HIGH INCOME GENERATION FROM MALAYSIAN PLANTATION RESOURCES. Tan Sri Datuk Dr. Yusof Basiron Chief Executive Officer MALAYSIAN PALM OIL COUNCIL

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1 HIGH INCOME GENERATION FROM MALAYSIAN PLANTATION RESOURCES Tan Sri Datuk Dr. Yusof Basiron Chief Executive Officer MALAYSIAN PALM OIL COUNCIL

2 Presentation Outline 1. NKEA Palm Oil and Rubber 2. Importance of Research & Development (R&D) & Success Stories for palm oil & rubber 3. Details on 8 palm oil EPPs to generate high income and R&D inputs involvement 4. Details on 4 rubber EPPs to generate high income and R&D involvement 5. Conclusions

3 Why palm oil & rubber chosen as NKEA Export earnings from palm oil industry in 2011 was RM 80.4 billion Export earnings from rubber industry in 2011 was RM 40.4 billion They are the top two export revenue earners for primary commodities Together they contribute to 17% of Malaysia s export earnings or 10% of GDP

4 Programme NKEA Palm Oil NKEA rubber High income generation from palm oil & rubber in 2020 Gross National Income generation (RM) RM 178 billion RM 52.9 billion Contribution from NKEA palm oil & rubber as % of total NKEA 13.6% Total for 12 NKEAs RM 1.7 trillion 100% Additional from National Biomass Strategy (from palm oil industry) RM 30 billion Additional Job creation is another aim of NKEA

5 Uses of palm oil & market share 1. Source of food (global food security ): 80% 2. Oleochemicals: 15% 3. Biofuel : 2% 4. Renewable energy source: Potential Remains Largely Untapped through Palm Biomass 5. Palm wood furniture (Heveawood furniture success story) Palm Oil Currently Accounts for 28% of Global Oils & Fats Supply Palm Oil Others Sunflower Oil Rapeseed Oil Soybean Oil

6 Malaysia is second most important exporter of Oils and Fats in world (2011) China EU-27 India Others North Africa Pakistan Iran B desh Mexico Egypt Japan Turkey South Africa South Korea Nigeria Taiwan Brazil Canada Philippines Russia Ukraine Argentina Net Exporters Net Importers Indonesia Malaysia -15,000-10,000-5, ,000 10,000 15,000 20,000 25,000 30,000 ('000 MT)

7 Importance of Malaysian rubber industry Planted area (ha) 1,020,380 1,022,780 Production (tonnes) 939, ,210 Average yield (kg/ha/yr) 1,480 1,500 Earnings (Exports + rubberwood furniture) Contribution to Malaysia s economy NR producer NR exporter Rubber gloves Latex thread & cord RM33.85b 2 nd position after palm oil 3 rd in world 3 rd in world World s largest supplier World s 2 nd largest supplier RM40.42b Nitrile butadiene rubber World s largest supplier Source : Ang Chai Seng (MRB) & MRB website

8 EPPs of Palm Oil and Rubber NKEA Palm Oil has 8 EPPs of which 5 upstream and 3 downstream NKEA Rubber has 4 EPPs of which 2 upstream and 2 downstream Activities in EPPs can be classified into Increase yield and productivity Make production process simpler, more effective, less labour intensive and/or more sustainable Improve current products Create new products Expand markets Research & Technology (R&D) efforts needed in some of the EPPs to make them a success

9 i. Dietary manipulations of fatty acids in human diet ii. iii. iv. Blending of palm and soya oils Humans taking this blend had improved human HDL/LDL cholesterol ratios Reduced cardiovascular risk v. This fatty acid blend could replace trans-fats margarine & other solid fats vi. Palm oil success stories from R&D Smart Balance Patent resulted in successful product commercialization IMPACT: Palm oil exports to USA soared

