Palm Plantation Tribune Vol 4 No 4

PALM P L A N T A T I ON T R IB U N E CURRENT BUZZ Unravelling The Windfall Profit Levy Conundrum In The Palm Oil Industry

KNOWLEDGE NUGGET

Beyond Profit: Palm Oil and Communities Flourishing Together

Editorial

Editorial Team

EDITOR

Volume 4 | No 4

Zahidah Zahidi zahidah@maps-globe.com

www.potribune.com

CREATIVE DESIGNER

Next Chapter Media

Muhammad Faireez artwork@mapsglobe.com

Palm Oil Industry Tribune Series Magazine: Palm Plantation Tribune Palm Oil Tribune Palm Downstream Tribune

Next Chapter Media

MARKETING Kelly Yew kelly@maps-globe.com

FRONT COVER BY PALM KING

DISCLAIMER: Next Chapter Media's editorial team strives to provide accurate and reliable information. However, we recommend that readers independently verify the claims and information presented in our publications. Next Chapter Media is not responsible for the accuracy of the content and encourages readers to use their own judgment when evaluating the information.

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DIRECTOR Emily Yu

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23

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3

Contents

CONTENTS 5-8

27-28

A quick digest of the latest policies and market trends.

Integrated Pest Management for Rhinoceros Beetle in Oil Palm Plantations

Latest News Roundup

IPM Insights

9-16 Current Buzz

29

19-21

ADVERTISERS INDEX

Oil Palm Ministry, Its Agencies And Related Associations: Malaysia and Indonesia

Unravelling The Windfall Profit Levy Conundrum In The Palm Oil Industry

Knowledge Nugget Beyond Profit: Palm Oil and Communities Flourishing Together

1-2, 14

Muar Ban Lee Group Berhad

17-18

Maps & Globe Specialist Distributor

23-24

22

17th National Seminar (NATSEM)

Palm King

30

Palm King: Your Partner in Precision Harvesting of Oil Palm

Next Chapter Media

Back Cover Unlocking Revenue and Sustainability: Exploring Carbon Credit Opportunities in the Palm Oil Industry

25-26

Harmony in the Wild

Sabah’s Path to Sustainable Palm Oil

4

News Roundup

EUDR delay confirmed after European Parliament vote

(14 Nov 2024)

The European Parliament has voted to delay the EU Deforestation Regulation (EUDR) by one year, with a vote of 371 in favor and 240 against. The EUDR, originally set to apply at the end of 2024, aims to prevent deforestation-linked products, including palm oil, beef, cocoa, and soy, from entering the EU market. The regulation mandates that companies prove their products come from land that has not been deforested after 2020, with traceability requirements extending to the plot level.

The vote followed concerns about stakeholders’ readiness to comply, both globally and within the EU. While the European People’s Party (EPP) proposed extending the delay to two years and exempting traders from the regulation, these amendments were rejected.

However, a "no risk" category for countries with minimal deforestation concerns was approved.

Environmental groups have criticised the delay, arguing that it weakens the regulation and undermines efforts to protect global forests. WWF called for EU President Ursula von der Leyen to withdraw the delay, warning that it could derail the Green Deal’s objectives.

On the other hand, some European companies, including Mars, Danone, and Nestlé, support the immediate implementation of the EUDR, having already invested in compliance measures. Following the vote, the legislation will undergo further negotiations before being finalised and entering into force.

14 palm oil groups urge govt to reconsider mandatory EPF (7 Nov 2024) for foreign workers A coalition of 14 palm oil industry associations, including the Malaysian Palm Oil Association (MPOA), Malaysian Estate Owners' Association (MEOA), Sarawak Oil Palm Plantation Owners Association (SOPPOA) and East Malaysian Planters Association (EMPA) has called on the Malaysian government to reconsider its 2025 Budget proposal mandating Employees' Provident Fund (EPF) contributions for foreign workers. These associations argue that the policy could impose severe cost pressures on an already strained industry, which relies heavily on foreign labour due to ongoing local workforce shortages, particularly for the physically demanding tasks on plantations.

The associations warn that the mandatory EPF contributions could significantly increase operational costs for plantation companies, especially small-and medium-sized enterprises (SMEs), which are already grappling with volatile global markets, sustainability requirements, and rising labour expenses. They also proposed that if it is to be implemented, a phased approach of the policy will help mitigate the immediate financial impact on plantation businesses.

Moreover, the associations call for targeted support measures or exemptions to ease the burden on smaller operators, ensuring that these companies can continue investing in productivity and sustainability. They stress the importance of continued dialogue with the government to develop a balanced, feasible approach that considers the industry's unique operational challenges. While they acknowledge the government's efforts to improve foreign workers' welfare, they emphasise that policies must be both fair and feasible to support the long-term sustainability of Malaysia’s palm oil industry

5

News Roundup

Replant or ‘Perish’: The Urgency of Replanting

(10 Nov 2024)

A special report by Daily Express in Sabah quoted Joseph Tek Choon Yee, Past President of MEOA and former CEO of MPOA, that ageing oil palm trees are driving a sustainability crisis across main producing countries Malaysia and Indonesia, with Sabah particularly hard-hit, as one-in-every-three oil palm trees here is over 20 years old.

As oil palms age, their yields decline and production costs rise, necessitating urgent replanting efforts to sustain the industry. In Southeast Asia, millions of hectares of oil palms are over 20 years old and need rejuvenation. Indonesia faces a critical replanting need of 2.6 million hectares (18% of its planted area), while Malaysia’s figures stand at 1.4 million hectares (25%). In Sabah, one-third of oil palms are over two decades old, highlighting a pressing challenge.

Replanting costs are substantial, with Malaysia and Indonesia facing an estimated RM100 billion (USD 23 billion) total need.

This includes RM65 billion for Indonesia and RM35 billion for Malaysia. Smallholders manage significant portions of these areas—41% in Indonesia and 26% in Malaysia—requiring targeted support to stay viable.

Despite its importance, replanting has been slow. Indonesia’s target of 180,000 hectares in 2023 resulted in only 53,000 hectares being approved, while Malaysia managed to replant 132,000 hectares, with Sabah leading the effort. The ideal replanting rate is 4-5% per year, but an accelerated rate is needed to overcome the backlog. This will impact supply chains and prices in the short to medium term.

Financial strategies, such as redirecting windfall tax revenues and providing reinvestment allowances, are crucial for accelerating replanting. Without prompt action, the sector risks stagnation, but investing in replanting now can rejuvenate the industry for a more sustainable futur

MPOB Targets Over 90% MSPO Certification for Independent Smallholders by 2025 (26 August 2024) The Malaysian Palm Oil Board (MPOB) aims to certify over 90% of the 210,891 independent smallholders (ISH) under the Malaysian Sustainable Palm Oil (MSPO) standard by the end of next year. Currently, 76.9% of ISH are certified, thanks to MPOB’s financial and technical support initiatives.

MPOB Director-General Datuk Dr. Ahmad Parveez Ghulam Kadir highlighted efforts such as awareness campaigns, targeted training, and the Sawit Intelligent Management System (SIMS) to improve transparency and traceability in the supply chain. The Board fully funds the MSPO certification audit process, offering further support through training and essential supplies like personal protective equipment and proper storage for agrochemicals.

