Proceedinga of the MPOA Seminar 2003


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Book Review by Dato’ Henry Barlow

The MPOA is to be congratulated for its proactive approach to emerging problems facing the palm oil industry. The publication under review bears evidence of this concern, at a time when the industry, largely because of its successful expansion, faces a shift from a roduction driven to a consumer driven industry. The definition sounds glib enough, but what are the implications?

They are very considerable, perhaps the more so because many of the industry leaders grew up in the era of rubber, and consequently ind the mindset required of a consumer based industry unfamiliar. However, like it or not, the industry must realize that the customer is lways right – particularly when there is such a variety of alternatives to palm oil on the international vegetable oil markets.

Globalisation, combined with vast increases in palm oil production has stimulated rivalry with other competing vegetable oils, chiefly oybean, in world markets. This has combined with an increasing environmental  wareness in the developed world, leading to demands or identity protection (traceability), for the aintenance of food quality standards at all stages of production from field to frying pan, and for proof that the industry is operating in accordance with principles of sustainability. This means the enforcement of Good Agricultural ractice (GAP) on estates and compliance with all legislation as far as the traditional rights of indigenous communities are concerned.

What is good agricultural practice? It is likely to go a good way beyond no-burning clearance and replanting, with the need, for instance, to nsure that adequate strips of land are left uncultivated along major river courses, and perhaps restrictions on the clearing of steep and illy areas, and inherently impoverished soils, as well as strict criteria for the drainage and cultivation of peat swamps.

Will the producer who complies with these regulations get a premium for his oil? Almost certainly not: if he fails to comply, he will simply ind it increasingly difficult to sell such oil, initially into the developed world, and doubtless in the not too distant future, into the large developing markets in China and the Indian subcontinent. There have already been a number of critical articles and reports on these roblems in some of the more important markets for palm oil. One recent one in particular was commissioned by a significant fund
manager in London, asking users of palm oil for food products whether they were aware of the sources of their oil. A large percentage of he respondents admitted they had no such knowledge. The message was clear: it is only a matter of time before retail consumers start sking for reassurances on these points.

Nor are these concerns restricted to estates: mills come in for equally close scrutiny. Compliance with Hazard Analysis and Critical Control oints (HACCP) and conformity with Codex Alimentarius, the international code for food safety, are becoming increasingly important. hese will require mills to be operated in accordance with international standards of food hygiene, and the use of stainless steel and egetable based, rather than petroleum based lubricants in all machinery likely to be in contact with palm oil: no more crows feeding on
the ffb ramp, nor sparrows or pigeons flitting around in the roofs of mills.

In terms of traceability, users of palm oil for human consumption will be under pressure to insist that any consignment of oil can be traced t least to the estate where it was grown. This requirement clearly favours large integrated producers who are involved in downstream efining of palm products. It does however raise significant problems over how to handle smallholder production, millers operating without  heir own sources of ffb and dealers on the international markets, particularly forward traders who may not know till the last moment the hysical origin of the oil traded. At the smallholder level, one solution may be the much closer supervision of smallholder agricultural ractices by an accredited mill.

It is in response to these issues that MPOA organised this seminar, which was attended by representatives of most of the stakeholders in he industry, from major growers through refiners and traders to include NGO’s, in this case WWF Malaysia, government representatives, nd representatives of chemical and fertilizer suppliers.

There are a number of organizations operating internationally who are involved in certification schemes of the kind envisaged, and one of he industry’s problems is to decide, in conjunction with end users and other interested parties the extent to which existing schemes or arts thereof can be adopted for use in the palm oil industry, and to what extent a completely new system is needed. This was among the ssues discussed at the seminar, and out of it arose the decision to set up a Environmental Charter under MPOA to provide a solution to hese problems.

There is clearly much detailed negotiation to come and this, if it is to produce a charter which all can subscribe to, will need to involve all the stakeholders. The experience of the cotton industry in Australia, where this process is far more advanced indicates that the first equirement is for the growers’ representatives to mandate full cooperation towards the development of a system of Good Agricultural ractice (GAP). This must be combined with collaboration among all stakeholders in a commitment to find solutions.

The seminar papers reflect a number of the problems which will face the industry, and, more important, the willingness of the industry to ake up the challenges needed to face the future. This bodes well for the industry.

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