Archive for January 2011

Defunct biodiesel plants get new lease of life

This was reported in Singapore Business Times.

Singapore, 31 January 2011 - Defunct first-generation biodiesel plants - which became uneconomical when palm oil prices soared - are being revived as new owners upgrade them to make other products like chemicals used for oil and gas drilling. 

The ‘rejuvenation’ of Northfield-based Stepan Company is the first of these. After acquiring Peter Cremer’s 100,000 tonnes per annum methyl ester plant in July 2010, the American chemicals company is currently upgrading it and installing another fractionation column at the Singapore plant to potentially double its capacity to 200,000 tonnes per year.

The plant’s upgrading and expansion, scheduled for completion in February 2012, will enable Stepan to produce surfactants used in oilfields. Stepan’s surfactants are used in three major oilfield market segments, including drilling, production and stimulation. Methyl esters are for instance used as solvents in drilling fluids.

Another Jurong Island's first generation biodiesel plant which looks set to go the same route is the S$130 million Jurong Island plant (once touted as the world’s largest biodiesel facility) of Australian-owned Natural Fuel Pte Ltd. The plant which folded up in late-2009 is understood to have changed hands recently. But no details are available at this time.

President and chief executive officer of Stepan, F Quinn Stepan Jr said at the time of its acquisition of Peter Cremer that: ‘Methyl esters are a core building block of Stepan’s surfactant business and the acquisition of this asset on Singapore’s Jurong Island provides a great opportunity to reach our global customer base with methyl esters and value added derivatives.’

‘Our plan is to install methyl ester fractionation capability on the site in order to supply our customers and our internal surfactant needs globally with fractionated methyl esters and derivatives made from tropical oils available in the region.’

The financial terms of the acquisition of the US$20 million plant - previously a joint venture involving Germany’s Peter Kremer and Malaysia’s Kulim Berhad - were not disclosed.

Stepan just over a week ago awarded a S$14.6 million contract to Rotary Engineering to build a new four-storey 50,000 tonnes per annum (expandable to 100,000 tonnes per annum) fractionated methyl ester plant and also upgrade the existing plant. The plant is expected to tap raw materials like palm oil and coconut from this region.

The early first generation plants here like Natural Fuel and Peter Cremer, and a third plant belonging to Continental BioEnergy, essentially fell victim to soaring palm oil prices. Palm oil prices had tripled to US$1,400- plus a tonne by March 2008 from US$450 a tonne around 2005/06 when the Jurong Island plants first started.

Given also stiff competition from the many rival biodiesel plants in neighbouring palm oil producing countries, Malaysia and Indonesia, Singapore has been promoting more advanced second generation plants, with biofuels developed from non-edible or discarded plant parts.

Finland’s Neste Oil which expects to ramp up its just-started S$1.2 billion biodiesel plant at Tuas to full production by mid-year, exemplifies such second generation technology.

Its 800,000 tpa Singapore plant - the largest in the world, with an identical new twin plant in Rotterdam starting up also around mid-year - produces biodiesel from 100 per cent renewable materials like palm oil and animal fat. Its advanced second generation refineries allow Neste Oil to produce biodiesel from straight processing of the raw materials.

The Economic Development Board, in a background note to a recent tender for a consultant, said: ‘EDB believes bio-based feedstocks could add a new dimension of chemical feedstock option on Jurong Island. The fast-growing bio-based chemicals industry would also create new economic opportunities for Singapore.’

Sarawak flaunts unique charms to draw tourists

SARAWAK is capitalising on its unique attractions to woo tourism dollars from the meetings, incentives, conventions and exhibitions sector, said Deputy Tourism Minister Datuk Dr James Dawos Mamit.

"Some of Sarawak's assets and heritage have a natural advantage over Kuala Lumpur. For example, meetings on tropical peat, tribal tattoos or even gatherings of Foochows," he told Business Times in an interview.

In 2009, Malaysia welcomed 1.18 million business travellers who spent RM9.9 billion in flight tickets, hotel rooms, taxis and train fares, and for dining and shopping. Business travellers make up 5 per cent of total tourist arrivals, but the RM10 billion they spend in Malaysia makes up 19 per cent of total tourism receipts.

When asked to comment on a Netherlands-based environment activist group claiming that the expansion of oil palm plantations on peatland in Sarawak is based on faulty science, Mamit replied, "It is these kind of misunderstandings and mistaken perception of tropical peat that fuels the need for a more effective communication platform.