MSPO certification ensures compliance with sustainable and environmentally safe agricultural practices, enhancing the global marketability of Malaysian palm oil, particularly in key regions like the European Union (EU). The EU, Malaysia's third-largest importer, purchased 2.7 million tonnes of palm oil products in 2023.

To bolster sustainability and combat anti-palm oil campaigns, the Malaysian government allocated RM50 million (US$11.4M) for MSPO certification and RM15 million (US$3.4M) for advocacy in the 2025 budget. These measures aim to strengthen Malaysia’s position in the international palm oil market while promoting responsible production practices.

6

News Roundup

Sarawak unveils mechanised oil palm harvester ‘Lipan’

(9 Oct 2024)

Sarawak Plantation Berhad (SPB) has introduced the "Lipan," a mechanised oil palm harvester designed to address labour shortages and boost productivity in the palm oil industry.

Launched by Sarawak Premier Datuk Patinggi Tan Sri Abang Johari Tun Openg, the Lipan harvester uses remote control to efficiently harvest fresh fruit bunches (FFBs), taking just two minutes to harvest and load 1.2 tonnes. This innovation addresses the long-standing issue of reliance on foreign labour, especially as the region faces challenges in attracting workers from neighbouring Indonesia due to competitive wages and delays in immigration processing.

Mechanisation not only mitigates labour shortages but also improves efficiency by reducing human error, such as fruit bunch breakage, which can negatively impact yields. The Lipan harvester can now collect up to 300 FFBs per day, equivalent to three tonnes of palm oil, enhancing productivity significantly.

SPB's development of the Lipan machine has been a long-term project, with many years of testing and innovation since 2015. After overcoming several design challenges, the machine now uses a remote control system and a cutter that enables it to harvest up to 38 bunches per hour. Additionally, Premier Abang Johari proposed future innovations, such as adding extra arms to the machine for harvesting palm leaves, which could be converted into biomass for additional revenue or even electricity generation.

This mechanisation marks a significant step forward in the industry’s future, combining innovation and sustainability to meet the challenges of labour shortages and increasing productivity.

DAABON Launches World’s First Carbon Neutral Palm Oil

(2 Oct 2024)

DAABON UK, a subsidiary of the DAABON Group, has introduced the world’s first carbon-neutral organic palm oil, setting a new benchmark for sustainability in the palm oil industry. While many companies are working to comply with the European Union Deforestation Regulation (EUDR), DAABON is not only meeting these requirements but also preparing for a future where carbon neutrality is the standard.

The company’s carbon-neutral organic palm oil has achieved a remarkable Life Cycle Assessment (LCA) with a negative carbon footprint of -977 kg CO2eq per tonne, cradle-to-gate. This sets it apart from industry averages, including for RSPO-certified sustainable palm oil, which typically has a positive carbon footprint ranging from 1,470 kg to 5,340 kg CO2eq per tonne. DAABON’s palm oil, sourced from its CI Tequendama SAS mill in northern Colombia, demonstrates the company’s commitment to reducing Scope 3 carbon emissions, making it an ideal choice for sustainability-focused users.

DAABON’s approach includes using the Ecopalma carbon footprint tool, aligned with ISO 14067 standards, to accurately measure its emissions. The company’s goal is to extend carbon-neutral practices to its other refineries, aiming eventually for carbon-negative and climate-positive palm oil. DAABON’s efforts align with its broader sustainability strategy, which includes certifications like RSPO, Fair Trade, and Organic Certification, and its commitment to achieving net-zero carbon emissions by 2040.

As a signatory of The Climate Pledge and the most transparent palm oil producer according to SPOTT, DAABON continues to lead by example in the sustainable palm oil sector.

7

News Roundup

First RSPO IP-Certified Sustainable Palm Oil Shipment to China

(26 Nov 2024)

In November 2024, the first-ever shipment of RSPO Certified Sustainable Palm Oil (CSPO) arrived at the Shanghai port, marking a milestone for China’s commitment to sustainability.

This shipment, totaling 750 tonnes, was led by Inner Mongolia Yili Industrial Group (Yili Group), Asia’s leading dairy brand, in collaboration with Yihai Kerry Arawana Holdings Co., Ltd (Yihai Kerry), China’s largest palm oil trader and a member of the RSPO group under Wilmar.

The palm oil was certified under the Identity Preserved (IP) supply chain model, which ensures that the certified palm oil is kept separate from conventional supplies throughout the entire supply chain, guaranteeing traceability and sustainability. This delivery follows Shanghai Kerry Food Industries' RSPO-IP certification in August 2024, the first of its kind in China.

Palm oil is a key ingredient in Yili’s ice cream production, with the company using 35,000 tonnes in 2023. Of this, 360 tonnes (1.03%) were RSPO-certified under the Mass Balance (MB) model. This new shipment reflects Yili’s increased use of RSPO-IP certified palm oil, aligning with its goal to maintain a deforestation-free supply chain by 2030.

Yili’s 2023 Sustainability Report highlights its commitment to increasing RSPO-IP certified palm oil by 50 tonnes annually, targeting 650 tonnes by 2030. The shipment is a clear indication of China’s growing commitment to sustainable palm oil, signalling an increasing demand in the market and marking a significant step towards a sustainable future.

Denmark Implements World’s First Livestock Emissions Tax

(18 Nov 2024)

Denmark has finalised a groundbreaking agreement to introduce the world’s first tax on agricultural emissions, including livestock flatulence. This policy, stemming from extensive negotiations involving major political parties, farmers, industry representatives, trade unions, and environmental groups, was initially announced in June under the Green Tripartite agreement.

Starting in 2030, farmers will face a levy of 300 kroner ($43; £34) per tonne of methane emissions from livestock, such as cows and pigs, with the rate increasing to 750 kroner by 2035. Minister Jeppe Bruus stressed the nation’s commitment to achieving climate goals and transforming agricultural land into natural areas to revive Denmark’s fjords and biodiversity.

Aiming to reduce nitrogen pollution, the agreement seeks a 13,780-tonne annual reduction by 2027, aiding coastal and fjord restoration. Denmark also plans to plant 250,000 hectares of new forest and restore 140,000 hectares of peatlands, which act as significant carbon sinks.

Lars Aagaard, Denmark’s climate minister, highlighted the model’s collaborative success, emphasising broad political support and sector involvement. He underscored the importance of global cooperation, stating that Denmark’s approach could inspire other nations to tackle climate challenges effectively.

8

Malaysia: Current Buzz

Unravelling The Windfall Profit Levy Conundrum In The Palm Oil Industry

By Joseph Tek

T

he Malaysian government established the windfall profit levy (WPL) to tax what it deemed excessive profits from oil palm growers. This is governed under the enactment of the Windfall Profit Levy (Oil Palm Fruit) Order 2023, which stems from the Windfall Profit Levy Act of 1998, originally introduced in 1999 as response to the Asian Financial Crisis. The primary goal was to enhance government revenues. After a five-year suspension from 2003, the WPL was reintroduced in 2008. Since its inception, the levy has specifically targeted crude palm oil (CPO) and crude palm kernel oil (CPKO), and subsequently on fresh fruit bunches (FFB), with varying price thresholds and levy rates over the years.

