OIL PALM – OPIEJ

OPINION PAPER: OIL PALM AND ISLAMIC FINANCE AS THE TWO INTERCONNECTED INDUSTRIES

mpob_admin — Mon, 29 Jul 2024 02:59:28 +0000

This paper investigates the evolving dynamics of the oil palm industry and its intricate implications for Islamic finance, particularly in the context of Malaysia where both sectors hold significant economic importance. Given the pivotal role of oil palm as a key commodity in Islamic financial instruments, notably in tawarruq (commodity trading), understanding the interplay between these two industries is crucial for charting a strategic path forward for both. Building upon prior research that has explored the oil palm-Islamic finance nexus, this study delves deeper into the specific Malaysian context, where oil palm reigns as the most frequently utilised commodity by Islamic financial institutions. By analysing the latest developments, we aim to uncover not only the inherent risks but also the untapped potential that oil palm presents for the Islamic finance sector. Effectively managing the risks associated with oil palm production and trade, while simultaneously harnessing its potential benefits, can significantly enhance the growth trajectory of both the oil palm industry and the Islamic finance sector in Malaysia. This, in turn, could have far-reaching implications for the overall economic development of the country. The insights gleaned from this research will be invaluable for policymakers, financial institutions, and industry stakeholders alike, enabling them to make informed decisions that foster sustainable growth and resilience in these interconnected sectors.

COMPARATIVE ANALYSIS OF OIL PALM IN-FIELD COLLECTION SYSTEMS

mpob_admin — Mon, 11 Sep 2023 07:41:16 +0000

The purpose of this study is to determine the most efficient system for the evacuation of oil palm fresh fruit bunches (FFB) from the oil palm tree to the mill. The study employed a quantitative method by utilising primary data, gathered by randomly selecting 500 oil palm estates in Malaysia. A descriptive analysis was conducted to identify the most used system for the in-field collections. The efficiency of each system was then measured by dividing the total output of each system by its respective operating costs involved. The study found that most oil palm plantations in Malaysia are using the conventional way of evacuating oil palms to the mill (termed as System 1). However, System 1 was found to be inefficient because it requires a higher cost of operation to produce the same amount of FFB. The study found that System 2, in which the FFB was immediately transferred to the collection bin after being removed from the oil palm tree and sent directly to the palm oil mill, is the most effective. System 2 has the highest ratio of production compared to the other systems under consideration, producing 0.0213 t of FFB on average per month for every Malaysian Ringgit (MYR) spent.

Risk Response Strategies of Malaysian Oil Palm Estates for the Downturn in CPO Prices

mpob_admin — Tue, 04 Jan 2022 08:07:54 +0000

Being traded in the Bursa Malaysia Derivative market, the price of crude palm oil (CPO) is volatile, which brings uncertainty to the profitability of the palm oil industry players, particularly to the oil palm growers. Lower CPO prices also causes the fresh fruit bunch (FFB) price to decline. Hence, the purpose of this study is to identify the risk mitigation strategies applied by the Malaysian oil palm estates during the low CPO prices environment to remain profitable in businesses. The study aims to examine the best risk mitigation measures practiced by the estates faced with a situation of low CPO prices environment and provides some guidelines to the relevant organisation to prioritise the mitigation measures in order to minimise the risk associated with low CPO prices. Primary data were collected through an online survey to 769 plantations throughout Malaysia. A descriptive and inferential statistical analysis was conducted using the Statistical Package for Social Science (SPSS) version 20. The study also provides various responses from the experienced oil palm players on the most crucial component in mitigating the price risk arising from the downturn in CPO prices. The measures include management of business assets, business diversification and the financial management found to be significant to reduce the risk of price volatility. Meanwhile, elements under the operational business decisions were the least preferred measures to minimise the risk during low CPO prices.