"Kuching recently won the bid to host the International Peat Congress (IPC) in 2016. It will be the first time an international gathering on peat soil science will be held in Asia. Here in the tropics, peatland is used as a planting medium for agriculture. Its content and usage is very much different from that in cold countries like the Netherlands where temperate peat is harvested for horticulture and exported as peat moss," he said.

"Some European countries, like Ireland, harvest it and burn it to generate electricity," he added. "We see the IPC 2016 as a good platform to disseminate the facts and field information on the development and conservation of tropical peat."

In its website, the European environment activist grouping claimed that much of the expansion of oil palm plantations in Sarawak will be at the cost of forests and further endangerment of threatened species such as the orangutans.

To this, Mamit referred to Sarawak Forestry's recent declaration that Sebuyau and Sedilu, covering 20,000ha and 5,000ha respectively, are now officially homes for orangutans. 

Studies show there are about 2,500 orangutans in the wild in Sarawak. With the two new additions, Mamit said the six orangutan sanctuaries in Sarawak will boost eco-tourism activities.

The environment activist grouping also claimed that Malaysian Palm Oil Board (MPOB) and Sarawak's Tropical Peat Research Laboratory (TPRL) are carrying out pseudo scientific research in a desperate effort to justify the destruction of around a million hectares of peat swamp for palm oil production.

Mamit responded that the credibility of scientific researches is on the methodologies and he has utmost confidence that MPOB and TPRL's works will be able to withstand peer scrutiny.

In a separate interview, Miri Member of Parliament Datuk Seri Peter Chin concurred with Mamit that the environment activist group's claim that MPOB and TPRL's peat experiments are being paid by oil palm planters, is factually wrong.

"It's not true, it is factually wrong. The RM40 million allocated for peat research comes under the 9th Malaysia Plan (2006-2010). It is not funded by oil palm planters," he said.

When Chin was still helming the Plantation Industry and Commodities Ministry from 2004 to 2009, he was responsible for spearheading initiatives to facilitate peat soil research. He is now Energy, Green Technology and Water minister.

"How can it be said that research work being carried out by MPOB and TPRL are funded by the industry and therefore biased?" Chin questioned. "Peat soil research is of national interest and therefore, funded by the government. The experiments being carried out by MPOB and TPRL are adhering to international protocols and subjected to peer reviews," he said.

When asked why the activists are so quick and vehement in their criticism of the credible work being carried out by MPOB and TPRL scientists, Chin replied, "they may have their own agenda. Whatever these environment activists want to lobby, the truth on carbon emissions and sequestration shall prevail. "Science is a fact-finding process. Let us not succumb to or be misled by fear of the unknown," Chin added.

In a separate interview, Sarawak Convention bureau chairman Datuk Seri Dr Muhammad Leo Michael Toyad said it is important for Sarawak to expand its tourism industry further as it draws close to a million business visitors a year.

They collectively contribute around RM50 million to Sarawak's economy. Tourism is the state's third-largest employer, supporting one in every 10 jobs. "Business travellers spend three times more than an average leisure visitor," he said.

Muhammad Leo then highlighted the Anak Sarawak Award ceremony where associations and influential individuals who won bids for new national or international conventions are honoured for their commitment and dedication to bring in businesses to Sarawak. The fourth "Anak Sarawak Award 2010" themed Night of the Pharaohs - Victory Feast, was recently held at the Borneo Convention Centre in Kuching.

This year, Muhammad Leo said, there will be 42 new conventions to be held in Kuching. "We expect some 25,000 delegates to fly in and land an economic impact of about RM50 million," he said.

MPOC: 17.6m tonnes of CPO output achieveable

MALAYSIA'S oil palm industry is hopeful of producing 17.6 million tonnes of crude palm oil this year as the government eases its foreign labour hiring rule and more trees mature.

"The forecast is not too ambitious because it is a reversion to 2009's level. We should be able to achieve it," said Malaysian Palm Oil Council (MPOC) chairman Datuk Lee Yeow Chor.

He was speaking to Business Times at an economic conference organised by the Asian Strategy & Leadership Institute in Kuala Lumpur yesterday.

CPO output has fallen for the last two years. In 2009, output dipped to 17.6 million tonnes from 2008's record high of 17.7 million tonnes. And last year, it plunged further to 17 million tonnes as planters complained of acute shortage of foreign workers to harvest fruit bunches and abnormal heavy rainfall made it difficult to bring fruits to mills.