Changes in WPL from 1999-2023 affecting the oil palm growers in Malaysia Effective Date

WPL Price Threshold

WPL Levy Rates and Remarks

01-Jan-99

RM2,000

Based on Windfall Profit Levy Act or Act 592 of 1998 RM50 per tonne of CPO and CPKO

17-Dec-03

RM2,000

WPL suspended MPOB Cess Order 2007 for Cooking Oil Stablisation Scheme (COSS) RM2 to RM30 per tonne of FFB for CPO price >RM1,500 to RM3,000

1 June 07-30 June 08

1-Jul-08

RM2,000

COSS abolished and WPL reintroduced after hiatus of 5 years from 2003 - 2008 Levy paid by mils and kernel crusher plants Levy took cognisance of state sales taxes imposed in Sabah and Sarawak Peninsular Malaysia : 15% x (MPOB Malaysia Price - WPL Threshold Price) x tonnages CPO and CPKO Sabah & Sarawak : 7.5% x (MPOB Malaysia Price - WPL Threshold Price) x tonnages CPO and CPKO

15-Jul-08

RM2,000

Levy collected per tonne FFB from growers with exemption for smallholders Levy took cognisance of state sales taxes imposed in Sabah and Sarawak Peninsular Malaysia : 3% x (MPOB Malaysia Price - WPL Threshold Price) x tonnages FFB Sabah & Sarawak : 1.5% x (MPOB Malaysia Price - WPL Threshold Price) x tonnages FFB

10-Mar-09

RM2,500 for Pen Msia RM3,000 for Sabah & Sarawak

WPL Price threshold was raised by RM500 Exemption for smallholders

01-Jan-22

RM3,000 for Pen Msia RM3,500 for Sabah & Sarawak

WPL Price threshold was raised by another RM500 However, levy rate for Sabah and Sarawak was raised from 1.5% to 3.0%

01-Feb-23

Windfall Profit Levy (Oil Palm Fruit) Order 2023 Windfall Profits Levy (Validation) Bill 2023

9

Malaysia: Current Buzz The palm oil industry is vital to Malaysia’s economy, primarily functioning as a price taker in the global commodities market. Despite challenges like labour shortages and crop losses, the sector has shown resilience post-COVID-19, significantly contributing to economic growth, employment and tax revenue. In the past 5 years, the oil palm sector contributed over RM6 billions of WPL to national tax revenues. Based on CPO prices, in 2022 and 2023, oil palm growers faced WPL taxes of RM3 billions and RM0.9 billion, respectively.

The WPL has sparked significant dissatisfaction among taxpaying growers, raising questions about whether their profits were truly extraordinary and if the levy considers the current cost pressures and challenges facing the industry. The WPL's implications are complex, directly impacting growers, the supply chain and sector competitiveness.

In November 2023, a coalition of 15 key oil palm related associations led by MPOA urged the government to re-evaluate the WPL, particularly for Budget 2024. A major concern is that the WPL targets the Malaysian oil palm sector without recognising the complexities of plantation operations, undermining competitiveness, especially in Sabah and Sarawak.

Critics argue that the WPL framework is biased. By focusing solely on commodity prices and revenue, it overlooks factors like return on investment (ROI), distorting the financial landscape and complicate the industry's ability to compete effectively in the global edible oil market. A review is urgently needed to advocate for a fairer and equitable taxation that considers the industry’s complexities.

Unfortunately, the WPL has yet to receive adequate government attention, limiting opportunities for stakeholders to create more awareness and strengthen their advocacy.

WPL COLLECTION (2019-2023) YEAR

RM MILLION

2019

0.3

2020

209.3

2021

1,950.2

2022

3,020.6

2023

922.2

TOTAL

6,102.6

Source: online MoF & MPOA Seminar 2023

Budget 2024 Takeaways: Setting the Stage for Budget 2025 On 26 October 2023, the Ministry of Finance (MoF) confirmed its intent to retain the WPL but was open to revising its methodology, including levy rates and profit thresholds, to better align with industry cost dynamics.

Deputy Prime Minister YAB Dato’ Seri Fadillah Yusof highlighted a proposal to reduce the WPL rate for Sabah and Sarawak from 3.0% to 1.5%, reflecting stakeholder consultations. The Deputy Prime Minister emphasised that the industry does not oppose the WPL; stakeholders seek a fair levy that supports industry needs, including incentives for sustainability such as oil palm replanting initiatives.

However, the Budget 2024 did not deliver anticipated updates on the WPL, leaving many oil palm planters disheartened.

As Budget 2025 approaches, KPK has resubmitted a proposal to the MoF to revise the WPL. KPK Minister YB Datuk Seri Johari Abdul Ghani stated they are awaiting a response from the MoF. The Minister highlighted stakeholders' concerns about the WPL's relevance amid rising production costs, noting, "The cost of producing one tonne of palm oil has surged from RM1,800 to RM2,800–RM3,000."

He stressed the need for a review of the WPL to reflect current industry realities and promote further investment. Since his appointment, industry players have urged a government review of the WPL. In July 2023, the Minister announced that KPK would gather data on industry costs to inform proposed WPL revisions ahead of budget discussions.

Why the WPL Conundrum for Palm Oil? The following table, adapted from the MEOA Annual Report 2023, summarised the estimated taxation on oil palm growers in the year 2023. Notably, the WPL constitutes nearly 12% of the total taxation, which amounts to RM7.9 billion. This marks a significant decrease compared to 2022, when the total taxation reached RM18.2 billion, driven by higher palm product prices.

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Malaysia: Current Buzz

Estimates of Total Windfall Profit Levy (WPL), State Sales Tax, MPOB Cess and Income Tax on Oil Palm Growers based on Malaysian CPO and CPKO Production for Year 2023 on Broad Parameters Pen. Malaysia

Oil Palm Planted Area Crude Palm Oil (CPO) Production Palm Kernel (PK) Production Crude Palm Kernel Oil (CPKO) Production

% mt mt mt

Sabah

Sarawak

Malaysia

45 27 28 9,825,140 4,507,460 4,219,350

100 18,551,950

2,603,699 1,259,959

4,517,973 2,116,509

983,097 459,254

931,177 397,296

RM (Millions)

Windfall Profit Levy (Chargeable per tonne of

%

669

137

131

936

11.9

0

1,264

832

2,096

26.6

0

0

81

81

1.0

177

79

74

331

4.2

846

1,480

1,118

3,444

43.7

14,951

5,244

4,016

24,212

14,282

3,843

2,973

21,098

5 = Income Tax assumed at average 21.0% Bx21% (i.e. 43% at SME rate of 17%)

2,999

807

624

4,431

56.3

C = Grand Total WPL, State Sales Taxes, MPOB 1 to 5 Cess and Income Tax

3,845

2,287

1,742

7,874

100.0

25.7

43.6

43.4

32.5

1

2 3 4 1 to 4 A B

6= C/A

i ii iii iii v

FFB but based on CPO price) (3% in Pen. M'sia threshold ≥ RM3,000 pmt; 3% in Sabah/Sarawak threshold ≥ RM3,500 pmt wef 2022)

State Government CPO Sales Tax (7.5% for Sabah and 5% for Sarawak) State Government CPKO Sales Tax (5% for Sarawak) MPOB Cess

(RM16 pmt CPO and CPKO wef Mar 2021)

Sub-Total Windfall Profit Levy, State Sales Taxes and MPOB Cess 'Business Profit' = PBT assuming no WPL and State Sales Taxes PBT net of WPL and State Sales Taxes

Total WPL, State Sales Tax, MPOB Cess and Income Tax as % of 'Business' Profit Aggregate assumptions Average CPO price realised Average PK price realised Average CPKO price realised Overall average all in cost of production (incl HQ, replanting costs)

FFB yields

%

RM

RM

RM pmt

3,817 2,018 n.a.

