OBG talks to Bernard Giluk Dompok, Minister of Plantation Industries and Commodities

Interview: Bernard Giluk Dompok

How do you rate Malaysia’s regional competitiveness in the alternative fuels market, and what efforts are in place to increase its market share?

BERNARDS GILUK DOMPOK: In March 2006 the government formed the National Biofuel Policy, which calls for the use of environmentally friendly, sustainable and viable energy sources to reduce dependency on fossil fuels. It also aims to enhance the well-being of all stakeholders in the agriculture and commodity-based industries through stable and remunerative prices. The policy focuses on five strategic pillars: using biofuel for transportation, biofuel as an industry input, biofuel for a cleaner environment, production of biofuel for export and the development of indigenous technologies.

Malaysia’s efforts in this context are reflected in the country’s commitment to reduce up to 40% emission intensity of GDP by 2020 compared to 2005 levels. To further promote the use of palm-based biofuel, in June 2011 the government implemented the B5 Programme, which calls for the use of biofuel that is a 5% palm methyl ester and 95% petroleum diesel blend. The B5 Programme is to be fully implemented nationwide by 2014. It is hoped that the programme will contribute towards energy security, as well as social and economic development. It will also significantly boost the green image of palm oil as an environmentally friendly and sustainable vegetable oil. The biofuel industry is also supported via incentives like sales tax and import duty exemptions, the green technology financing schemes (government financial support for green technology development), and the pioneer status and income tax allowance, which give certain businesses tax breaks.

In what way will the new National Commodities Policy (NCP) help grow Malaysia’s commodities sector?

DOMPOK: The strategies outlined under the NCP address industries’ market orientation and the potential for wealth creation through the production of high value-added products. Additionally, the enabling strategies are meant to enhance the global competitiveness of the plantation and commodities sector even more.

The NCP provides specific strategies to guide the development of different commodities. In the case of oil palm, the focus is on enhancing productivity and intensifying research and development of new products; in the case of rubber, it focuses on productivity and market share. For the timber industry, the NCP targets increasing the export of value-added products, and in the case of the cocoa and pepper industries, it addresses strengthening and expansion strategies.

What has been the outcome of efforts to attract foreign investor participation in upstream and downstream plantations activities?

DOMPOK: According to the 2011 “Malaysia Investment Performance” report by the Malaysia Investment Development Authority, the plantation and commodities sub-sector, which falls under the primary sector, attracted investments worth RM989.5m ($319.2m) in that year. In the palm oil industry in 2011, a total of 52 production projects with investments of RM3bn ($967.8m) were approved, compared with 75 projects with investments worth RM3.6bn ($1.2bn) in 2010. The projects include production of palm oil and palm kernel oil products, oleochemicals, products of palm biomass and energy generation from palm biomass. The industry also attracted foreign investments totalling RM1.5bn ($483.9m), with the most investment going towards the oleochemicals sector.

The investment trend in the rubber products industry is directed towards downstream manufacturing, with a variety of technologies having been developed specifically for rubber products to meet required specifications. The outlook for the industry as a whole is positive, especially with the recovery and increased demand in the global automotive sector. Rubber prices are expected to steadily increase due to declining stocks in many major consuming countries, coupled with fears that the supply situation may worsen because of political tensions in several rubber-exporting countries.