A Growing Industry


Economic News

22 Jul 2010
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Malaysia is looking to genetics to help its palm oil industry improve productivity, while enhacing the image of the sector at a time when it is seeking to capture a bigger share of the global vegetable oil market.

Widely used in cooking oil, other foods, cosmetics and biofuels, palm oil is a major contributor to the Malaysian economy. In 2008 the country produced 17.7m tonnes of crude palm oil (CPO), of which 15m tonnes were shipped overseas, generating export revenue of $17.6bn. The industry provides direct and indirect employment to some 800,000 Malaysians, according to government figures.

However, the highly versatile palm oil has been getting some bad press of late, mainly from the environmental lobby who are voicing concerns that accelerated clearing of land in countries such as Malaysia and the production of biofuels will result in higher greenhouse gas (GHG) emissions, and the destruction of rain forests.

One of those trying to dispel these concerns is the Malaysian Palm Oil Board (MPOB), the state body tasked with promoting and developing the industry. On November 9, Datuk Mohd Basri Wahid, the board's director-general, announced that a consortium co-led by the MPOB and US-based Orion Genomics had sequenced three oil palm genomes from two palm species.

What makes this breakthrough important is that it would allow researchers to understand genetic differences between the two species, which results in differences in yield, disease resistance and height increment.

Zainal Azwar, chief executive officer of TH Plantations, a leading Malaysian plantation company told OBG, "Palm oil only uses 5.6% of the total land area of the seven major oil seeds, but produces an output of 38% of the total. For example, 100m ha would be needed to produce 37 tonnes of soyabean, where only 11m ha would be needed for oil palm to produce the same amount. Worldwide 230m ha are cultivated for the seven major oil seeds of which 100m alone is for soyabean."

Oil palm is already the highest-yielding oil-bearing crop, with palm plantations producing just under four tonnes per ha, almost 10 times the output of other plant types. By being able to develop a comprehensive genetic blueprint, the benefits of the two species of the plant could be blended, increasing yields and productivity for the growing food and biodiesel markets.

Azwar said, "Palm oil only uses 5.6% of the total land area of the seven major oil seeds, but produces an output of 38% of the total. For example, 100m ha would be needed to produce 37 tonnes of soyabean, whereas only 11m ha would be needed for oil palm to produce the same amount. Worldwide, 230m ha are cultivated for the seven major oil seeds, of which 100m ha alone is for soyabean."

This, of course, has direct commercial applications but also very real advantages when responding to the conservation lobby. By being able to improve yields and reduce losses through disease, less land would be needed for oil palm plantations, reducing pressure on the environment.

According to Nathan Lakey, the president and chief executive officer of Orion Genomics, the sequencing and mapping of the oil palm genomes has been the most comprehensive carried out to date, with the results holding great promise for the future.

"We theorise that by studying oil palm epigenetics, we may be able to help to speed up the development of varieties of oil palm that produce more oil, rapidly increasing the per-acre efficiency of the crop, which already is the single largest producer of edible oils worldwide," he said.

While Basri is confident that genome sequencing will bring great benefits to the industry and the environment, he acknowledges that the process will take time.

"Genome sequencing is not that straightforward," he told OBG in an exclusive interview. "The yield depends on many factors, so you would have to assemble all these. We can look at the sequence of the genome and come up with markers like thin shells, high oil, disease resistance; high bunch numbers, then screen them for content, quality, heights and so on," Basri added. But this screening alone, according to him, will take years and after real trials one cannot be assured of an immediate impact. Although MPOB is in an advantageous position to screen for these traits as it houses the world's largest oil palm germplasm collection, validation of the screening will take years. This is because one breeding cycle of the oil palm takes seven years, he said.

The genome project is part of a far broader programme aimed not only at improving output and allaying environmental concerns, but at establishing Malaysia as an international brand name, one associated with quality and sustainability, said Basri.

"MPOB wants to be a certifying body, similar to the International Organisation for Standardisation we have established a team and trained them as auditors to develop certificates," he said. "There is a complete code of practice that can be applied to plantations, mills and across the industry."

"Overseas countries don't differentiate countries who produce palm oil, we are the same as Indonesia to them. Therefore MPOB is working towards a certificate of assurance."

The Roundtable on Sustainable Palm Oil (RSPO), the international group representing both oil buyers, sellers and producers, is also slowly working towards reducing GHG emissions. At its recent meeting in Kuala Lumpur, the RSPO announced it would develop a voluntary framework within which companies will work together to reduce emissions and develop further measures related to land use before the group's next conference in 2010.

Besides implementing industry standards to drive sustainable practices, the private sector has itself found ways to address the green issue while at the same time turning a tidy profit.

One area being addressed is the environmental impact of chemical fertilisers. Organic fertilisers are being introduced to reduce the use of inorganic fertilisers. The process uses organic waste that would normally be left to decay and emit GHG emissions as the feedstock for organic fertiliser production. Malaysian company Asia Green Environmental converts available organic wastes, in the case of the palm oil industry, oil palm empty fruit bunches (EFB), palm oil mill effluent (POME), mesocarb fibre (unutilised as biomass boiler feedstock), decanter cake/sludge and boiler ash generated from palm oil mill operations to produce compost or organic fertiliser.

As Steven Chong, the company's managing director, told OBG, "The amount of chemical fertilisers applied in oil palm estates can be reduced and substituted with compost or organic fertiliser and this in turn, can mitigate pollution of rivers and water catchment areas by chemicals from inorganic fertilisers, in particular during the monsoon season. One major victim of such pollution is the Kinabatangan River in Sabah, a site earmarked for eco-tourism." In exchange for a 20-year concession, a build-own-operate-transfer plant provides plantation companies with cheaper fertiliser using their mills' waste by-products that would normally emit GHGs based on the mills' conventional waste treatment and disposal practices. Though he concedes, the environmental agenda must move beyond an exercise in green CSR, "The only way that it will work is from a capitalist point of view, the solution to the problem is to make money by going green."

Palm oil mill technology has also been getting smarter. CB Industrial Products has been rolling out its patented Modipalms mills for about five years, having spent the first five on research and development. Besides automating the process of processing fresh fruit bunches and reducing the fuel and labour required, the mills can use the biomass and biogas to generate electricity and organic fertiliser; thus achieving zero discharge. As Mr Lim, the company's managing director, told OBG, "There are many methods of handling waste, but the engineering and planning wasn't fully developed to achieve zero discharge."

With less land available for expansion and older inefficient plants needing replacement, green technologies are therefore beginning to make good economic sense as a way of increasing efficiencies, cuting costs and addressing environmental concerns.

Though Malaysia's palm oil industry still has some hurdles to overcome, it is working to prove its international sustainability credentials while at the same time improving the lifestyles of the many smallholders who make up the backbone of the sector. By using advanced technology to improve processing, Malaysia could help achieve both objectives.

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