During a two-day event starting 9 October the Malaysian Palm Oil Council (MPOC) organised the Malaysian Palm Oil Forum (MPOF KL 2024) under the theme “Navigating Trading Challenges with Sustainable Solutions”. Participating was a group of Egyptian companies showcasing how the palm oil industry is evolving, with many developing countries, mainly Indonesia, Malaysia and Egypt, relying heavily on this healthier oil as net importers.
The event included a familiarisation programme for journalists from India, Egypt, Turkey, South Africa, Kenya and Vietnam. The programme was an opportunity for representatives of the respective countries to take a closer look at the palm oil industry in Malaysia and how it has managed to work around economic and environmental challenges.
Malaysia is one of the world’s largest producers and exporters of palm oil, whereby versatile vegetable oil is derived from the fruit of the oil palm tree Elaeis guineensis. It is used in a wide range of products, from cooking oil to cosmetics and biofuels. Since its introduction to Malaysia in the early 20th century, the industry has expanded rapidly due to favourable climatic conditions, government support, and increasing global demand for palm oil. In recent years, Malaysia has become the second-largest producer of palm oil after Indonesia, contributing 30-35 per cent of global production.
Five million hectares of land in Malaysia are devoted to oil palm plantations, with a significant portion located in Peninsular Malaysia and Sabah. Malaysian plantations are known for their high productivity, with yields averaging four to five tons of crude palm oil (CPO) per hectare.
The palm oil industry is a vital part of Malaysia’s economy, contributing significantly to the agricultural sector and overall GDP. It also provides direct and indirect employment for millions, particularly in rural areas. Palm oil is one of Malaysia’s top export products, generating billions in revenue annually.
Yet, the expansion of oil palm plantations has been associated with deforestation and loss of biodiversity. Critics argue that this contributes to climate change and the loss of habitat for endangered species like orangutans. This represents a huge challenge to the industry. The European Union has enacted the EU Deforestation Regulation (EUDR) which aimed at addressing the issue of deforestation and forest degradation associated with EU trade. The EUDR, which is expected to come into effect by the end of December 2025, comes in line with the EU’s broader sustainability and climate goals which include commitments to protecting biodiversity and addressing climate change. The EUDR covers specific commodities linked to deforestation, including palm oil, soy, cocoa, coffee, rubber, and wood, along with products that are made from these commodities, such as chocolate and furniture.
Meanwhile, the CEO of the MPOC, Belvinder Kaur, said that Malaysian exporters have made significant investments in financial and technical resources to align with the EUDR’s requirements. “Despite these efforts, many small farmers within the palm oil supply chain are encountering difficulties and are at risk of being excluded from the market,” Kaur said. She stressed that while larger exporters are working diligently to comply, the intricate nature of the palm oil supply chain complicates the provision of necessary due diligence information.
In May this year Egypt hosted the MPOF under the theme “Malaysian Palm Oil: Paving the Way for Sustainable Agribusiness”, with the aim of expanding cooperation between Malaysia and countries in the Middle East region, especially Egypt. Cairo already hosts one of MPOCs seven offices, including two others in the Middle East region — one in Saudi Arabia and one in Turkey.
Speaking to Al-Ahram Weekly, Malaysian Minister of Plantation and Commodities Datuk Seri Johari Abdul-Ghani said that the trade ministers of both Malaysia and Egypt are currently engaged in designing a free trade agreement (FTA) between the two countries, in which palm oil will be a key pillar of this imminent action. “We continue to be key suppliers for the North African countries in terms of palm oil. The African market has lots of potential, such as a growing population and the high level of consumption, which increases the appetite of investors and maintains our focus on it as well. For Egypt, it is a big market for us,” Abdul-Ghani said.
During the address, the minister said that this year’s conference theme was indeed “timely and relevant” as the palm oil industry sector faces numerous challenges, from ever-changing market dynamics and evolving trade policies to increasing scrutiny on sustainability practices and environmental impact. “These are not just domestic challenges. They are global in nature and affect every player in the oils and fats industry,” added the minister.