Some planters are worried that rainy days could hinder current fertiliser input and crimp oil palm yields six months later. To this, Lee assures that such anxiety is not felt across the board. "Delayed manuring by a few months at certain estates doesn't affect overall yield. Oil palms are very resilient."

Lee also thinks CPO price will stay firm in the next three months as global demand continue to exceed supply. Yesterday, the third month benchmark crude palm oil futures on the Malaysian Derivatives market rose RM15 to close at RM3,685 per tonne.

At a recent industry dialogue, Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said the government has allowed plantations to hire foreign workers for up to 10 years. He also said the Sabah government will soon adopt this policy soon. In recognition of the dwindling availability of foreign labour from Indonesia and the Philippines, it has now allow Bangladeshis to work in plantations.

Dompok assured planters that his officials are discussing with the Home Affairs Ministry to fast track en bloc foreign workers quota approvals.

Currently, the oil palm industry hire slightly more than 200,000 foreign workers, a sharp fall from more than 300,000 five years ago.

In a separate interview, Malaysian Palm Oil Association (MPOA) chief executive officer Datuk Mamat Salleh estimates that planters will soon hire up to 50,000 or 20 per cent more foreign workers. "We appreciate the efforts by our minister to set up a Human Resources Centre for Commodity Sector in consultation with the industry," he said.

Visiting MP calls for Malaysian CPO rep

This is written by my colleague Rupa Damodaran.

MALAYSIA is doing the right thing to address the ongoing scathing attacks against the palm oil industry in Europe but it needs to be in the forefront to ensure that information is provided early, a visiting British member of the European Parliament said.

Roger Helmer suggested having someone stationed in Brussels, the seat of the European Parliament, to give early input.

“While the government and the Malaysian Palm Oil Council may be working hard (to counter the allegations and claims) there are dozens of major organisations preaching the contrary message.

"It does need a professional approach to providing the information,” he said in an interview in Putrajaya yesterday.

Helmer, who sits on European Parliament’s temporary committee on climate change and the European conservatives and reformists group, said many do not know the approaches Malaysia and Indonesia had taken in developing oil palm and tend to believe the allegations on deforestation and destruction of orangutan habitat.

A person based in Brussels will be able to identify the points where Malaysia can exert pressure. “When the European Commission is thinking about some plan of policy, that is best time to get in and say to the commission the other side of the story to what Greenpeace or Friends of the Earth may have."

Helmer was in Putrajaya for the "Reach & Teach Friends of the Industry seminar: Challenges and Opportunities in 2011".

Helmer described environmental NGOs as "agents of the state", receiving large sums of funding to support their campaigns and activities. According to him, the European Commission alone had provided more than 60 million euros to these pressure groups through a programme called LIFE+.

“The driving priority of the various NGOs is to have free funding and keep their media profile high so that people want to talk to them, by creating scares and also creating scapegoats. They decided palm oil is a terrible thing and decided it drives deforestation and threatens habitat like the iconic orangutan, that it is a food crop and therefore wrong to convert to biofuel.

“There is no easy way of doing that except for a public information programme focused on like minded MPs and I think that is already working.” he explained.

The European Union gives far too much emphasis to "participative democracy" using the NGOs and taking advice from them, he added.

But that is set to change and people in the UK and the US no longer believe human activity is the main cause for climate change. "People in the UK are getting upset with wind farms and are getting tired of price of gasoline and diesel. They are seeing green policies as an excuse to raise taxes and exert more control," Helmer said.

Palm oil exports set for another record year

MALAYSIA'S palm oil exports may achieve another record year like 2008’s all time high of RM65 billion, thanks to higher average palm oil prices and improving global demand.

So far in January 2011, palm oil futures prices is averaging at RM3,500 per tonne, higher than last year's RM2,700 per tonne.

“I don’t foresee any sudden plunge in the market. If prices remain buoyant, I think it is achievable,” Plantation Minister Tan Sri Bernard Dompok told reporters at an industry dialogue in Putrajaya yesterday

Prices are set to stay firm as the current limited global supply is due to continue for the rest of 2011 with Indonesia imposing higher export duties on its palm oil shipments. Also, as more rapeseed, soybean and corn oil are burnt as renewable energy in Europe, the US and Latin America, more palm oil is needed to make margarine, mayonnaise, cheese spread and chocolate.