3,739 1,878 n.a.

3,755 n.a. n.a.

3,810 2,016 3,896

RM/tCPO

2,830

2,978

3,248

Est 2,987

tonnes/ha

16.09

16.39

14.75

15.79

RM pmt RM pmt

11

Malaysia: Current Buzz

It must be noted that in 2007, the Malaysian government introduced a cooking oil cess under MPOB Cess Order 2007 to subsidise the price of cooking oil. This was subsequently replaced by the reintroduction of WPL starting 1 July 2008. This shift came after a five-year hiatus of the WPL, which had been deactivated since 2003, and followed legal challenges from some planters regarding the cooking oil cess. The plaintiffs challenged the constitutionality, legality and discriminatory taxation, whether ultra vires Federal Constitution, scope of MPOB’s roles and exclusion of certain parties in WPL. Although the WPL was effectively reintroduced, it resulted in a similar financial impact on oil palm growers, as indicated by it back-of-the-envelope calculations. The WPL imposed a 15% tax on CPO sales that exceed RM2,000 per tonne in Peninsular Malaysia while those in Sabah and Sarawak benefit from a reduced rate of 7.5% due to their respective state sales tax (SST), thus closely resembling the previous cooking oil cess. The collection of the WPL transition from growers' estates to mills. MPOB continues to provide reference prices for CPO to facilitate the calculation of the WPL, while the Finance Ministry took over as the collection agency.

WPL is triggered when CPO prices exceed certain thresholds, but it impacts all oil palm growers by affecting the pricing of their FFB while today exempting 450,000 smallholders, those having less than 100 acres or 40 hectares of oil palm trees. While oil palm planters contribute to the WPL to support the government’s fiscal tax revenue, there is growing concern among affected stakeholders. They urge the Ministry of Finance (MoF) through the facilitation by KPK to take into account the current cost dynamics, yield variations, Federal-State tax collection and competitiveness within the palm oil sector. Many stakeholders advocate for a review of the WPL's CPO price thresholds and levy rates, with some even calling for its abolition. From the industry’s perspective, these appeals are valid and deserve prompt attention. While the levy aims to generate revenue from higher CPO prices into government’s consolidated funds, the current economic realities for oil palm growers suggest that a reassessment of the levy’s thresholds and rates is necessary to ensure fairness and sustainability in the industry.

Today, a 3% WPL is applied when CPO prices exceed RM3,000 per tonne in Peninsular Malaysia and RM3,500 per tonne in Sabah and Sarawak – with the levy collected directly from the growers. It is important to understand that this levy affects only on oil palm growers who produce FFB, not the CPO itself, which is then processed in palm oil mills. This distinction is crucial because it helps clarify how the levy impacts tax-paying growers on their FFB directly, rather than other players in the supply chain. As a ball-park figure, the price thresholds for FFB translated from the CPO threshold is approximately RM600 and RM700 per tonne, respectively based on the estimate that 5 tonnes of FFB produce 1 tonne of CPO.

Calculation of WPL based on the Windfall Profit Levy (Oil Palm Fruit) Order 2023 effectve 1 February 2023 1 WPL rate for Peninsular Malaysia oil palm growers Levy of 3% when CPO price > RM3,000/MT

Formula: (Monthly average national price of CPO based on MPOB - RM3,000) x 0.03 x Monthly total production of oil palm FFB in MT Formula: (Monthly average national price of CPO based on MPOB - RM3,500) x 0.03 x Monthly total production of oil palm FFB in MT

2 WPL rate for Sabah & Sarawak oil palm growers Levy of 3% when CPO price > RM3,500/MT

12

Malaysia: Current Buzz

Analyst Ivy Ng from CIMB estimated that set against the national CPO yield at 3.2 tonnes per hectare in 2023, the overall production cost is estimated to be around RM3,000 per tonne of CPO. (Note: The actual yield in 2023 has been reported by MPOB as 3.14 tonnes per hectare, with an average of 15.79 tonnes of FFB per hectare). The Minister has also concurred that all-in production costs for many growers fall between RM2,800 and RM3,000 per tonne of CPO, or approximately RM560 to RM600 per tonne of FFB. Given these figures, the idea of extraordinary windfall profits from the selling prices seems questionable.

For instance, if the average CPO price reaches around RM3,800 per tonne, the resulting gross profit margin of RM800 per tonne of CPO – or equivalent to about RM160 per tonne of FFB -results in a profit margin of 21%. This is in line with typical profits from many other business sectors rather than extraordinary margin that is subject to the WPL. Understanding these details is essential for informed engagement about fair taxation and competitiveness in the palm oil sector.

Additionally, rising labour costs are expected especially with the upcoming review of the minimum wage. To manage these increasing expenses, the palm oil industry should focus on improving CPO yields. According to CIMB’s model, each 0.5-tonne increase in yield per hectare could lower production costs by RM462 per tonne of CPO. The MoF has indicated that the WPL has been in place since 1999, using the same calculation formula, although there have been periodic adjustments to the levy rate and price threshold. However, the adjustment made in Year 2022, which equalised or ‘harmonised’ the levy rate between Peninsular Malaysia and Sabah & Sarawak, ‘overlooked’ earlier appreciation the State Sales Taxes (SST) applicable in Sabah & Sarawak. For record, Sabah imposes a 7.5% sales tax on CPO, while Sarawak imposes a 5% tax on CPO and CPKO. There are no sales tax imposed on palm oil in Peninsular Malaysia. This discrepancy means planters in Sabah and Sarawak face a higher overall tax burden, leading to dissatisfaction among growers from both regions.

The WPL is uniquely targeting oil palm growers because this sector, despite facing numerous challenges, has shown potential for windfall profits. However, it’s important to note that oil palm growers are NOT the only sector with significant profit potential.

The commodity-based industry generally operates as a price taker, influenced by global market conditions rather than setting prices.

Currently, CPO prices may appear favourable, but the industry is contending with several unabated rising costs. These include increasing wages, higher input expenses and skilled labour shortages, all of which contribute to lower realised yields. Additionally, interconnected factors lead to considerable field losses, ultimately resulting in reduced national yields.

Going forward to remain competitive and achieve sustainable cost reductions for improved margins, the oil palm industry must improve overall yield productivity for better unit costing and expedite the replanting of aging and unproductive oil palm trees.

13

Malaysia: Current Buzz

Windfall Profits Levy Act: A Flawed Framework?

Legal issues surround the Windfall Profit Levy Act 1998 (Act 592). In early 2023, Parliament discussed the Windfall Profit Levy (Oil Palm Fruit) Order 2023, effective from 1 February 2023, intending to impose a levy on "extraordinary profits" in the palm oil sector, though no clear definition was provided. Simultaneously, the Windfall Profits Levy (Validation) Bill 2023 was passed to indemnify the government for collecting the levy from 1 January 1999 to 31 January 2023, necessary due to noncompliance with the original Act. This bill aims to protect the government from potential refunds of billions in taxes. Concerns arose since ministerial orders for the levy were never officially presented in Parliament in 1999, prompting some industry stakeholders to consider legal action on its retrospectivity.

Parliamentarian YB Wong Chen sought clarification on the bill's retrospective application and its implications for transparency in tax collection. This concern resonates with many stakeholders who feel the government’s actions are disproportionately punitive toward the palm oil industry. They question whether the retrospective law would hold up under legal challenge.