Malaysia comes second after Indonesia in palm oil production. In 2023, crude palm oil (CPO) production increased by 0.5 per cent to reach 18.55 million tons compared to 18.45 million tons in 2022 attributed to an improved labour supply, particularly in harvesters and fresh fruit bunches (FFB) collectors. Likewise, FFB yield of oil palm estates and oil extraction rate (OER) in 2023 witnessed a rise of 1.9 per cent to reach 15.79 tons/hectare and 0.8 per cent to reach 19.86 per cent compared to the 15.49 tons/hectare and 19.70 per cent in 2022, respectively.
According to official data revealed during the conference, the global challenges have resulted in a decline in palm oil exports due to reduced demand by major importing countries, causing a higher palm oil stock. Accordingly, palm oil exports stood at 15.13 million tons in 2023 compared to 15.71 million tons in 2022.
According to MPOC data, Egypt enjoys preferential access to several countries through multiple free trade agreements which provide access to 1.5 billion consumers, with 110 million consumers in Egypt alone. The country also connects investors with other developed and emerging markets, with eight per cent of global trade passing through the Suez Canal, which qualifies it to be a business hub, especially in palm oil trade. The data also highlighted that the shipping time and cost are lower from Egypt, seven days less to the US than from China and 50 per cent cheaper than the UAE.
“The trade agreements have a positive and significant impact on stimulating trade from Malaysia to key markets like Egypt to become the main re-export centre to other countries under the established agreements to satisfy the vast demand for oils and fats and to fill the gap of limited local production. The current existing trade agreements create countless opportunities and facilitate the export growth of Malaysian palm oil to new developing markets,” according to a study by the MPOC.
According to the same study, the Egyptian palm oil market is developing at a rapid pace, as this type of oil is an economically essential component for food and non-food industries.
The study showed that there is also a higher intake of palm oil in the food processing industry and the growth of the HoReCa (hotel/restaurant/café) sector to cater to tourism industry needs.
Most recently, according to the study, palm oil was given the green light to be included in cooking oil blend produced by the Egyptian government for food subsidy programmes, comprising 10 per cent.
The government of Egypt has already disclosed a plan to develop and merge some edible oil subsidiaries to enhance production capacity, reduce total costs, and maximise profits to improve the competitiveness of Egyptian products in local and international markets. The plan includes building three new edible oil factories at New Borg Al-Arab, Sadat city and Sohag to replace six old factories, stressing the government’s willingness to establish cooperation with Malaysian parties to achieve development objectives.
In Egypt, palm oil is used in several products, including blended cooking oils, vegetable ghee, cheese, sweets, baked goods, margarine, cereals, detergents, and cosmetics. Palm oil imports have jumped over the last five years, amounting to 1.15 million tons in 2022. It also leads the market share in Egypt’s oils and fats portfolio, scoring 67 per cent of total oils and fats imports, followed by soybean oil at 16 per cent, sunflower oil at 14 per cent, palm kernel oil at two per cent, and others at one per cent, according to the MPOC study.
According to another study by the MPOC, the North Africa region relied significantly on imports as a local production in 2023, totalling 1.13 million metric tons (MT), which only covers 26.7 per cent of the domestic demand. The total consumption of oils and fats reached 4.29 million MT, and the majority is fulfilled through imported sources. Soft oils, including soybean, sunflower, and corn, dominate the market with 58.3 percent share of total oils and fats imports, whereas palm oil accounts for 36.4 per cent of the market share. Overall, the region imported a total of 3.37 million MT of oils and fats to meet its consumption needs.
The study also highlighted that soybean oil has been the most imported oil in North Africa in the past five years, followed by palm oil and sunflower oil in third place. However, the growth rate of palm oil surpasses that of soybean oil which has been declining for the past five years. Accordingly, as per the study, the demand for palm oil is increasing, which means there is room for growth in the future.
* A version of this article appears in print in the 17 October, 2024 edition of Al-Ahram Weekly
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