In 2008, Malaysia produced 17.7 million tonnes and the following year, it dipped to 17.6 million tonnes. In 2010, it plunged to 17 million tonnes. This means Malaysia's palm oil output had declined for two straight years, while Indonesia had seen rising production. This year, however, Dompok thinks palm oil output can rise again to 2009's level of 17.6 million tonnes as more oil palms mature and bear more fruits.

The minister also announced that the current foreign labour constraint will soon be resolved. The labour shortage have severely affected palm oil output and therefore billions of ringgit in export opportunities. “The labour issue will not be a problem anymore. The Sabah state government has given the green light to allow the plantation industry to hire more foreign workers from other nations like Bangladesh. I know we face competition with Indonesia for skilled workers to harvest the oil palm fresh fruit bunches.”

The Malaysian Palm Oil Association raised the issue of unwarranted imposition of quarantine controls of oil palm planting materials by Sabah’s Department of Agriculture that has caused much grievance to oil palm seed producers. Effective 1st January 2011, the Sabah state government had subjected the entry of oil palm planting materials to be certified free of the Philippines' coconut cadang-cadang viroid (CCCVd) disease by Universiti Putra Malaysia's laboratory.

While Dompok sees the logic that the quarantine controls do not serve a purpose, he said, “we’ve to respect the decision of Sabah state government. It is their prerogative.”

The minister then revealed that the Palm Oil Refinery Association of Malaysia (PORAM) had appealed to his ministry to ask Europe to waive import duty on processed palm oil. Dompok assured PORAM that he would forward to Finance Ministry of the need for more efficient trading by approving export quota on crude palm oil earlier.

The Malaysian Biodiesel Association vice president U.R. Unnithan, who was also present at the dialogue, said members are facing non-tariff trade barriers in the export market and as a result are facing bankruptcy. He then appealed to the government to implement the mandate to blend 5 per cent biodiesel into the domestic diesel supply on a nationwide basis rather than just the central region.

“If the B5 mandate were to just apply in the central region of Peninsula Malaysia, it would only take up 139,000 tonnes per year as opposed to 500,000 tonnes per year if done nationwide,” he said.

To this Dompok replied, “We have to treat this matter cautiously because at current world oil prices, we’re looking at a subsidy of RM20 million a month for biodiesel. That is taxpayers’ money going to subsidy.”

Plantation firms rap medical insurance ruling

Oil palm and rubber plantation firms, which are already footing the medical bills of their foreign workers, will now have to fork out another RM50 million to insurance companies, following the Health Ministry's new ruling.

Effective January 1 this year, the Health Ministry requires all employers to pay for foreign workers' medical insurance.

In an interview with Business Times, the Malaysian Palm Oil Association (MPOA) chief executive Datuk Mamat Salleh said the new ruling makes its members pay a second time and "at a very high fee for what we have already been providing to foreign workers".

Mamat explained that under the Workers Minimum Housing Standard & Amenities Act 1990 (WMHSA), all estate owners are required to provide healthcare facilities and services for their staff including foreign workers.

"Many estates have already set up hospitals and clinics managed by health assistants and visiting medical officers. We're actually undertaking part of the government hospitals' responsibility of providing health facilities and services," he said.

Apart from estate owners, there is no specific law to mandate employers to pay for their foreign workers' medical bills. Currently, many foreigners, working outside the plantation sector, pay their own medical bills.

Mamat said MPOA had undertaken a survey on 200 member's estates, which employed 39,292 foreign workers. In 2009, some 650 workers, or only 2 per cent of foreign workers in the estates, sought medical treatment in government hospitals, costing RM216,214.

The number of plantation workers seeking treatment in the government hospitals is actually very small because only serious cases are referred to the healthcare centres outside the estate. Even then, Mamat said the estate had to provide a guarantee letter to the hospital, stating that it will pay for the foreign workers' medical bills.

"If our estate members were to participate in the medical insurance scheme, we'll be paying about RM50 million to insurance companies for the 400,000 foreign workers staying in the estates," he said. "Since WMHSA Act 1990 requires the employers to pay for the medical bills of foreign workers, the method of payment should be left to the individual employers," Mamat added.

Separately, Malaysian Estate Owners Association (MEOA) president Boon Weng Siew concurred with Mamat that estate owners have always been responsible for their workers health under the WMHSA Act 1990.