Deputy Finance Minister Datuk Seri Ahmad Maslan subsequently confirmed that no refunds would be issued, citing that the revenue funded cooking oil subsidies. This raises questions about why the palm oil sector alone bears this burden while other industries do not contribute equitably.

Additionally, former Minister YB Teresa Kok mentioned of a proposed special committee to manage a WPL trust account projected to hold around RM200 million from the windfall tax, intended to reinvest in the palm oil industry and support Malaysia's biofuel programme. This strategy represents a positive opportunity for targeted taxpayers to see their contributions reinvested back into the sector to promoting growth.

Reforming WPL As the palm oil sector faces multitude of challenges, reviewing the WPL’s equitability and fairness are crucial. A taxation approach that reflects industry realities and fosters sustainability is needed for equitable contributions to the national economy. Instead of burdening the growers with heavy taxes, the industry and government must work together prioritising reinvestment and invigorating declining yields to avert losses and improve it further, sustaining its supply chain and maintain competitiveness vis-à-vis other producers.

Repealing WPL? In 2008, the government refrained from applying the WPL to Independent Power Producers (IPPs) due to bondholder backlash. WPL was collected from IPPs once in 2008, and stopped thereafter. Similarly, during the Covid-19 pandemic, glove manufacturers were exempted from WPL fearing operational relocations.

Critics may argue that these precedents suggest that if a law cannot be applied uniformly across sectors, it may warrant reconsideration.

The current WPL application is seen as unfair, as it only assesses windfall profits based on realised commodity-based CPO prices, rather than a complete evaluation of return on investment (ROI).

Furthermore, certain legal aspects of the WPL remain ambiguous. Repealing it would free essential funds for reinvestment in the industry, eliminating the levy and allowing for key initiatives like accelerated replanting, promote mechanisation, equipment upgrades, supply chain improvements and compliance with ESG standards.

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Malaysia: Current Buzz Improving WPL collection It is crucial to clearly define windfall profits separate from regular profits. This clarity will help stakeholders understand extraordinary profits and create a fairer tax framework. If the WPL remains in place for oil palm growers, enhancing its application is essential. The current "one size fits all" approach does not capture industry variability. A tailored framework could set specific thresholds based on ROI percentages after tax and utilise regional reference prices for CPO rather than relying solely on the national MPOB price. The WPL should also reflect the diversity among taxpaying growers, considering factors like regional differences, holding sizes and palm ages.

Established players and new entrants also have varying financial conditions, including different loan covenants.

To effectively determine ROI, it’s important to understand production costs, which can vary significantly. Validating these costs against audited results can enhance credibility. Additionally, the framework should consider actual FFB yields and OER extractions, specific to different Malaysian regions.

Presently, independent and organised smallholders are exempt from the WPL, representing approximately 27% of the total oil palm area.

As a result, WPL collections are primarily drawn from the remaining 73% of FFB production when price thresholds are exceeded.

However, MEOA has estimated that only around 55% of FFB production is subject to WPL payments under these circumstances, indicating potential leakages in the system. A viable solution could involve reverting to WPL collection at mills based on CPO tonnage, as was practiced prior to 15 July 2008. This adjustment could effectively reduce leakages by ensuring that ALL growers contribute to the WPL, much like the current collection methods for the MPOB Cess and State Sales Tax (SST). This proposed approach not only simplifies administrative processes but also aligns with existing collection frameworks, thereby creating a more efficient tax collection system for all stakeholders.

Applying WPL to All Sectors with Windfall Profits If the WPL remains, it should be uniformly applied across all sectors experiencing "extraordinary" profits. This would align with equitable taxation principles and the MALAYSIA MADANI agenda, creating a level playing field for taxation.

Raising the WPL's Effective Price Threshold for Palm Oil If the WPL continues, the effective price threshold must be realistically adjusted set against the present production cost. A portion of the revenue from contributing growers should also be reinvested into the palm oil industry to ensure its continuous improvements.

Reviewing the WPL Levy Rate in Sabah and Sarawak If the WPL persists after the threshold revision, the levy rate for growers in Sabah and Sarawak should also be reevaluated, considering their SST under the Malaysian Agreement 1963. The unique challenges there, including higher input costs and financial pressures, necessitate this reassessment, as they currently bear a disproportionate tax burden compared to Peninsular Malaysia. MEOA estimated that taxation for oil palm growers as % of business profitability in Sabah stood at 43.6%, Sarawak at 43.4% vs Peninsular Malaysia at 25.7% in 2023 as compared to normal corporate tax rate of 21.0%.

The WPL on palm oil in Malaysia poses a significant challenge to an already burdened industry but which has so much potential ahead.

The urgent need for reform is echoed by stakeholders across the supply chain, advocating for a comprehensive review that addresses industry realities and fosters sustainable regrowth and growth. As discussions around Budget 2025 unfold, it is imperative for the government to engage meaningfully with industry stakeholders, ensuring that the taxation framework reflects a commitment to the industry’s long-term viability. The focus must shift from collecting levies to collaborative solutions that support equitable taxation, competitiveness and a long-term shared prosperity in Malaysia’s vital palm oil sector with the nation.

UPDATE FROM BUDGET 2025 Under the Belanjawan 2025 the government announced an increase in the windfall profit levy threshold by RM150 per tonne to RM3,150 per tonne for Peninsular Malaysia and RM3,650 per tonne for Sabah and Sarawak from 1 Jan 2025. The rate of levy remains at 3 per cent.

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Knowledge Nugget

Beyond Profit: Palm Oil and Communities Flourishing Together

By Joseph Tek

Malaysia's journey with palm oil is not just a success story - it's a powerful testament to the profound impact that an industry can have on both a nation and its people. As we celebrate and reflect on the transformative influence of palm oil, we are reminded of how this sector has become a beacon of progress and hope, reshaped lives and driving our nation's development.

From humble beginnings just over a century ago, oil palm has risen to become a cornerstone of Malaysia's economic and social advancement. It has fuelled our economic engine and empowered countless individuals, proving that a single industry can create waves of positive change, multiplying and spin-off effects. The triumphs we have achieved are the result of relentless passion, perseverance and an unwavering belief in the potential of the crop, our people and resources.

In the vibrant mosaic of Malaysia's palm oil sector, where over 450,000 oil palm smallholders thrive alongside a diverse array of other planters and in an interconnected supply chain, the story of palm oil is one of remarkable evolution and shared prosperity for Malaysians. What once was an ornamental plant a century ago has grown into a global economic powerhouse, driving Malaysia’s progress and serving as a lifeline for many. This journey symbolises more than just economic success; it represents a new era of sustainable development, good agricultural practice and community empowerment.

Our Common Future – Palm Oil Has the Answers

In the pursuit of sustainable development, we are challenged to address environmental, social and economic dimensions holistically. The 1987 Brundtland Report, Our Common Future, emphasises that sustainability involves integrating these aspects in a balanced manner. For developing countries, development must be at the heart of sustainability discussions, ensuring that progress is not only green but also equitable from its social aspects.

While the "Triple Bottom Line" of Planet, People and Profit often reflects the priorities of developed nations, developing countries, particularly those reliant on agriculture with large number of smallholders, require a broader perspective. Sustainability means optimising limited resources to enhance livelihoods while safeguarding the environment.