A Study on the Malaysian Oil Palm Biomass Sector – Supply and Perception of Palm Oil Millers

mpob_admin — Tue, 28 Aug 2018 14:02:00 +0000

From 379 palm oil mills in Malaysia that responded to the survey, about 30% or 120 of them were involved in utilising biomass [either empty fruit bunches (EFB) or palm oil mill effluent (POME)] by turning this biomass into EFB fibre, bio-fertiliser or biogas. Nevertheless, some of the millers who have not been involved in ... Read more

Palm Oil: Nature’s Gift to Malaysia and Malaysia’s Gift to the World

mpob_admin — Tue, 28 Aug 2018 06:33:34 +0000

For Malaysia, oil palm is the golden crop that has helped to change the scenario of the Malaysia’s agriculture and the Malaysian economy. In 2007 at 4.17 million hectares, the oil palm performance is compared over the last 90 years from 1917 to 2007 and some projections are made over the next 100 years to 2107. The various phases undergone by the oil palm industry from the pioneering work with the determination to nurture the plant into a crop and to create a home for it in Malaysia, have been marked with several important milestones such as diversification from the over dependence on rubber in the 1950s and 1960s, strong support from well thought-out policies involving use of palm oil as food, fuel, fibre and feed in the 1970s and 1980s, through R&D move into processing and value-adding activities to improve the health and food safety aspects and finally in the 1990s and 2000s to tackle the environmental and sustainability development. The broadening of the scope and horizon for export of oil palm and its products into 11 areas of food, oleochemicals, energy, biomass, biotechnologically improved products, nutraceutical, pharmaceutical, farm machinery, research and advisory services, processing, livestock integration and feed production will strengthen the competitiveness of the Malaysian oil palm products that will take centre-stage in international oils and fats businesses. In so doing, the impact of such massive development of the oil palm has helped uplift the rural poverty, enhance social and economic life, and yet protect the very environmental and ecological bases on which the oil palm thrives. Truly the oil palm is a crop that nature gives to Malaysia and now it has evolved into Malaysia’s gift, thanks to continuous R&D with many innovations, to share the new discoveries on the uses of palm oil and its products with the whole world. In the future, the Malaysian oil palm industry will remain a major reliable supplier of vegetable oil for both food and non-food applications. It must be mentioned that the projections made here after deliberation are the views what the MPOB team members have wished for the industry. For a forecast of a hundred years, the reality will be dictated by events and the rate of progress of R&D.

Chemical Weed Control in the Oil Palm Sector with Particular Reference to Smallholders and Nursery Operators

mpob_admin — Tue, 28 Aug 2018 06:31:41 +0000

This article attempts to assess the impact to the oil palm smallholders and the nursery operators when there is a change from using paraquat to other kinds of weed killers in the oil palm and nursery areas. Surveys via face-to-face interviews with independent smallholders and 56 nursery operators were conducted. The study found that the impact of paraquat was insignificant among the smallholders, with only 0.65%, 1.30% and 0.32% having problems related to skin, nose bleeds and nails, respectively. The cost comparison of spraying herbicides in the smallholders’ areas revealed that RM 221/ha/yr was incurred when using paraquat while RM 365/ha/yr was spent with the use of Round-up. At the nursery, annual spraying using paraquat and Basta incurred costs of RM 492.74/ha and RM 763.44/ha, respectively. The study revealed significantly that both the smallholders and the nursery operators were knowledgeable about the danger and handling of herbicides. Paraquat was the most preferred herbicide because it neither reduced the productivity of the oil palms nor affected the growth of the oil palm seedlings. It was also claimed that the use of paraquat helped to improve the texture of the soil. This indirectly led to efficient uptake of fertilizers and hence increased productivity of the oil palms.

Feasibility Study on the Potential Production of Oil Palm Shell Bio-phenol

mpob_admin — Tue, 28 Aug 2018 05:26:23 +0000

The extraction of bio-phenol from oil palm shell is being investigated in Universiti Teknologi Malaysia. In this article, the economic feasibility of producing oil palm shell bio-phenol is studied. Plants of three capacities – 100 t/day, 10 t/day and 1 t/day – are discussed. Their potential profitabilities are assessed, for which an estimation of the initial total investment and the cost of production were derived. The project evaluation and profitability analysis was performed including total capital investment, manufacturing cost, and discounted cash flow analysis. The plants require three years for starting up and their operating life is 17 years with a depreciation of 10% per year. The discounted cash flow rate of return (DCFRR) and the discounted breakeven period (DBEP) are used to access the profitability. From the results, it shows that the bio-phenol extraction plants are feasible and profitable.