"Injury-related accident cases are already covered by the Workmen Compensation Insurance, for which the employers are paying RM72 for each foreign worker. As such, this new ruling mandating us to pay another RM120 is grossly unjustified. We should not be burdened with additional costs," Boon said.

The government is mandating employers to provide medical insurance to address the problem of hospital charges owed by foreign workers. Since plantation companies provide bank guarantee to hospitals prior to the admission of foreign workers as patients, Boon said the question of hospital charge arrears should not arise.

MEOA members are mid-sized plantation companies employing about 21,000 foreign workers. This brings the total annual cost of medical insurance to RM2.52 million. "Currently, hospital charges incurred by MEOA members for treatment of their foreign workers by government hospitals are estimated at only about 5 per cent of the proposed medical insurance premium of RM2.52 million," he said.

Malayan Agricultural Producers Association (MAPA) director Mohamad Audong said the new ruling will mostly affect estates owned by government-linked companies like Sime Darby Plantations, Felda Plantations, Tabung Haji Plantations and state agencies such as Johor Corp. "Private estates like United Plantations, Boustead Estates, Taiko Plantations will also be affected," he said.

Mohamad estimates the extra medical insurance cost by MAPA members to be around RM30 million for plantations and RM20 million for small farmers. "This brings the total to RM50 million per year and causes food production to be more costly," he said.

RM4.4 billion to replant oil palms

MALAYSIA's oil palm industry will spend RM4.4 billion to replant some 365,000 hectares from 2011 to 2013, an official from the Performance Management and Delivery Unit (Pemandu) in the Prime Minister's Department said.

"We cannot force landowners to do something they don't want to, especially at the current high palm oil prices. But we can encourage via financial incentives," John Low, Pemandu's director of the national key result areas (NKEA) on palm oil, rubber and agriculture told Business Times in an interview in Petaling Jaya recently.

"If replanting is not accelerated, it will take 14 years to clear the backlog. It is critical to clear the backlog now as each year an average of 125,000 hectares of trees are due for replanting," he said.

There are 161,000 independent smallholders in Malaysia. With 600,000 hectares, they account for 12.8 per cent of the country's planted area. Low said the government will pay RM1 billion to these independent smallholders to compensate for the loss of income from the replanting activities. Independent smallholders with 40 hectares or less are entitled to a one-off replanting payment of more than RM6,000 per hectare and monthly payments of RM500 per household for two years.

On the other hand, private and government-linked plantation companies are expected to spend RM3.4 billion to replant aging oil palms in the next three years.

Also present at the interview was Malaysian Palm Oil Council chief executive officer Tan Sri Yusof Basiron. He referred to MPOB statistics showing Malaysia's licensed seed producers churning out some 80 million germinated seeds per year. "We only need 50 million seeds a year, so there's enough to go around," he said.

Asked if the government guarantees that 100 per cent of the seeds for sale are of the genuine, high-yielding dura and pisifera hybrids, Yusof said: "That's not possible. Therefore, we advise independent smallholders to deal directly with licensed seed suppliers and not middlemen."

Some licensed seed producers, like Applied Agricultural Resources Sdn Bhd, go the extra mile to ensure seedlings' authenticity by using a new laser tattooing technology and pre-agreed codes with its clients.

On rumours of select MPOB enforcement officers abusing their powers instead of enforcing against the supply and sale of fake seedlings, Low said: "We have regulators watching over the industry but it is also for the industry to report any wrongdoings.

"We're all for weeding out wrongdoings but without any formal complaint and evidence we're unable to act on hearsay."

He highlighted the Whistleblower Protection Act 2010, a key piece of new laws under the Government Transformation Programme, that protects the identity of informants revealing acts of corruption. Informants get immunity from civil and criminal actions. However, this protection can be revoked, if and when, the whistleblower is found to be involved in improper conduct.

Low said as a precautionary measure against graft, MPOB enforcement officers will be rotated periodically. "We want to eliminate opportunities that could facilitate bribery, corruption and abuse of powers," he said.

On the downstream industry, Low noted the government's plans to extend the Brain Gain Malaysia programme to woo Malaysian chemists, food scientists and fast-moving-consumer-goods marketing specialists in leading global companies.

Currently, the oleochemicals industry suffers from low-profit margin. Malaysia is producing mostly basic oleochemicals to make soap, detergent and cosmetics. "What we want to do is to spur production of higher-priced specialty oleochemicals to make agro-chemicals, surfactants, bio-lubricants, bio-polyols and glycerol derivatives. We want to retain and attract the best brains to Malaysia. There's still good growth prospects in the downstream businesses," he said.

