Economic Transformation Programme. Palm Oil as a Na*onal Key Economic Area

Transcription

1 Economic Transformation Programme Palm Oil as a Na*onal Key Economic Area

2 4 strategic thrusts to transform us towards Vision 2020

3 1 Malaysia (People First, Performance Now) Government Transformation Programme 4 Strategic Thrusts Economic Transformation Programme 10 th & 11 th Malaysia Plan

4 People First Performance Now was a first step to unite our people

5 1 Malaysia (People First, Performance Now) Government Transformation Programme 4 Strategic Thrusts Economic Transformation Programme 10 th & 11 th Malaysia Plan

6 We introduced 6 NKRAs under the GTP based on what the rakyat wants

7 The GTP is already delivering results in 12 months...

8 38% drop in -11,297 Street 29,596 18, % Crime Jan-Sep 2009 Jan-Sep 2010

9 54,569 children are benefiting from 1,358 pre school classes

10 9,816 schools (primary & secondary) have been ranked

11 99% reduction of hardcore poor 44, Jan 2010 Jan 2011

12 3716 government contracts have been published on line myprocurement.treasury.gov.my

13 208 corruption offenders published in MACC website

14 1 Malaysia (People First, Performance Now) Government Transformation Programme 4 Strategic Thrusts Economic Transformation Programme 10 th & 11 th Malaysia Plan

15 In order to achieve a high income nation, our GDP must grow at least.. 6% per annum

16 That means we must grow the economic pie in the next 10 years

17 So that everyone in this country can benefit

18 The new Private Sector engine of growth will come from the private sector

19 This is in line with the 10 th Malaysia Plan.. Private Sector Driven Public Sector Driven

20 So how do we achieve a highincome nation status?

21 NKEA (driver) National Key Economic Areas (NKEAs) The NKEAs will identify projects that will achieve the Gross National Income

22 Financial Services Wholesale & Retail Tourism Greater KL Business Services Agri culture 12 NKEAs 11 sectors 1 Geography Oil, Gas & Energy Educa*on Electrical & Electronics Comms Content Infrastructure Palm Oil Healthcare

23 The 12 NKEAs are the growth engines (73% contribution to the Gross National Income) Oil, Gas & Energy Fin. Svcs Palm Oil W/sale Tourism E&E Biz Edu- CCI Health Agri- Others & Retail Svcs ca*on Svcs culture GNI

24 What are the unique features of ETP?

25 Overview of ETP unique features.. 1 ETP Is a Programme, and Not a Plan 2 ETP is anchored on Gross National Income 3 ETP is co-created by private sector 4 ETP will shift the role of the Government 5 ETP is for all 6 ETP creates higher paying jobs

26 12 Lab Reports 131 Entry Point Projects 60 Business opportunities 3.3 million jobs opportunities 30,000 X 1 3 X

27 131 Entry Point Projects 2 (EPPs) worth USD 138 billion (RM 275 b) 523 USD (billion) 188 (RM 661 b) 138 (RM 442 b) (RM 359 b) (RM 1.7 t) 2009 GNI 1 Entry 2 Point Projects (EPPs) Business Opportunities (Biz Opps) 3 Growth in other Sectors 2020 GNI Target Note : Nominal GNI (USD billions). Assuming population by year 2020 is 31.6 million

28 2 60 Business Opportunities (BOs) worth USD 112 billion to be identified in the next 10 years

29 3 ETP is co-created by the private sector

30 1,000 people 3 workshop..

31 500 representatives from the private and public sector 3

32 Open engagement 3 approach through ETP Open Day 13,000 people

33 4 Shifting the role of the Government from financier to facilitator

34 ...92% of the investment will come from the private sector Public Sector 8% USD 34 b 92% USD 410 b Private Sector* 100% = USD 444 billion 4 * Includes GLCs & non-glcs

35 4 73% of the private investment will come from Domestic Direct Investment (DDI)

36 5 ETP is for all (inclusive)

37 131 EPPs spread 5 throughout the country... Note : Illustra*ve

38 Addi.onal Job Opportunity (rural areas) 5 Wholesale & Retail 196,696 Oil Palm Agriculture 94,100 83,485 CCI 3,135 with Tourism 2,919 potential 323,596 jobs to be created in the rural sector

39 5 A lot of opportunities for women in Malaysia million are women million women workforce million female university students

40 5 EPPs are Entry Point Projects...

