PETALING JAYA: The palm oil sector will be able to match the New Economic Model’s (NEM) major goals of high income, sustainability and inclusiveness, industry players said.

Therefore, it was no big surprise when the Government inserted an appendix in its newly released NEM report on how the development of the industry can help achieve the NEM’s sustainability goal.

Last year, Malaysia’s palm oil production stood at 17.7 million tonnes, with a total of about 4.69 million ha.

Palm oil contributed about 3.2% to the country’s real gross domestic product (GDP) in 2008.

Exports in 2009 rose to RM38.5bil, capturing about 7% of total exports.

In comparing the palm oil sector to the electrical and electronics (E&E) sector, the National Economic Action Council (NEAC) has estimated that unless the E&E sector is dramatically upgraded, the palm oil sector could become a larger component than E&E in GDP contribution, rising in nominal terms to 12.2% of GDP by 2020.

In terms of high income, industry calculations suggest that the sector’s share of real GDP can grow to 7.6% by 2020 if the value-added gains from efficiency and innovation can be realised.

Palm oil exports could also grow by 7% per annum to RM84bil by 2020, and probably more if new oil palm products and services can be successfully marketed.

The sector employs 590,000 direct workers versus 316,956 in the E&E sector.

More than one third of domestic palm oil production comes from smallholders, who have lower yields compared with commercial estates.

Initiatives by the Government and market leaders could help smallholders improve their yields, thus generating better income.

As for sustainability, better R&D will help to improve productivity, better conservation of the environment and lower net carbon impact on operations.

Other initiatives include mechanisation, biomass, biofuel, moving downstream and carbon trading initiatives.

Genome research, for example, will be able to unlock the full potential of palm oil production and upgrade smallholding production.

The NEAC also recommends a new form of cooperation to be initiated with key stakeholders in the industry in order to unlock resources and produce breakthroughs in the commercialisation of the industry’s research and development, particularly in genome research.

Asked to comment on NEM, United Plantations Bhd vice-chairman and executive director Datuk Carl Bek-Nielsen told StarBiz that the Government hit the nail right on the head when it focused on sustainability issues and how the oil palm sector needed to better manage its resources.

“Palm oil is increasingly becoming a major revenue earner for the country and this industry cannot simply be uprooted (like the microchip industry) and relocated to other places where the labour cost is cheaper,” he said.

The NEM wanted the palm oil sector to become better at managing its resources, he noted, adding that the sector had an abundance of biomass wastes that could be generated into green energy, while palm oil mill effluents could be converted into biogas, which would benefit the nation.

“Industry players can help improve the environment by making use of available resources in a more smart and efficient manner that will also lead to new job opportunities,” said Bek-Nielsen.

This will put Malaysia in a better light on the international front for taking the extra effort to reduce carbon emissions and reduce the usage of fossil fuels, according to Bek-Nielsen.

In addition, he said the strategy in the 10th Malaysia Plan was very forward thinking as it would enable Malaysia to reaffirm its position as the world’s most sustainable “bread basket” in terms of the supply of edible oils to the world.

The Malaysian Estate Owners Association president, Boon Weng Siew, said the Government should focus more on the implementation of home grown technologies such as palm-based biodiesel and genome research.

“We need the political will for the mandatory usage of palm biodiesel in Malaysia.

“We all need the genome technology to increase the productivity of per unit land area on existing plantation as Malaysia does not have the luxury to do forest clearing for oil palm cultivation,” he said.

Meanwhile, ECM Libra investment research in its latest market strategy report said it would be an uphill task for the plantation sector to move towards reducing its dependancy on foreign labour.