The successful cultivation of oil palm is a shining example of human ingenuity and agricultural excellence, making it one of the top ten vegetable oils traded globally. For over 5,000 years, palm oil has been a staple in kitchens around the world, playing a vital role in modern food systems. In Malaysia, oil palm cultivation stands as a proud testament to our nation's growth. Since gaining independence, Malaysia has diversified its plantation crops mainly from cocoa and rubber to emerge as a global leader in palm oil production and export, contributing significantly to its socio-economic prosperity and also its political stability. The expansion of this industry has been a driving force in enhancing the lives of countless individuals, particularly in rural landscapes.

Yet, the true impact of Malaysian palm oil is often understated. It is not just a commodity but a remarkable gift of nature, offering an opportunity for profound positive change on both a national and global scale. The cultivation of oil palm in Malaysia exemplifies how development and sustainability can co-exist and must continue to evolve for future generations.a

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Knowledge Nugget Empowering Landless Malaysians

Palm oil has been a game-changer for Malaysian smallholders, bringing about transformative improvements in their lives. The Federal Land Development Authority (FELDA) scheme stands out as a beacon of hope and progress. FELDA has been instrumental in uplifting landless Malaysians, turning them into successful oil palm growers and helping countless families rise from poverty.

FELDA’s land resettlement programmes have relocated rural populations to newly developed plantations, providing them with not just land but also housing, training and a supportive community environment. This initiative has empowered families to build vibrant communities complete with roads, schools, mosques, clinics and hospitals. Beyond resettlement, FELDA's support has also extended to education loans, home assistance and entrepreneurship programmes, reflecting a holistic approach to enhancing settlers' lives and overall well-being. This model has become an inspiration for other developing countries aiming to combat poverty. The success of FELDA highlights palm oil's potential to transform lives and uplift communities.

Moving Forward

To effectively support smallholders and advance sustainable agricultural development, we must transition from a reliance on continuous subsidies and assistance to a model centered on empowerment and independence. While direct grants can offer immediate relief, they often fall short in fostering long-term growth and self-sufficiency. Instead, the focus should shift to effective programmes to equip smallholders and also mid-sized growers with the skills knowledge, and tools needed to thrive in a changing global agricultural landscape.

This means moving away from the traditional “give a fish” approach, where regular support is provided, and adopting a more transformative “teach to fish” strategy. By investing in education and training and re-training, we can strive to empower smallholders to navigate the complexities of modern agriculture, respond effectively to market demands and manage resources more efficiently. This approach not only helps them adapt to new technologies and improve their farming practices but also enables them to make informed decisions that boost their productivity and resilience.

Fostering a culture of learning and innovation will enable smallholders to achieve greater self-reliance and contribute more effectively to the agricultural sector's growth and sustainability.

Cultivating Engagement Driving Growth

and

The Malaysian palm oil sector is committed to building a bright future in close collaboration with local communities. Plantation companies have been pioneers in developing essential infrastructure, such as connecting roads, which has significantly improved accessibility and development in many rural areas in the country.

Moreover, the sector is also involved in creating crucial community facilities, including schools, clinics, and roads. Vocational and technical training (TVET) programmes are equipping locals with valuable skills for better employability and entrepreneurship. A notable example is the partnership between a Malaysian plantation association and a TVET provider in Sabah, focused on training marginalised youths in plantation management. Collaborations with indigenous and local communities underscore a profound commitment to preserving traditional ecological knowledge and establishing conservation areas. This comprehensive approach highlights the industry's dedication to sustainable growth and the well-being of all stakeholders – and this must be affirmed and further promoted.

Support for Malaysia’s smallholders remain central to the industry’s mission. Plantation companies, along with relevant stakeholders across the supply chain, are helping farmers achieve the mandatory Malaysian Sustainable Palm Oil (MSPO) certification through vital training and assistance. Other bigger players are also subscribing to the voluntary B2B Roundtable on Sustainable Palm Oil (RSPO) standards that provides a global benchmark for sustainability, reaffirming Malaysia’s commitment to responsible production practices.

By enhancing livelihoods and fostering local business growth, plantation companies are reinforcing the rural landscape and supply chain ecosystem.

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Knowledge Nugget

Harmonising Profitability and Positivity

Balancing profitability with social-environmental responsibility is crucial for advancing rural development, combating poverty and environmental protection. The Malaysian palm oil industry stands at a pivotal crossroads, striving to align itself with the triple bottom line of sustainability - economic, social, and environmental - while also meeting the ambitious United Nations Sustainable Development Goals (UNSDGs).

Growers, from smallholders to large plantations, face a multifaceted challenge. They must navigate a complex web of stakeholder expectations, including those of investors, consumers, employees, NGOs, and governments. At the same time, they grapple with intricate supply chains and pressing environmental concerns. As price takers and not price makers in a volatile market, where they have little control over palm oil prices, they must also balance these pressures with the need to sustain their livelihoods and support rural communities.

The path forward requires a commitment to both innovation and responsibility. By continuing to embrace sustainable practices and championing social and environmental stewardship (Note: we have many good sustainability-related stories to share!), the Malaysian palm oil industry can transform its challenges into opportunities, driving meaningful progress for rural development and poverty alleviation.

The global regulatory landscape is rapidly evolving, with consuming countries setting new standards for environmental accountability.

Further regulations can be expected soon, imposing stricter trade barriers on products associated with deforestation and also social issues. These regulations will lead to mandatory requirements for thorough verification of product origins.

As these regulations become more stringent, it is essential for growers to be united and advocate for policies that are reasonable, comprehensive and mindful of the unique challenges faced by developing countries. The industry must come together to support regulations that strike a balance between social environmental goals and practical realities, ensuring that policies are both effective and equitable.

While navigating these evolving standards, there are also significant opportunities for the industry to drive continuous improvements. This is a chance to reaffirm its commitment to sustainable agricultural practices, adopt innovative solutions, and prioritize community welfare. Moving forward, it is essential that we demonstrate that profitability and social good can not only coexist but thrive together, creating a future where economic success and social responsibility go hand in hand.

As Malaysia’s palm oil industry evolves, it stands as a beacon of how dedication to sustainable development and community empowerment can drive both economic prosperity and profound social impact. With unwavering national pride, passion and perseverance, we must envision a future where our palm oil sector not only prospers but also sets a global standard for excellence and shared responsibility.

Let us celebrate the remarkable achievements of the palm oil industry and unite in our efforts to ensure that palm oil remains a force for good. By creating opportunities and transforming lives, we can pave the way for a future where the industry continues to generate positive change for generations to come.

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“FROM PLANTATION TO PRESERVATION: THE ROLE OF OIL PALM IN SUSTAINABLE VEGETABLE OIL PRODUCTION”

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Palm King: Your Partner in Precision Harvesting of Oil Palm In today’s rapidly advancing agricultural sector, mechanisation and automation are revolutionising practices across the globe. However, the oil palm industry still relies on largely unchanged harvesting methods, making it one of the most critical and time-consuming tasks in estate operations. Harvesting not only involves significant manual labour but also directly affects yield, crop quality and overall profitability. As oil palm trees mature and grow taller, the challenges of harvesting intensify. While the industry increasingly discusses mechanisation, one local company stands out as a vital solution provider. They offer innovative tools designed to boost productivity and reduce losses, addressing the unique demands of modern oil palm harvesting.