Low noted that he had met up with tocotrienol producers, who highlighted the need for more public funding to carry out clinical trials. Currently, there are several groups of scientists, conducting clinical trials on the effectiveness of palm oil vitamin E in preventing stroke, fatty liver syndrome and cancer.

Cooking oil price stays, for now

This is written by my colleague at general newsdesk Patrick Sennyah.

PETALING JAYA: The price of cooking oil will remain the same, for now. Deputy Domestic Trade, Cooperatives and Consumerism Minister Datuk Tan Lian Hoe said the current shortage was mainly caused by panic buying, following rumours of an impending price increase.

"There is enough cooking oil in the country. I hope consumers will not listen to rumours. There will be no price increase unless it is recommended by the Cabinet," she said after a visit to the Tesco hypermarket in Mutiara Damansara, near here.

Tan said steps were being taken to get the Malaysian Palm Oil Board to speed up distribution of cooking oil to all retail outlets.

Cooking oil is a price-controlled item. She said her ministry is monitoring the situation closely. Traders, found to jack up the price of cooking oil, will be charged under the Anti-Profiteering Act.

Tan also said it was crucial for consumers to support the move to reduce the use of plastic bags instead of complaining about the ban on their use on Saturdays. She said on average, Malaysians use eight billion plastic bags a year and the staggering price of petroleum was causing a huge increase in the production cost of plastic bags.

In Seremban, the state Domestic Trade, Cooperatives and Consumerism Department said it will distribute more cooking oil to various districts following shortage complaints. Its director, Norashiken Ishak, said this was to ensure consumers received sufficient supply and not be forced to purchase cooking oil at high prices from unscrupulous traders.

"About 12,000kg of cooking oil will be distributed to five main wholesalers before it is channelled to retailers state-wide. Our focus, however, will be on areas where there is a serious shortage, such as Seremban, Port Dickson, Rembau and Bahau in Jempol," she said.

Although the situation in the state is under control, the department has received reports that some traders are hoarding their supplies so as to cash in later. "We will take action against those found increasing their prices and also hoarding," Norashiken said, adding that the shortage in supply was because producers had failed to meet the increasing demand since early last month.

Plantation companies diversifying earnings

Plantation companies are starting to plant more rubber trees to diversify their earnings and not rely solely on oil palms, said Malaysian Rubber Board director-general Datuk Dr Salmiah Ahmad.

At current high prices, the investment return on one hectare of rubber is better than of oil palm planted on marginal soil. Last Thursday, centrifuge latex at the physical market of the Malaysian Rubber Exchange closed at RM9.86 per kg. Marginal soil is land on hilly areas that are typically not so fertile and drier than flat area.

In an interview in Kuala Lumpur, Salmiah said the government policy is for estates to expand their rubber acreage or at least maintain it.

IOI Corp Bhd had, a few years ago, started replacing oil palm trees with rubber trees when the palms succumbed to the deadly fungal disease called ganoderma.

Sime Darby Bhd and Felda Plantations Sdn Bhd too have been planting rubber trees on hill slopes where it is not suitable for oil palm trees.

Kuala Lumpur Kepong Bhd, one of the biggest rubber estate owners in Malaysia, expanded its holding to 24,000ha from some 20,000ha five years ago.

"In 2010, we saw 20,000ha of new rubber plantings among big plantation companies. Of this total, about 15,000ha were carried out in Sabah and Sarawak," Salmiah said.

Their renewed interest in rubber estates may have been spurred by tax incentives. Plantation companies are eligible for pioneer status and investment tax allowance to plant rubber trees on a large scale under the forest plantation scheme.

Since 2002, the federal government has extended these incentives to approved agricultural projects under schedule 4(A) of the Income Tax Act 1967 to forest plantations. "This is in the form of deductions for capital expenditure to clear at least 50ha land, construct road and bridges in the farm and plant rubber trees," Salmiah said. "The deductible expenses stretch across 25 years, the average lifespan of rubber trees."

As of 2010, there were 1.05 million ha of land planted with rubber trees in Malaysia. "Although the total area planted with rubber trees has been shrinking since the 1980s, we have set a cut-off point at one million ha to ensure minimum annual production of a million tonnes," she said.