10 Palm oil success stories from R&D Debunking the saturated fats issue Palm oil has higher amount of saturated fatty acid compared to olive, soya & canola oils Higher intake of saturated fat thought to cause poorer cardiovascular health > 180 studies on nutritional value and health benefits of palm oil carried out Conclusions 1. No significant evidence to show that dietary fat associated with increased risk of coronary heart disease (CHD) 2. Consuming palm oil increases good high density lipoprotein cholesterol (HDL-C) and trends towards reduced CHD IMPACT: Palm oil defended its turf & won new markets & retain old ones

11 Rubber success stories from R&D Standard Malaysian Rubber (SMR) NR produced as sheets & scraps traditionally SMR Scheme is scheme to grade Malaysian rubber based on technical specifications with certain defined packing requirements Launch marked success resulting from months of R&D efforts on processing, grading and packaging of NR Today (47 years later) Scheme still in use Major NR producing countries copied the SMR scheme: i. Standard Thai Rubber (STR) ii. Standard Indonesian Rubber (SIR)

12 Rubber success stories from R&D Heveawood products In earlier days rubber wood used as fuel for cooking Late 1970s R&D at RRIM and later at FRIM found a method to treat rubber wood & make furniture and other wooden products RESULT: i. Convert use of rubber wood to end product with high value ii.today s revenue is RM 8 billion out of total RM42 billion

13 Furniture from Heveawood Source: Malaysian Rubber Board (MRB)

14 Palm wood furniture

15 NKEA Oil Palm Entry Point Projects (EPP) Description Type 1 Accelerate replanting & new planting Upstream 2 Improve fresh fruit bunch yield Upstream 3 Improve workers productivity Upstream 4 Improve OER Upstream 5 Develop biogas facllities Upstream 6 Focus on high value oleo derivatives Downstream 7 Commercialise 2 nd generation biofuels Downstream 8 Expediate growth in food & health based segment Downstream

16 Rubber Entry Point Projects (EPPs)under National Key Economic Area (NKEA) Rubber NKEA to raise Gross National Income by RM 52.9 billion by EPPs for rubber industry First 2EPPS to address upstream productivity & sustainability Last 2 EPPs to address downstream value addition

17 NKEA Rubber Entry Point Projects (EPP) Description 1 Increasing average national rubber productivity to 2,000kg/ha/yr by 2020 Type Upstream 2 Ensuring sustainability of upstream rubber industry 3 Increase world market share of latex gloves to 65% by 2020 Upstream Downstream 4 Commercialise Ekoprena and Pureprena Downstream

18 Need for R&D in EPPs Palm Oil & Rubber Oil palm & rubber trees produce raw materials Need new products to increase use of these raw materials Need evidence (results) from R&D to resolve attacks on palm oil & rubber These R&D activities will Create new products & new demand Create new markets Maintain existing markets Net effect: Increased export earnings R&D activities needed for the various EPPs & Biomass Strategy

19 EPP1 Accelerating replanting and new planting STATUS - 400,000 ha with trees > 25 years drag down national average yield ACTIONS - Replant if > 25 years & productivity <14 t/ha/yr - Increase national area under oil palm by new planting. - Replant another 1 million ha by 2020

20 Big scope of R&D needed in higher yielding varieties/fertilizer use/agronomy/ Water management need for new plantings & replantings

21 STATUS EPP2 Inproving Fresh Fruit Bunch Yield - National FFB yield stagnated at 20MT /ha & independent smallholders lower at 17 MT/ha ACTIONS - Increase National FFB yield to 26.2MT/ha - Group 161,000 independent SH around the nearest mill into organized co -operatives & rank them by yield

22 A need to increase yield productivity for oil palm t/ha Average yield t/ha/yr In 2007, oil palm industry players had a round table discussion on elevation of national average FFB yield to 35t/ha and OER to 25% to obtain 8.75 t CPO /ha/yr. KEY: replant with good materials + best agro-management practices. Need for R&D