41 A lot more projects will be 5 identified... GNI Target (USD 15,000 per capita) Gross Na*onal Income Entry Point Project (EPP) Business Opportunity (B.O) Unidentified / Other Unknown projects Note : Illustrative Year

42 EPPs are catalytic 5 Supplier 1 Manufacturer 1 Project A Supplier 2 Manufacturer 2 EPP 1 Project B Project C Supplier 3 Supplier 4 Manufacturer 3 Manufacturer 4 Supplier 5 Manufacturer 5 Project D Supplier 6 Manufacturer 6 Note : Illustrative

43 6 ETP creates higher paying job opportunities

44 6 A total of 3.3 million additional jobs will be created by year

45 63% will be in the middle 6 and higher income 2020 Projected Salary Distribu*on Number of jobs (millions) 2.9 Low Income Middle Income High Income < RM 750 RM 750 RM 1.5k RM 1.5k RM 3.k RM 3k RM 5k RM 5k RM 7.5k > RM 7.5k

46 6 600,000 people will move out of the lowest income segment

47 The bottom 40% in 6 Malaysia will enjoy a higher income RM 2,300 RM 337 RM 1, Source : Tenth Malaysia Plan

48 PM has announced in Budget 2011 that RM 6.0 billion will be allocated to catalyze the EPP projects

49 8% public funding will catalyze 92% of private investment USD 410 b USD 34 b Public Funding Private funding

50 Clear Governance Structure is ETP Forum Semi- Annual crucial to monitor the ETP projects Economic Council NKEA Steering Committee Weekly Monthly Monthly Investment Committee EPP / BO owners Year- round

51 Financial Services Wholesale & Retail Tourism Greater KL Oil, Gas & Energy Business Services Agri culture Palm Oil NKEA Educa*on Electrical & Electronics Comms Content Infrastructure Palm Oil Healthcare

52 8 Entry Point Projects (EPPs) i IMPROVE UPSTREAM PRODUCTIVITY & SUSTAINABILITY ii ENHANCE DOWNSTREAM EXPANSION & SUSTAINABILITY 1 Accelerate Replanting 6 Focus on high value oleo derivatives 2 Improve FFB Yield 7 Commercialise 2nd Generation Biofuels 3 Improve Workers Productivity 8 Expedite Growth of Food and Health Based Segment 4 Improve Oil Extraction Rate (OER) 5 Develop Biogas Facility at Mills UPSTREAM GNI IMPACT : RM33.1 billion DOWNSTREAM GNI IMPACT : RM14.0 billion 52

53 EPP 1 : Accelerate replanting The first EPP aims at implementing an accelerated replanting policy to clear the backlog of old low yielding palms across Malaysia (2011 Budget : RM 297m) Objective Recommendations Impact Clear backlog of low yielding palms (> 25 years) across Malaysia: hectares Increase average yield of plantations across Malaysia Key issues Cash flow considerations of individual companies and smallholders have held up the replanting rate of old and low yielding palms Implement mandatory replanting policy for plantations and smallholders If the current replanting is not accelerated, it would take 14 years to clear the current backlog of trees over 25 years. 2 strict replanting criteria for smallholders: No trees above 25 years, & Plot average yield for past 3 years <13 MT/Ha/year (*) for organised smallholders, <10 MT/Ha/year (*) for independent smallholders. A strict replanting criterion for plantations: Trees above 25 years and yielding less than 16 MT/Ha/year (*) for the past 3 years must not exceed 5% of total planted area New higher yielding planting material will be introduced in the plantations and smallholders (e.g.: clonal material) Expected time to clear backlog is 2-3 years GNI Impact in 2020 Key challenges RM 4.6 b Jobs created Nil Public Investment (**) Secure buy in of plantations and smallholders for mandatory criteria Ensure full collaboration between public and private sector R&D to ensure fast availability of high yielding new planting material Key stakeholders RM 1.3 b Plantation companies, Smallholders, MPOB, KPPK, RISDA, FELDA, FELCRA, Sabah & Sarawak State Government Agencies (*) If necessary, this will be updated by MPOB during implementation (**) Includes cash and tax incentives 53