"Last year was the turning point from 2009's low of 1.03 million ha," Salmiah said, adding that the national rubber planted area must go on expanding in the years ahead to ensure sustainable supply of resource for a myriad of downstream businesses.

She explained that rubber is a national strategic crop because it provides much needed latex for downstream businesses such as tyre-making and the manufacture of rubber gloves. "Nothing can match the superior grip and elasticity features of natural rubber, not even synthetic rubber. For example, airplane tyres are 100 per cent natural rubber for the simple reason of safe landing," she said.

Salmiah added that when rubber trees reach maturity at 15-20 years old, their trunks become useful resource for the furniture industry.

Oil palm dealers concerned over MPOB new rules

This was published in NST business times yesterday.

KUALA LUMPUR, 31 Dec 2010 (Bernama) -- The Malaysia Oil Palm Dealers Association (MOPDA) has expressed concern over the move by the Malaysian Palm Oil Board (MPOB) to bar dealers from buying and selling oil palm fresh fruit bunches (FFB).

MOPDA President Datuk Abdul Fattah Abdullah said the new ruling was not beneficial to the stakeholders, particularly dealers and the industry as a whole.

"We are deeply concerned about this despite objections being raised at the meeting last year with MPOB in relation to the proposed imposition of such condition in their respective licences of oil palm dealers," he told a press conference here today.

The buying and selling of FFB among dealers was the norm and if small dealers were not allowed to trade among themselves, this would result in loss of employment, income and the eventual folding of the enterprises, he said.

The MPOB ruling, which takes effect 1st Jan 2011, is meant for estates, smallholders and dealers to sell directly to millers. In the process, MPOB think this will prevent small dealers from being monopolised by big dealers, and enhance the quality of oil palm fruits. The government wants the nation's oil extraction rate to exceed 25 per cent.

Abdul Fattah said the ruling would cause a lot of hardship to small enterprises due to their limited financial resources and logistics and transportation problems.

"Therefore, we propose an in depth study ought to be made by MPOB to resolve this problem of low oil extraction rate rather than imposing such ruling.

"Those millers who fail to achieve their targets will have to face the consequences including the need for mandatory takeover by the government in the interest of the industry," he said.

Abdul Fattah said MPOB must focus on the enhancement of oil yield extraction process through the introduction of new technology and good agricultural practices with the necessary support of government schemes to replace old, low-yielding trees.

IJM Plantations -- Profits and rugby

LEE Wei Ming, one of IJM Plantations Bhd's (IJMP) senior assistant estate managers, made a sharp strike at the neck of an oil palm tree and a 15kg fresh fruit bunch fell onto the ground with a thud.

A crowd of 11 city slickers cheered and clapped loudly. Their enthusiasm over the novelty of fruit harvesting confirmed IJMP managing director and chief executive officer Joseph Tek's view of the need for regular stakeholders' visits to oil palm estates to better understand the business.

"The communication of the facts, figures and reality of oil palm planting is seriously lacking. I still have friends in the UK who assume we're tapping oil from the palm tree, like the tapping of latex from a rubber tree," he said.

As the entourage of stock analysts, fund managers and journalists walked towards the company's sports complex within the estate, Tek attested that Lee was once Malaysia's rugby captain.

Lee is known among his teammates as the X-Men comic character "Wolverine" because of the metal plates in his body.

In 2005, Lee broke metacarpal bones in both his hands. He had to undergo numerous surgery to have titanium alloy plates fused into his bones so that he could move his fingers again.

A year later, Lee injured his neck in a tournament. His C5 and C6 vertebrae were fractured, leading to screws and plates inserted into his spine.

Unlike the comic superhero Wolverine who possess miraculous healing powers, Lee is all human. Early 2010, he decided to retire from competitive rugby to take on more responsibilities at IJMP's estate. It is no coincidence that this Sabahan, who is trained as an accountant, is charting his career at IJMP.

Unlike other oil palm firms which encourage their staff to play football and golf in their spare time, IJMP is truly passionate about rugby. In 2002, IJMP initiated the Academy of Rugby Excellence in Sandakan with the Sabah Education Department to introduce and encourage school children to play rugby. "To date, about 2,000 children from 52 schools are participating in the rugby programme," said Tek.

Fiji High Commissioner Suliasi Lutubula, who was visiting IJM's estates, said, "I'm very happy that IJMP is giving an opportunity to young Fijians to be gainfully employed here, in furthering rugby sports."

