Promoting Agricultural Value Chains:
In the OIC Member Countries
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Therefore, the Malaysian Palm Oil Association (MPOA), which represents the Malaysian palm
oil producers and is one of the key members under the RSPO’s growers group, began
developing its own national certification standard in 2011, the Malaysia Sustainable Palm Oil
(MSPO). The MSPO standard was officially launched in January 2015 and is promoted on a
voluntary basis. Many Malaysian companies who are RSPO-certified already expressed their
interest in obtaining MSPO certification as well. Special focus will also be placed on facilitating
compliance by small and medium-sized farmers by means of an initial fund of US$ 13.2 million
established for this purpose. Independent smallholders seem to be more receptive towards
getting MSPO certification compared to the costly certification process of the RSPO. At the
moment, the MPOB acts as the governing body for the standard, but the plan is to establish a
separate entity in the future, while the MPOB becomes the owner of the standard. A review of
the MSPO, which encompasses criteria on sustainable agricultural practices as well as on
environmental, social and economic aspects, is scheduled for 2018.
5.5.3 Infrastructure and logistics
Being one of the biggest producers and exporters of palm oil and palm oil products worldwide,
Malaysia has an important role to play in fulfilling the growing global need for oils and fats
(MPOC, 2012). The industry therefore relies on a well-organised system of logistics and
infrastructure which is important for reasons of efficiency but also a necessity as it involves a
product processed into numerous consumer products worldwide and thus health and safety
are of great concern. A highly organised logistical set-up is reflected in the first steps of the
production process at the palm oil estates. To avoid spoilage, fresh fruit bunches (FFBs) are to
be milled within 24 hours after harvesting and on the larger estates an extensive logistical
network of harvesting, transporting, milling and recycling of the plant material is in place. The
first processing is done at the mill on the estate. The two main products from the FFB are
crude palm oil and palm kernels (from which oil is extracted as well).
Crude palm oil for export is usually shipped overseas for further processing. Traders connect
with the shippers who on their turn take care of custom clearance issues. Transport over land
mainly goes by rail. In upcoming markets like in Central Asia logistics are seen as one of the
market challenges for Malaysian palm products due to the landlocked location of many
countries. Shipment through China remains the most viable option but limited wagons
available on the Chinese railway into Russia and Kazakhstan, for instance, might delay
consignment deliveries (Hidzir & Aspar, 2013).
Since the adoption of the Biofuel Industry Act in 2007, Malaysia has established a substantive
infrastructure to produce palm oil biodiesel and production has grown steadily. However, due
to continuous delays in implementing the government mandate to include biodiesel in all
diesel used for transport, only 10 out of 29 biodiesel plans are in operation. In 2013, just over
330,000 tonnes of biodiesel were produced which is well below the annual production
capacity of 3.5 million tonnes (USDA, 2014c).
5.5.4 Governance and value chain actors
The palm oil value chain can be categorised into an upstream and a downstream part. In the
upstream part, smallholder farmers account for close to 40 percent of the area planted, while
the rest is attributed to large scale plantations (see . There are two categories of
smallholder farmers. The first are independent farmers with less than 40 ha (15 percent of the