Oil Palm in Indonesian Socio-Economic Improvement – A Review of Options

mpob_admin — Tue, 28 Aug 2018 05:01:04 +0000

The Indonesian Government has used oil palm as a tool of rural socioeconomic improvement, doing this through nucleus estates operated by estate companies and through assisting individual smallholdings. Over 900 000 ha of high yielding oil palm have been established in 2-3 ha settler blocks in nucleus estate plasma, and 250 000 ha have been planted on individual smallholdings. The initiatives have together raised the incomes of over 500 000 farmers, and may be judged successful market interventions which are far superior to laissez faire. Although the average economic and social performances of both initiatives have been reasonable, their outcomes have been variable. The nucleus estates have sometimes suffered from faulty management, bad community rapport and difficult land conversions, and from the mistakes of government agencies and settler cooperatives. They were discontinued in 2001, due to scarce finance. The assistance to individual smallholdings has always had short funding, limiting its scope. Both initiatives were commenced under the New Order, and face fresh challenges in the present era of democracy and otonomi daerah. The analysis of this paper nonetheless shows that these Indonesian interventions should be continued, albeit more capital being provided and their deficiencies being remedied. It denotes that the interventions compare well with official efforts in other countries, strengthening the general case for public action to assist poor rural dwellers.

Environmental Issues in an Age of Regional Autonomy: The Case of Pollution in the Plantation Sector of North Sumatra

mpob_admin — Tue, 28 Aug 2018 04:51:57 +0000

Discussion of the agro-industry sector to date has largely neglected the significant impact of Indonesia’s extensive plantation sector on the rural environment. This article discusses this problem in North Sumatra, the historical centre of Indonesian agro-industry, examining the underlying factors leading to the failure of legal and economic instruments to control agro-industrial and plantation activities before and during decentralisation. It examines the reasons for the failure of bureaucratic regulation, arguing that the underlying problems of political accountability of state officials continue to undermine law enforcement. As well as improving the accountability of state officials, a policy to mitigate the large-scale pollution associated with the sector needs to be better crafted to suit the characteristics of the industries concerned and address the wider socio-economic realities within which the problems are embedded and where any policy tool must be applied. The sector can be profitable without having to harm the environment through both self-motivated changes and government support. Although the government of Indonesia has created a legislative framework for pollution control, rubber factories and palm oil mills across the country continue to generate large quantities of solid waste, air and water pollution. A key factor behind this is that many institutions and interpersonal relations are involved apart from the legislative framework, and are often beyond the reach or even knowledge of the policy makers and legislators (Eckersley, 1995). While scholars and activists have widely addressed the problems of deforestation, forest fire and haze associated with plantation expansion, they have largely neglected the environmental issues of air pollution and effluent in the rivers (Kantor Menteri Negara Lingkungan Hidup, 1998; IFFM/GTZ, 1998; Gonner, 1998; Gellert, 1998; Down to Earth, 1998; Casson, 2000; Alwy, 1998; WRM, 1998; Wakker, 1999). The latter are major problems affecting the quality of life of local communities living around crumb rubber factories (CRFs) and oil palm mills (OPMs), and are crucial in the environmental context.

Selling the Green Palm Oil Advantage?

mpob_admin — Tue, 28 Aug 2018 04:29:33 +0000

Palm oil has many positive environment attributes; this paper discusses the green palm oil advantage (GPOA) and the prospects of using it as a marketing edge over competing edible oils. Compared with the major oilseed crops (soyabean, rapeseed and sunflower), oil palm is considered the most environmentally friendly with respect to land use efficiency and productivity, energy efficiency and inputs of fertilizers and pesticides and pollution potential. It contributes positively to climatic change through effective carbon sequestration and it is not genetically modified. When defining GPOA, due consideration must be given to the expectations of its stakeholders and how well they are met. At present, some major stakeholders are concerned over the potential linkage between forest destruction and loss of biodiversity with the expansion of the oil industry. As this concern could lead to consumer action that could undermine the competitive position of oil palm, it is vital that the industry engages the stakeholders concerned, to bring about a win-win resolution to this contentious issue and enhance the green palm oil advantage.