54 EPP1: Accelerating Replanting YB Tan Sri Bernard Dompok will be launching the Replanting and New Planting Programme on 31 st January in Sabah 54

55 EPP 2 : Improve fresh fruit bunch (FFB) Yield The second EPP focuses on increasing the national FFB yield from a current 21 MT/ha/year to 26 MT/ha/year by 2020 Objective Increase upstream yield from 21MT/ha to 26.2 MT/ha of current plantations Implement best practices in new plantations Improve quality of life of 161,000 independent smallholders across Malaysia Key issues Low yield of independent smallholders ( hectares or 12% of total palm oil areas in Malaysia) Lack of access to best practices and small average size of independent smallholders dilutes average FFB output performance The three reference Code of Practices are not applied by all plantations, which drags down average yield Recommendations Mandatory CoP Enforce mandatory implementation of one of the 3 reference Codes of Practice or company best practice for plantations and organised smallholders MPOB/SIRIM to conduct regular audits to ensure full implementation Cluster independent smallholders in cooperatives Take stock of all independent smallholders and group into cooperatives ( ) Cooperative membership to become mandatory for ALL smallholders after 2013 At least 1 of the reference Codes of Practice is mandatory for cooperatives Implement yearly ranking MPOB to rank smallholders by yield within cooperatives MPOB to rank cooperatives by yield nationally on a yearly basis Impact GNI Impact in 2020 RM 10.2 b Jobs created ,600 jobs Public Investment (*) Key challenges Not Required Ensure adequate resources for MPOB s TUNAS and implementation of one reference Codes of Practice or company best practice equal r better than CoP Prevent potential issues with formation of cooperatives (corruption, mismanagament etc.) Key stakeholders KPPK, MPOB, smallholders, plantations, FELDA, RISDA, FELCRA, State Govt Agencies, SIRIM * Includes cash and tax incentives 55

56 RECRUITMENT OF 100 TUNAS OFFICERS - Timeline No Activity Due Date Status 1 Job specification and distribution (IRED) - Completed 2 Advertisement (HRD) 4 Oct - 1 Nov 2010 Completed 3 First screening (HRD) 2-10 Nov 2010 Completed 4 Second screening (IRED) Nov 2010 Completed 6 Final list for interview 26 Nov 2010 Completed 6 Calling for interview 27 Nov - 3 Dec 2010 Completed 7 Interview (MPOB HQ) 4-10 Dec 2010 Completed 8 Interview (East, South and Northern Dec 2010 Completed 10 zone) Appointment Dec 2010 Completed 11 9 Interview Report for (Sabah duty and Sarawak) Jan Dec Work Completed in progress 12 Training Feb 2011 Work in progress 56

57 RECRUITMENT OF 100 TUNAS OFFICERS - Timeline TUNAS officers required by Feb 2011 posts filled posts to be interviewed on 2 Feb 2011, to be interviewed on 15 Mar 2011 and targeted to report for duty on 1 Apr