23 Oil palm yield increase via R&D

24 SMART IRRIGATION Source: TH Plantations Much water lost as runoff. Reduce runoff as much as possible.

25 Results from experiments on irrigating oil palm Situation FFB Yield (t/ha/yr) Malaysian National Yield ( ) MPOB (DG s plot) 32 Felda (irrigated) 46 Felda (lysimeter with maximum inputs of fertilizers & water) India (irrigated) 32 India ( non-irrigated) 8 60

26 Positive response from irrigation in field trials on oil palm Experiment details Results reported Reference Drip or furrow irrigation of oil palms ( non effluent) Flat bed irrigation on oil palm (non effluent) Furrow application of rubber effluent on oil palm 30% yield increase from irrigation & mulching 11% yield increase with irrigation 4-40% yield increase with irrigation Chan K.W et al (1985) Lee C.T et al (2011) Mohd Nazeeb et al (1983) Plantations should relook at this option to reach the yield potential. Start small by irrigating a 20 hectares block. With experience & success obtained, expand by repeating experience in parcels of 20 hectares. Irrigate during dry season only. Combination of smart irrigation + fertilizer use expected to give some dramatic yield increase

27 EPP3 Improve Worker s Productivity STATUS - Labour shortage - Mechanization constraints ACTIONS - Encourage use of Cantas - Encourage use of Diamond Sharpening Tool

28 Mechanization Good progress made in mechanization Mechanized harvesting tool for oil palm: CANTAS Next: R & D needed to find solutions for weaknesses found in mechanized tools & equipment Cost must be affordable

29 EPP4 Improve Oil Extraction Rate STATUS - Inconsistent quality of FFB delivered to mills - Some mills with high oil loss of FFB at 1.8% ACTIONS - MPOB to assist 186 mills to improve quality - Ensure Code of Practices

30 Continuous sterilization Method in Palm Oil Mills Older technology Some of technology used today dates back to 1950s Intermittent steam at high & low pressure Cannot use continuous processing Need more space & labour CONTINUOUS STERILIZATION MPOB continuous sterilization FFB double roller crushed+ steam at low pressure No cages, cranes, tractors Need less space & less labour

31 EPP5 Develop biogas facilities STATUS - Opportunity loss from unutilized methane gas released during milling ACTIONS - Build biogas facilities for all mills by mills to supply electricity to national grid by Get increase in electricity tariff from 21 sen to 35 sen per kilowatt hour R & D - Big demand for biogas capture technology Up to October 2012: 55 completed biogas plants, 16 under construction & 150 planning (almost ½ of total number of mills in Malaysia) - Demand for technology to use RE efficiently or in other ways - Demand for LCA studies

32 More R&D needed to build better & more efficient biogas utilization facilities

33 EPP6 Focus on high value oleo derivatives STATUS - 99% Malaysian production is basic oleochemicals - Basic oleochemicals market is stagnating ACTIONS - Support local oleo players to expand domestic production - Use MPOB pre-commercialisation & technology fund - Industry players can apply grant up to 40% investment cost R&D needed to come up with more high value new products

34 EPP7 Commercialising 2 nd Generation Biofuels STATUS - EFB fibre & shell accounts for 74% of biomass - Biogas-to-gas technology available but more expensive that fossil fuel gasification ACTIONS - Fast track commercialization of 2 nd generation biofuels - As technology becomes available next few years, bio oil to be converted into transportation fuels e.g. diesel - R & D - B5 programme in Central Region successfully implemented using first genearation biofuels - Immense scope to find new ways to produce 2 nd generation biofuels from palm biomass - Technology has to be modified for oil palm biomass which contains high amount of lignin

35 EPP8 Expediate growth in food & health based segment STATUS - Slow growth in these segments - Most SMEs have ingredient formulation BUT no financial means ACTIONS - Position Malaysia as significant world player in food & health-based downstream segment - 6 ongoing clinical trials on tocotrienols R & D - R& D grants already approved for tocotrienols (need for scientists) - Many other products in both food as well as health products (need for food scientists)