The Challenge of Oil Palm Harvesting Managing an oil palm plantation presents unique challenges, as operations like planting, field maintenance, and harvesting still rely heavily on manual labour. Although this dependency provides job opportunities, the "3D" perception - dangerous, demeaning, and difficult - has deterred local workers. As a result, Malaysia, the world's second largest palm oil producer, depends significantly on foreign labour to meet the demands of this labour-intensive industry.

Current harvesting methods in the oil palm industry still rely on traditional tools such as chisels, sickles, poles, blades, and stones.

These methods are often labour intensive and inefficient, with an experienced harvester typically covering 2.0 to 3.5 hectares per day, assuming there is effective loose fruit collection and manageable intervals between harvesting rounds. To minimise accidents and enhance efficiency, estate managers must promote the use of appropriate tools and correct harvesting techniques.

Economically, any inefficiencies or risks inherent in these methods can result in significant fruit losses and a reduction in overall yield.

Harvesting oil palms presents several significant challenges due to the physical characteristics of the plant and the limitations of current tools. The high silica and lignocellulose content in oil palm biomass contributes to the toughness of the plant tissues, making them more resistant to cutting. Each palm tree stores approximately 4–5 kg of silica in its above-ground biomass, and pruned fronds return 110 - 131 kg of silica per hectare to the soil annually. Oil palms grow at an average rate of 60 cm per year for certain planting materials, such as the widely planted Deli x AVROS hybrids. While they can reach heights of up to 30 meters, they are typically replaced when they exceed 12 meters due to the 1 increased difficulty in harvesting taller trees. This height is usually reached after about 25 years of growth. (Source: Joseph Tek, MPOB PIPOC 2023).

There is substantial potential to enhance harvesting efficiency through the adoption of advanced technologies such as motorised cutters, robots, exoskeletons and drones. These innovations are expected to address the shortage of manual harvesters and significantly improve overall productivity. However, the variability in palm tree heights, ground and soil conditions, and field layouts presents considerable challenges for mechanisation. While these advancements hold promise, realising their full potential will require time and continued development. There are still low-hanging fruit opportunities to enhance current harvesting methods. Companies like Palm King Marketing Sdn Bhd are leading the way in developing practical and cost-effective solutions to improve harvesting tools. Their vision is to be one of the largest one-stop station and service provider for agricultural industrial in Malaysia. By concentrating on advancements in tool design and efficiency, Palm King is dedicated to overcoming the challenges of oil palm harvesting, paving the way for more effective and efficient harvesting operations.

Palm King’s Cutting-Edge Solutions At Palm King, they understand the limitations of traditional harvesting tools and have dedicated themselves to developing advanced agricultural solutions to overcome these challenges. Founded over two decades ago as a small family-owned business, Palm King initially focused on delivering high-quality tools to local farmers. As demand for more efficient and reliable harvesting equipment surged, the company quickly expanded their operations, investing heavily in research and development to create innovative solutions tailored to modern agricultural needs. Today, Palm King stands at the forefront of the industry, celebrated for their unwavering commitment to quality, innovation and customer satisfaction. From their humble beginnings, the company has evolved into a respected international brand, reflecting their dedication to enhancing productivity and sustainability in farming practices worldwide. Established in 2013 and headquartered in Selangor, Malaysia, the company leverage nearly 30 years of experience through their manufacturing facility, operational since 1986, to produce cutting-edge harvesting tools.

Their core mission is to improve the safety and productivity of harvesters by streamlining harvesting processes and addressing existing challenges. Their comprehensive product lineup includes high quality harvesting sickles, axes, telescopic poles and tool attachments, all engineered for precision and efficiency. Designed to handle tall palms, Palm King’s tools significantly boost harvester productivity while reducing physical strain. 2 In addition to their flagship tools, the company has expanded their offerings to include essential harvesting-related products such as aluminium poles, sickle safety covers, clamps, sharpening stones, blade holders, Allen screws, Allen keys, loose fruit collection baskets and Bio Semi-Organic fertilisers. This diversification has solidified their reputation within the industry and also fuelled their rapid growth in international markets.

Manufacturing Excellence and Industry Trust What sets Palm King apart is their dedication to superior manufacturing quality. Each of the products is crafted from top-grade raw materials to ensure exceptional durability and performance, meeting stringent international standards. The company’s ISO 9001:2015 certification further attests to their commitment to producing consistently reliable and high-quality tools.

Whether the customers are smallholders, mid-sized operators or managing large plantations, Palm King’s tools are designed to perform reliably in the most demanding conditions. Palm King’s commitment to excellence ensures that customers can trust their products to enhance harvesting efficiency and support plantation success.

Palm King’s innovative tools are specifically designed to boost productivity and reduce fruit losses during harvesting. Traditional methods often lead to unripe fruit being harvested or ripe fruit being left behind.

With Palm King’s precision-engineered sickles and axes, these inefficiencies are minimised, allowing harvesters to achieve cleaner cuts and maximise yield.

Palm King’s Flagship Pole Products The PK Gold Pole, one of the Palm King’s flagship products, combines ultimate reach and exceptional strength in a single tool. It is made from Aluminium Alloy T6 and is 10% lighter than conventional pole. Extending up to 8 meters, it is perfectly suited for harvesting tall palm trees with precise control. Crafted from high-grade aluminium, the pole is both lightweight and durable, minimising operator fatigue while enduring the demands of regular use. Its ergonomic design includes a comfortable handle and anti-slip grip, enhancing user comfort during extended periods. Additionally, the adjustable length offers versatility for various harvesting tasks, boosting both efficiency and speed in the field.

Another product, the KLS Compact Pole is engineered for versatility and portability, extending up to 4 meters to suit small to medium-sized estates where manoeuvrability is key. It is made from Aluminium Alloy T6 and is 15% lighter than conventional pole.

Despite its compact size, it can deliver high precision cutting with a sharp, durable blade that minimises fruit damage and enhances yield quality. Its user-friendly design allows for quick assembly and disassembly, facilitating easy transport and storage. Lightweight yet robust, the KLS Compact Pole is ideal for extended use in tight or challenging areas, ensuring both convenience and performance.

Harmony in the Wild

Sabah’s Path to Sustainable Palm Oil Sabah, known for its rich biodiversity and expansive oil palm plantations, is leading efforts to foster peaceful coexistence between humans and wildlife. From wildlife corridors to ecotourism, conservation takes centre stage as the industry proves that sustainability and profitability can go hand in hand.

MPOGCF

The Brumas Wildlife Corridor, a prime example of this initiative, connects the Ulu Kalumpang and Ulu Segama forest reserves, creating a safe passage for endangered species like the Bornean elephant. Covering 1,067 hectares, the corridor has achieved remarkable success in reducing human-wildlife conflict while boosting biodiversity. Losses from elephant-related damages have plummeted by 99%, from RM500,000 annually to a mere RM5,000.

These outcomes are bolstered by proactive habitat enrichment, with 85,516 trees and Taiwan Napier grass planted to support the wildlife. The efforts have also seen the local elephant population more than double, from 50 to 120. Community collaboration has been central to this success, with locals trained to handle wildlife conflicts and rapid-response teams mitigating issues swiftly.