58 EPP 3 : Improve workers productivity This next EPP is targeted at improving workers productivity in the fields through the introduction or scale up of new techniques for key activities Objective Increase average productivity of harvesters Reduce dependence on foreign labor in Malaysia Key issues Growing shortage in labor, esp. harvesters in oil palm plantations impacts overall industry yield Lack of mechanisation options in oil palm plantations creates over dependence on manual labor Over dependence on foreign workers creates a large outflow of money due to remittances abroad Recommendations Develop usage of Cantas Develop production of Cantas for bulk purchase (high volume and lower price per unit) Plantations to adopt Cantas Expected increase in workers productivity ~ 85% Develop usage of diamond sharpening tool Contact agent for tool and negotiate for bulk purchase (fix a lower price based on volume) Promote distribution and take up by plantations, FELDA and smallholders Switch from manual to buffalo assisted FFB collection in plantations Veterinary Dept (1) to select local importer and supplier for buffaloes import, (2) to launch breeding programme is deemed necessary to meet demand Need 32,000 in 5 years Impact GNI Impact in 2020 Jobs created Public Investment (*) Key challenges RM 1.7 b -110,000 (foreign) +25,000 (**) Not Required Secure buy-in from companies for Cantas usage Increase in production of Cantas production will require full commitment of selected manufacturers Buffalos breeding program in Malaysia still small scale and ad hoc Key stakeholders Plantations, MPOB, KPPK, Immigration Department, MOHR (Labor Dept.), Vet. Dept. Includes cash and tax incentives (**) Maximum potential expected 58

59 EPP 3 Improving workers productivity 1 From manual harvesting pole to CANTAS 2 Harvesting From traditional sharpening stone to diamond sharpening tool Productivity: + 86% Improved Working Conditions + Higher Productivity Sharpening Tool Productivity: + 40% 3 FFB Collection From manual collection to buffalo assisted collection Productivity: accelerate Local Employment + 50% 59

60 EPP 3 Improving workers productivity 11 pilot plantations for trial No Plantation State Date of visit Status 1 FELDA Technoplant Pasoh 2 Negeri Sembilan 2 FELDA Technoplant Pasoh 3 Negeri Sembilan 16 Dec 10 Completed 16 Dec 10 Completed 3 FELDA Technoplant Jengka 20 Pahang 17 Dec 10 Completed 4 FELDA Plantation Sahabat, Lahad Datu Sabah 17 Jan 11 Completed 5 KLK Ladang Tuan Mee, Sg. Buloh Selangor 20 Dec 10 Completed 6 Sime Darby Ladang Pekan, Bandar Tenggara Johor 22 Dec 10 Completed 7 Tradewinds Miri Sarawak To be determined W.I.P 60

61 EPP 3 Improving workers productivity Pilot plantation results* Areas of improvement Productivity increased Results 1.8 MT/man day to 3.2 MT/man day Labor dependence reduced 50% 61% Workers income increased Land to labor ratio increased Tool to land ratio increased RM 800/month to RM 1600/month 18 ha to 36 ha 36 ha to 106 ha * Sg Labis and Pekan Estate, both plantations owned by Sime Darby Plantations 61

62 EPP 4 : Improve oil extraction rate (OER) This EPP aims at increasing national average Oil Extraction Rate (OER) from 20.49% to 23% Objective Recommendations Impact The objective is to increase the National OER from 20.49% to 23% by 2020 Key issues Inconsistent quality of FFB are delivered to Palm Oil Mills Inefficient plants with relatively high oil losses on FFB at 1.8% Old mills have not upgraded their machineries Improve the quality of FFB at mill gate with the help of MPOB enforcement officers. Enforce proper grading on incoming FFB, based on guidelines produced by MPOB. Millers and dealers of FFB must employ competent graders, certified by MPOB FFB price must be paid according to the quality of FFB received Improve supply of steam to maintain a stable temperature throughout the processing activities, i.e. sterilisation and oil recovery Installation of Empty Fruit Bunch (EFB) Screw Press KPPK to arrange for fund allocation from Commercial/ Development Banks to upgrade/ modernise POM. GNI Impact in 2020 Public Investment (*) New higher yielding planting materials Availability of funds Increasing supply of FFB Palm Oil Millers FFB Suppliers KPPK /MPOB RM 13.7 b Jobs created ,000 jobs Key challenges Key stakeholders Not Required * Includes cash and tax incentives 62

