer is, the situation is not good for our economy. It implies that owners / small holders are at the near end of their productive life. Perhaps younger generations are not interested to work in palm oil sector and this is scary. If this really happen, then guess who are forever among those 60,000 plantation workers!

The news further stated that Sabah has a very high potential to further develop in oil palm industry will in turn generate the economy. I truly wish this vision not going to be translated into more plantations, involving more agriculture areas.

This is because, unless Sabah land mass area is getting bigger and bigger over time, this “sawit” thing seems encroaching every area suitable for agriculture in the State.

According to state government website, out of total land area of 2.1 million hectares identified suitable for agriculture, 1.25 million hectares have been developed. Another source cited that palm oil is by far the main crop cultivated, occupying about 81pc of the total cultivated land area.

Now palm oil area in the state is 1.24 million hectares, as the news said.

I won’t blame palm oil planters; palm oil based entrepreneurs and or smallholders for promoting and switching to palm oil. There is nothing personal in capitalist economy system. It is about money making business and profit maximization.

But do not underestimate the danger posed by dependency on single source of earning situation to the economy. Malawi and Costa Rica had learnt it the hard way.

Also in Haiti, Ghana and Nauru, to mention a few. In the event such as competition from other countries or any reasons that cause price to drop, or anything that causes production to fail, the whole economy lands into trouble.

We should learn by our mistake in the past when the sole major source of earning was timber. Being the richest state in Malaysia in 1970s Sabah slipped down to the poorest in 1990s. We are closer to repeat it once again, by leaning more and more on palm oil as the sole source of income.

It is government who should provide “hala tuju” and product diversification, not the business sector. Speaking of “hala tuju” in agriculture, Sabah’s Second Agricultural Policy (SAP 2 1999 – 2010) is meant to guides the agriculture development in the State.

It speaks on “transforming smallholders into a commercial and dynamic sector”. However, in the case of palm oil, there will not be so much concern on transforming small holders if the focus is on big players and the small holders' role is minimal.

I don’t know how to relate palm oil plantation with “increasing level of domestic and food production”, another “essence” of SAP2. Perhaps SAP2 talks about “other” agriculture sectors too.

But since palm oil sector is getting closer to become the “only” agriculture sector available in Sabah in term of area coverage, its only natural for it to fit into all essences of SAP2 as the government medium-term plan in agriculture development.

Creating policies such as SAP2 incurs financial cost and consumes a lot of time. Hence, adhere to what has been planned is always a better choice for government.

Last but not least, bad economics or the negative impacts due to over-development process of palm oil sector need to be seriously considered.

For example, in Sarawak, environmentalists claimed that Malaysia's lucrative palm oil industry and unabated logging are destroying native lands in eastern Sarawak state, while indigenous people are left in extreme poverty.

Source: Daily Express Newspaper, 24 Feb 2008. pp. 17


kalapa sawit - what can we say? |2008-06-14
this is the capitalist system... profit maximization is the objective of any business so it is only natural for businessman to switch on to palm oil

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