HIGH INCOME GENERATION FROM MALAYSIAN PLANTATION RESOURCES

Tan Sri Datuk Dr. Yusof BasironChief Executive Officer

MALAYSIAN PALM OIL COUNCIL

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

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

High income generation from palm oil & rubber in 2020

Programme Gross National Incomegeneration (RM)

Contribution from NKEA palm oil & rubber as % of total NKEA

NKEA Palm Oil RM 178 billion13.6% NKEA rubber RM 52.9 billion

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

28

29

7

13

23

Palm Oil Others Sunflower OilRapeseed Oil Soybean Oil

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)

Uses of palm oil & market share

Palm Oil Currently Accounts for 28% of Global Oils & Fats Supply

Malaysia is second most important exporter of

Oils and Fats in world (2011)

-15,000 -10,000 -5,000 0 5,000 10,000 15,000 20,000 25,000 30,000

Net Exporters

Net Importers

Indonesia

Malaysia

Argentina

Brazil

CanadaPhilippines

Russia

India

EU-27

Ukraine

China

North Africa

Pakistan

B’desh

Iran

Mexico

Egypt

Nigeria

Japan

Turkey

South Africa

South Korea

Taiwan

Others

('000 MT)

Importance of Malaysian rubber industry

2010 2011

Planted area (ha) 1,020,380 1,022,780

Production (tonnes) 939,241 996,210

Average yield (kg/ha/yr) 1,480 1,500

Earnings (Exports + rubberwood furniture)

RM33.85b RM40.42b

Contribution to Malaysia’s economy

2nd position after palm oil

NR producer 3rd in world

NR exporter 3rd in world

Rubber gloves World’s largest supplier

Latex thread & cord World’s 2nd largest supplier

Nitrile butadiene rubber World’s largest supplier

Source : Ang Chai Seng (MRB) & MRB website

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

i. Dietary manipulations of fatty acids in human “diet”

ii. Blending of palm and soya oils

iii. Humans taking this blend had improved human HDL/LDL cholesterol ratios

iv. Reduced cardiovascular risk

v. This fatty acid blend could replace trans-fats margarine & other solid fats

vi. Patent resulted in successful product commercialization

Palm oil success stories from R&D

Smart Balance

IMPACT: Palm oil exports to USA soared

Palm oil success stories from R&D

• 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

Debunking the saturated fats issue

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

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 theSMR scheme:

i. Standard Thai Rubber (STR)

ii. Standard Indonesian Rubber (SIR)

Rubber success stories from R&D

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

Furniture from Heveawood

Source: Malaysian Rubber Board (MRB)

Palm wood furniture

NKEA Oil PalmEntry 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 2nd generation biofuels Downstream

8 Expediate growth in food & health based segment Downstream

Rubber Entry Point Projects (EPPs)under National Key Economic Area (NKEA)

• Rubber NKEA to raise Gross National Income by RM 52.9 billion by 2020

• 4 EPPs for rubber industry

• First 2EPPS to address upstream productivity & sustainability

• Last 2 EPPs to address downstream value addition

NKEA RubberEntry Point

Projects (EPP)

Description Type

1 Increasing average national rubber productivity to 2,000kg/ha/yr by 2020

Upstream

2 Ensuring sustainability of upstream rubber industry

Upstream

3 Increase world market share of latex gloves to 65% by 2020

Downstream

4 Commercialise Ekoprena and Pureprena Downstream

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

EPP1Accelerating 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

Big scope of R&D needed inhigher yielding varieties/Fertilizer use/Agronomy/

Water management need for new plantings & replantings

EPP2Inproving Fresh Fruit Bunch Yield

• STATUS

- 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

A need to increase yield productivity for oil palm

0

5

10

15

20

25

1975 1980 1985 1990 1995 2000 2005 2010

t/ha

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

Average yield 18.94 t/ha/yr

Oil palm yield increase via R&D

SMART IRRIGATION

Source: TH Plantations

Much water lost as runoff. Reduce runoff as much as possible.

Results from experiments on irrigating oil palm

Situation FFB Yield (t/ha/yr)

Malaysian National Yield (1975-2010) 18.94

MPOB (DG’s plot) 32

Felda (irrigated) 46

Felda (lysimeter with maximum inputs of fertilizers & water)

60

India (irrigated) 32

India ( non-irrigated) 8

Positive response from irrigation in field trials on oil palm

Experiment details Results reported Reference

Drip or furrow irrigation of oil palms ( non effluent)

30% yield increase from irrigation & mulching

Chan K.W et al (1985)

Flat bed irrigation on oil palm (non effluent)

11% yield increase with irrigation

Lee C.T et al (2011)

Furrow application of rubber effluent on oil palm

4-40% yield increase with irrigation

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

EPP3Improve Worker’s Productivity

• STATUS

- Labour shortage

- Mechanization constraints

• ACTIONS

- Encourage use of Cantas

- Encourage use of Diamond Sharpening Tool

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

EPP4Improve 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

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

EPP5Develop biogas facilities

• STATUS

- Opportunity loss from unutilized methane gas released during milling

• ACTIONS

- Build biogas facilities for all mills by 2020

- 200 mills to supply electricity to national grid by 2020

- 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

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

EPP6Focus 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

EPP7Commercialising 2nd 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 2nd 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 2nd generation biofuels from palm biomass

- Technology has to be modified for oil palm biomass which contains high amount of lignin

EPP8Expediate 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)

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: http://www.innovation.my/programmes/wealth-creation/bio-mass/

Large amounts of palm oil biomass

Wide scope for R&D in use of palm oil biomass

Biomass

Fuels

Chemicals

Materials

Power

RUBBER EPP 1Increase 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

Source: MRB

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

R&D: Shortage of planting materials

• Cannot get enough seeds to get rootstock

• What about use of tissue culture? Not successful currently

Source: MRB

RUBBER EPP 2Ensure 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

RUBBER EPP 3Increase 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

Malaysian NR consumption by sectors in 2011

compounds

thread

others

tyres & tubes

gloves70.7%

8.9%13.1%

6.8%

Source: MRB (Dec 2011)

0.4%

Malaysia is world’s largest supplier of gloves in world

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

Importance of R&D (rubber)

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

R&D for EPP 3

RUBBER EPP 4Commercialise 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

R&D efforts

• Find new areas where Ekoprena & Pureprenacan be used

• Find new materials

• What about Nano-Ekoprena?

Source: MRB

• 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 260.9 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

7. Conclusions

THANK YOU

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