IJMP spends RM200,000 per year, of which RM150,000 goes to running the rugby school in Sandakan and the remaining RM50,000 to organise tournaments.

Two months ago, IJMP told the stock exchange that it had sold its 51 per cent stake sale of a joint venture with India's Godrej Agrovet Ltd for RM9.8 million. Back in February 2008, the joint venture was set up to buy and mill fresh fruit bunches from oil palm farmers in Goa and Karnataka.

IJMP had also dissolved a planned biodiesel joint venture with CTI Biofuels LLC.

When asked to comment, Tek said, after much deliberation, IJMP had to pull out of India to consolidate its resources and focus on upstream activities in Malaysia and Indonesia. "We have much to do upstream. We need to replant certain blocks in Sandakan, carry out new plantings in Sumatera and put up a 30-tonne mill in East Kalimantan."

As at October 2010, IJMP had drawn down RM225 million of the RM335.51 million, raised from a rights issue, for the development of its oil palm estates. "There's still RM110.51 million left and we estimate to use it up by the second half of 2011," Tek said, adding that the company will plant up 10,000ha, mainly in Indonesia.

Since the Indonesian government wants oil palm planters to source at least half of their germinated seeds locally, IJMP reserves the bulk of its own seedlings for replanting at its Sandakan estates.

IJMP's profits for the second quarter ended September 2010 jumped 2.7 times to RM47.34 million on more sales of palm oil at higher prices than a year ago. Asked on the current year's prospects ending March 2011, Tek replied, "It should be good. Shareholders are happy that palm oil prices, in the last two months, have been trading above RM3,000 per tonne."

Analysts upbeat on IJM Plantations

IJM Plantations Bhd (IJMP) is one of the favourites among analysts and, what's more, they think the stock could climb higher. Seven out of 10 research houses have a "buy" call on IJMP and on average, they reckon the price can rise further to RM3.57.

IJMP shares rose 20.2 per cent to close at RM2.98 for the whole of 2010. This is better than the broader market's 19.3 per cent gain in the same period. IJMP's stock price has been rising over the last six months, in tandem with palm oil futures prices on the Malaysian Derivatives Exchange.

ECM Libra, the most optimistic research outfit, estimates that the price can climb as high as RM3.99. Analyst Bernard Ching said IJMP's current share price is trading at only 17.6 times of the current year's forecast earnings.

In his note to investors, Ching said IJMP has bucked the industry trend because it reported 26.5 per cent improvement in fresh fruit bunch production in the second quarter results ended September 2010, from a year ago. This is why he sees current strong palm oil prices fuelling good earnings in the next quarter or so.

IJMP managing director and chief executive officer Joseph Tek, in an interview with Business Times in Sandakan, confirmed that more than 60 per cent of the group's planted area is at prime fruit-bearing age.

He is confident of harvesting more than 600,000 tonnes of fresh fruit bunches by March 2011.

Currently, IJMP's tree profile is such that it is able to reap 5.5 tonnes of oil per hectare in a year. "We expect the oil extraction rate to stay at 21 per cent," he said.

Over its 25-year history, IJMP has planted more than half of its 80,000ha plantation landbank in Malaysia and Indonesia.

It is interesting to note that while IJMP is just a mid-sized player, it invests substantially in oil palm seed gardens. To date, the gardens are able to produce more than two million germinated seeds a year. "We're willing to invest in the long term because we want to be self sufficient and control the quality of our planting materials," said Tek, who is trained in botany and tree breeding.

He also takes a keen interest in ensuring ecological balance at the estates. From the early days of development, Tek was able to convince shareholders of the need to retain some 800 acres as natural forest. To date, there is also a herb garden, fruit orchards and vegetable plots for community sustenance.

The group's research and development department carries out pest census regularly. Pests like bagworms and nettle caterpillars are capable of "eating up" large areas of oil palms, if they are not detected or treated early.

As a precautionary measure, a variety of creepers are planted to provide predatory bugs shelter and nectar as a biological control over pests. When there is an imbalance between pest and predator population, pesticides are used judiciously. "Basically, integrated pest management is about maintaining the right balance," Tek said.

Asked if there are plans for mergers and acquisitions, Tek said his immediate concern is to raise yield and efficiency at existing oil palm estates. But then again, he said the group is open to opportune offers. "Indonesia is a good place to expand if the price is right," he said.