63 EPP 5 : Develop biogas facility at mills This EPP aims at building biogas facilities at mills across Malaysia Objective To build Biogas (methane) capturing facility for utilisation in palm oil mill for own use and supply electricity to the National Grid. Key issues Companies are not reaping the benefits from carbon credit incentive offered under United Nation Framework for Climate Change Convention (UNFCCC). Opportunity loss from unutilised methane gas released during milling process Recommendations Mandatory CoP To gradually build biogas facilities across 400 mills by To supply electricity to national grid from 200 mills by To utilize captured biogas in POM boiler and free up Oil Palm Shell for sales, in 267 POM by To increase electricity tariff for Renewable Energy Power Purchasing Agreement (REPPA) from the current RM0.21/kWh to proposed RM0.35/kWh Impact GNI Impact in 2020 Tedious approval process Limited technology provider RM 2.9 b Jobs created ,000 jobs Public Investment (*) Key challenges Lack of technology know-how in dealing with POM biogas by PO millers Financial Constraints due to high CAPEX for installation. Key stakeholders Palm Oil Millers Not Required KPPK, Ministry of Natural Resources & Environment, Commercial/Dev Banks * Includes cash and tax incentives 63

64 EPP 5 Develop biogas facility at all mills : Development plans 2 Total mills : # 28 mills with biogas plants (as of Dec 2010) # 8 additional mills with biogas plants by

65 EPP 6 : Focus on high value oleo derivatives The sixth EPP recommends shifting Malaysia s focus towards high value oleo derivatives (2011 Budget : RM 127m) Objective Shift focus of production from basic oleochemicals to higher value oleo derivatives from a current 1% share to a forecasted 40% by 2020 Focus development of 5 key products i) Agro chemicals ii) Surfactants iii) Bio lubricants iv) Bio Polyols v) Glycerol derivatives Key issues Basic oleo-chemical market is saturating and stagnating. CAGR ( 02-07): 5.1% CAGR ( 09-14): 4.6% suffers from low margins Basic Surfactant Bio polyol Bio lub. Agro chem. and 98% of Malaysia s production is focused on basic oleos * Includes cash and tax incentives Recommendations Support local oleo-derivative industry/ players to expand domestic production Pre-commercialization investment and technology acquisition funds Focused R&D efforts on identified high value products Global market knowledge and research support Incentivise local players to setup plants through JVs abroad Tax incentives for foreign acquisitions Enhanced collaborations with investors and technology providers Major oleochemical players to lead investments Increase derivatives revenue share by 2020 Exploit synergies with petrochemical players Share raw materials and spread investments across two industries Encourage foreign investors to setup factories/jvs in Malaysia Promote five proposed oleo hubs Impact GNI Impact in 2020 Public Investment (*) RM 5.8 b Jobs created ,860 jobs Key challenges RM 0.59 b New products & markets - Risks of shifting to a new product category & expansion to new markets Research & marketing Need for specific R&D and marketing focus Time - Uncertain timeline for full-scale commercialisation Price pressure - Boom and bust cycle of oleos to put pressure on margins for new players Scale Challenging to find investors for scaling up production Key stakeholders MPOB, MPOC Private sector Sime Darby, IOI, KLK, Felda MIDA 65