36 National Biomass Strategy (NBS) Palm oil industry has a second value add driver NBS has a roadmap to use palm oil biomass for biofuels and biochemicals To generate RM 30 billion GNI by 2020 This is additional to palm oil s contribution from NKEA palm oil Source Picture:

37 Large amounts of palm oil biomass

38 Wide scope for R&D in use of palm oil biomass Fuels Biomass Chemicals Materials Power

39 RUBBER EPP 1 Increase average national rubber productivity STATUS - Declining rubber planted area - Shortage of high quality/quantity of seeds for rootstock - Low land productivity ACTIONS - Increase use of automation & mechanization - Provide high quality rubber seedlings - Strengthen extension services

40 Source: MRB

41 R&D Activities Needed in EPP 1 Breeding for more high yielding clones, better than Clone 1Malaysia Better latex harvesting technologies ARTS : Automated Rubber Tapping System Source: MRB

42 R&D: Shortage of planting materials Cannot get enough seeds to get rootstock What about use of tissue culture? Not successful currently Source: MRB

43 RUBBER EPP 2 Ensure sustainability of upstream rubber industry STATUS - Drastic declining planted area - Strong gestation period (6-7 years) - Smallholders not incetised to produce latex ACTIONS - 40,000 ha of new planting - 18,000 ha of repalnting R & D - Develop technologies to increase land productivity e.g. better tapping technologies - Breed high yielding latex timber clones - With large replanting programme, technologies to help plant survive transplant shock - Methods to reduce gestation period

44 RUBBER EPP 3 Increase world market share of latex gloves to 65% by 2020 STATUS - Malaysia is world s largest producer of gloves ACTIONS - To increase the share of latex gloves globally - To monitor & ensure world getting adequate supply of gloves

45 Malaysian NR consumption by sectors in % 8.9% 13.1% 70.7% 6.8% compounds thread others tyres & tubes gloves Source: MRB (Dec 2011) Malaysia is world s largest supplier of gloves in world

46 Importance of R&D (rubber) NR latex medical gloves R & D to make gloves economically Malaysia is largest supplier of gloves in world Allergy resulting from use of latex medical gloves in early 1990s caused alarm as >1,000 reported cases Alarm also caused by reports of NR latex glove proteins contaminating food due to food handlers in 2001 Research at RRIM found allergy due to: i. latex protein ii. powder added to gloves

47 R&D for EPP 3 2. NR latex medical gloves Solutions 1. NR gloves today have lower latex protein content 2. Gloves sold With Powder or Without Powder Impacts: 1. Malaysia remains world s largest glove supplier R & D To make lower allergy or even allergy free gloves

48 RUBBER EPP 4 Commercialise Ekoprena & Pureprena R&D found new products that can be made from NR Ekoprena : form of epoxidised NR (ENR) i. Considered a green material ii. Can make tyres with excellent grip & reduced rolling resistance Pureprena: form of deproteinized NR i. Its products show low water absorption & consistent modulus

49 R&D efforts Find new areas where Ekoprena & Pureprena can be used Find new materials What about Nano- Ekoprena? Source: MRB

50 7. Conclusions NKEA Palm Oil & Rubber is one of twelve NKEAs that will propel Malaysia to high income status National Biomass Strategy for Palm Oil Industry will be another driver Total GNI contribution by 2020 will be RM billion to be derived from NKEA Palm Oil RM 178 b, NKEA Rubber RM 52.9b & NBS RM 30b Some of the activities need R&D contributions to achieve success Only some examples of R&D activities for the various EPPs are given in this presentation as possibilities are so great Just one R & D breakthrough can give dramatic effect to achieve the aim of the EPPs or exceed the target Future is bright for scientists, agriculturists and technologists in NKEA oil palm & rubber as apart from income generation, creation of new jobs is another target of NKEA

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