Sabah Softwood Berhad’ Wildlife Corridor Linking Ulu Kalumpang Forest Reserve to Ulu Segama Forest Reserve

Ulu Segama Brumas Wildlife Corridor

Ulu Kulumpang

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Harmony in the Wild

Sabah's Conservation Economy: Ecotourism and Wildlife Preservation Ecotourism Projects Ecotourism is emerging as a vital part of its sustainability strategy. The Brumas Wildlife Corridor now invites visitors to experience its natural beauty, with plans underway for night safaris and eco-friendly tourism packages.

The Borneo Elephant Sanctuary (BES) Borneo Elephant Sanctuary (BES) offers a refuge for injured and orphaned elephants. BES has become an educational hub, inspiring future conservationists and fostering partnerships Houses seven elephants, with plans to expand facilities for veterinary care.

Wider Impact: Orangutan Rehabilitation Sawit Kinabalu’s reforestation efforts have rejuvenated 2,632 hectares of degraded land, increasing the orangutan population from 37 to 55. A new initiative, dubbed “orangutan diplomacy,” aims to engage corporate sponsors in conservation efforts, setting an example for sustainable partnerships.

MPOGCF’s Role The Malaysian Palm Oil Green Conservation Fund (MPOGCF) has been instrumental in these projects, supporting initiatives like BES and the Sungai Pin Conservation Area.

MPOGCF

26

IPM Insights

Integrated Pest Management for Rhinoceros Beetle in Oil Palm Plantations The rhinoceros beetle, Oryctes rhinoceros, is a significant pest in oil palm plantations, particularly in replanting areas where zero-burning practices have been adopted.

These methods leave behind shredded palm trunks, creating ideal breeding grounds for the pest. The beetle causes severe damage to young palms by boring into their growing points, leading to wedge-shaped gaps in fronds, broken spears, and malformed leaves. This damage exposes the palms to secondary infections from bacteria and fungi, ultimately reducing crop yield by up to 25% annually.

Adult beetles attack unopened fronds, female inflorescences, and stalks, sometimes resulting in the loss of up to 36% of fruit in affected bunches. Larvae develop in decaying organic material, including oil palm trunks, empty fruit bunches, and other organic waste. These breeding habits differ across regions, with females preferring decaying trunks in Malaysia and cattle dung or rotting stems in Papua New Guinea.

Without effective control measures, O. rhinoceros infestations significantly impact oil palm productivity and plantation sustainability.

Integrated Pest Management (IPM) Strategies

Entomopathogenic Fungus (Metarhizium anisopliae) The fungus M. anisopliae has been effectively used as a biological agent to control O. rhinoceros. Powder and granule formulations have been developed for different field conditions, proving effective against larvae. The fungus infects and kills larvae within 2–12 days of application.

Oryctes Nudivirus (OrNV) OrNV infects both larvae and adult beetles, significantly reducing pest populations within 1–2 years of introduction.

This method has been successfully applied in countries such as Papua New Guinea, Indonesia, and the Maldives.

Auto-dissemination Techniques • Modified Pheromone Traps: These traps are equipped with spore solutions, allowing infected beetles to spread the fungus to breeding sites. Factors like trap density and beetle migration behaviour influence effectiveness.

• Artificial Breeding Sites (ABS): ABS combines pheromones, breeding materials, and adults to naturally spread biopesticides, proving effective regardless of terrain or plantation size.

27

Paudel et. el., (2023)

IPM Insights

Mechanical and Manual Methods Light Traps Ultraviolet light traps attract nocturnal O. rhinoceros, leveraging their phototactic behaviour. These traps are particularly effective for adult beetles, offering an environmentally friendly control option.

Ferrotraps Ferrotraps with pheromone-based lures (e.g., ethyl 4-methyloctanoate) are widely used to capture adult beetles, especially in replanting areas.

These traps also help monitor pest populations in the field.

Manual Larvae Removal Removing larvae from organic waste, such as empty fruit bunches and dead palm trunks, effectively suppresses larval populations. However, this method requires significant labour resources.

Hole Traps

Credit: Olympia Terral Tekken, a gill net used by Chamorro fishermen for centuries, has proven to be an effective trapping tool for rhinoceros beetles.

Hole traps filled with organic material like manure and leaf litter attract larvae and pupae. When combined with M. anisopliae, this method enhances pest mortality.

Orycnet Traps Nets placed around the growing points of young palms prevent beetle attacks. The insects become entangled, making them easier to capture. This method is especially effective when combined with pheromones or insecticides.

Cultural Practices Destruction of Breeding Sites Efficient chipping and even distribution of palm trunk residues reduce potential breeding grounds.

Incorporating legume cover crops further limits pest habitat availability.

Mulching and Composting Careful management of organic materials like empty fruit bunches prevents them from becoming breeding sites while improving soil health.

Integrated pest management (IPM) offers a multi-faceted approach to controlling Oryctes rhinoceros in oil palm plantations.

Combining biological agents, mechanical traps, and cultural practices ensures sustainable pest control while minimising chemical usage. By adopting these methods, plantations can mitigate crop losses, reduce environmental impact, and ensure long-term productivity.

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OIL PALM MINISTRY, ITS AGENCIES AND RELATED ASSOCIATIONS MALAYSIA

Ministry of Plantation and Commodities (KPK) www.kpk.gov.my

Malaysian Palm Oil Board (MPOB) www.mpob.org.my

Malaysian Palm Oil Council (MPOC) www.mpoc.org.my

Malaysian Sustainable Palm Oil (MSPO) www.mspo.org.my

Malaysian Palm Oil Green Conservation Foundation (MPOGCF) www.pkpkm.org.my

Malaysian Palm Oil Association (MPOA) www.mpoa.org.my

Malaysian Estate Owners' Association (MEOA) www.meoa.org.my

Sarawak Oil Palm Plantation Owners Association (SOPPOA) www.soppoa.org.my

East Malaysia Planters' Association (EMPA) www.theempa1889.wixsite.com/empa

Incorporated Society of Planters (ISP) www.mapa.net.my

Sarawak Dayak Oil Palm Planters Association (DOPPA) www.doppa.org

National Organisation of Smallholders (NASH) www.pkpkm.org.my

Malaysian Agricultural Producers Association (MAPA) www.mapa.net.my

INDONESIA

Badan Pengelola Dana Perkebunan Kelapa Sawit (BPDPKS) Indonesian Palm Oil Plantation Fund Management Agency https://www.bpdp.or.id/

Asosiasi Petani Kelapa Sawit Mandiri (APKSM) Independent Palm Oil Farmers Association

Gabungan Pengusaha Kelapa Sawit Indonesia (GAPKI) Indonesian Palm Oil Association https://gapki.id/en/

Indonesian Oil Palm Research Institute (IOPRI) Pusat Penelitian Kelapa Sawit (PPKS) https://iopri.co.id/

Palm Oil Agribusiness Strategic Policy Institute (PASPI) https://palmoilina.asia/

Asosiasi Petani Kelapa Sawit Indonesia (APKASINDO) Indonesian Palm Oil Farmers Association https://dpp-apkasindo.com/

Forum Pemuda Sawit Indonesia (FPSI) Indonesian Palm Oil Youth Forum https://www.forumpemudasa wit.or.id/

Gabungan Pengusaha Perkebunan Indonesia (GPPI) Indonesian Plantation Entrepreneurs Association https://www.gppindonesia.com/

Indonesian Planter Society (IPS) Masyarakat Planter Indonesia https://www.ips-planter.o r.id/

Serikat Petani Kelapa Sawit (SPKS) Indonesian Oil Palm Smallholders Union https://spks.or.id/

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