66 EPP 7 : Commercialise 2 nd generation bio fuels Next EPP emphasizes on an early commercialisation of 2nd Generation Biofuels Objective Fast-track the commercialisation of 2 nd generation biofuels to leverage the biomass generated in the industry As the technology becomes available in the next few years, Bio Oil can be converted into transportation fuels like diesel Key issues Empty fruit bunches, fibre and shells accounts for ~ 74% of volume of fresh fruit bunches Biomass-to-gas (BTG) technology is available, but is low value generating and is still costlier than fossil fuel gasification Biomass-to-solid (BTS) technology is also available, and is higher value generating; however it has limited applications and is cumbersome to transport Biomass-to-chemical (BTC) is the highest value generating, but is still only in R&D phase, and will take a much longer time to commercialise (> 2020) Recommendations Push by private sector Premium Renewable Energy & Genting Bio Oil to form JVs with plantation companies and establish Bio Oil plants They will further commercialise the technology for conversion of Bio Oil to transportation fuels Feedstock availability Bio Oil players will have to negotiate with mills to ensure feedstock availability and sustainability Support and optimize infrastructure and logistics The Bio Oil players will need to develop their own infrastructure for transportation and storage Promotion of Green Technology Financing Scheme GreenTech Malaysia (Formerly PTM) to aggressively promote the GTFS to all potential Bio Oil players Impact GNI Impact in 2020 Public Investment (*) RM 3.3 b Jobs created ,044 jobs Key challenges Not Required commercialisation Timeline for full-scale commercialisation of the BTL technology is still unclear Higher capital investment Required higher investment than other biomass technologies, and hence finding investors will be a challenge Technology transfer Imparting technology to smaller players to ensure future ramp-up Key stakeholders Private sector Premium Renewable Energy, Genting Bio Oil Plantation companies MPOB * Includes cash and tax incentives 66

67 EPP 8 : Food & Health Based Segment The eighth EPP is to expedite growth in food & health based downstream segment (2011 Budget : RM 23.3m) Objective To position Malaysia as a significant world player in the Food & Healthbased downstream segment To expand Malaysia s global market share in the Food & Health-based (incl. Halal) downstream segment Targeted total incremental market share in selected countries/region (i.e. Malaysia, EU, US, Eastern Europe, China, India, Indonesia, MENA* and Pakistan) of at least 1.0% by 2020 Key issues Slow growth in Food & Health-based downstream segment: 1) Plantation companies Have muscle to vertically integrate BUT prefer sure gains in upstream investments 2) Food & Health-based companies Are mostly SMEs and have ingredient formulation expertise BUT no financial muscle and economies of scale to compete and expand effectively Recommendations 1) Acquire foreign food players The fastest way to achieve end in mind but has low probability of success Able to localize acquired expertise 2) Anchor Company Model Anchor Co. will: i. Consolidates/buys all products produced by SMEs ii. Brand, promote and sell products to the market iii. Advise SMEs on technology, QC and market requirements SMEs will: i. Optimize productivity ii. Maintain/enhance quality of products and produce based on Anchor Co. s requirements 3) MPOB Inc. MPOB Inc. will provide advisory services to SMEs interested in commercializing MPOB products advisory services include: i. Technical know-how ii. Sourcing of funds and financial evaluation iii. Market intelligence iv. Branding and promotion Impact GNI Impact in 2020 Public Investment (*) RM 4.9 b Jobs created ,900 jobs Key challenges Key stakeholders RM 4.4b Reluctance of major companies to invest in downstream activities To encourage SMEs to commercialise new palm-based products To encourage top players to acquire foreign companies Oil palm industry players SMEs involved in producing palm-based products Existing local Food & Health-based downstream players * Includes cash and tax incentives 67

68 8 key initiatives will focus on the lowest lying fruits, whilst planning for longer term benefits KEY INITIATIVES i 1 Accelerate Replanting UPSTREAM PRODUCTIVITY & SUSTAINABILITY ii DOWNSTREAM EXPANSION & SUSTAINABILITY Improve FFB Yield Improve Workers Productivity Increase Oil Extraction Rate Develop Biogas Facilities at Mills Expedite Oleo Derivatives Growth Commercialise 2 nd Generation Biofuels Expedite Growth of Food and Health Based Segment High Ease of Implementation Low Identify ways to increase value add 3 (RM 1.7 b) LOW PRIORITY 5 (RM 2.9 b) 1 (RM 4.6 b) 2 (RM 13.7 b) (RM 10.2 b) Low GNI Contribution High ( < RM 3 Billion) ( > RM 3 Billion) 7 6 (RM 3.3 b) (RM 5.8 b) HIGH PRIORITY 8 (RM 4.9 b) 4 Remove barriers for implementation 68

69 EPPs already delivering results...

70 We have 3 versions Full version for the rakyat Execu*ve Summary video Avid reader Lazy people Laziest people

71 Thank You