Promoting Agricultural Value Chains
In the OIC Member Countries
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Malaysia has identified growth potential in untapped markets in west and central Asia where
most countries rely on imports from countries such as Turkey, Iran and Kazakhstan (Hidzir &
Aspar, 2014). In Turkey, local production of oils and fats is unable to meet domestic
requirements and therefore the country is importing oils and fats for domestic use. The 24
countries from the west and central Asian region together imported 1.5 million tonnes of
Malaysian palm products in 2013. Despite challenges, e.g. logistics and the high costs of
transportation of the individual countries in west and central Asia region, the use of Malaysian
palm oil products for solid fats formulation has been identified as one of the strategies of
market expansion in west Asia (Hidzir & Aspar, 2014).
5.5.6 Conclusions and lessons learned
Malaysia is the world’s second biggest producer and exporter of palm oil. The sector involves
both large-scale plantations, usually held by large Malaysia-owned companies, and smallholder
farmers, who are often integrated in governmental plantation schemes but may also operate as
independent smallholders. The industry is well organised with close ties to the Government of
Malaysia. Both public and private infrastructure is in place, for instance for R&D and
processing.
Since 2010, palm oil is one of 12 National Key Economic Areas identified by the Malaysian
Government. As the country is running out of land that could support the spatial expansion of
palm oil, other ways needed to be identified to promote the sector in the future. At the
upstream level, the Government promotes the replanting of oil palm trees and productivity
increases. At the downstream level, emphasis is placed on developing more value added
activities in Malaysia. This includes the promotion of biodiesel from palm oil and the
development of chemical, food and health-based industries in which palm oil is a key
ingredient.
Meanwhile, large Malaysian companies are increasingly expanding their operations abroad by
acquiring land in resource-rich developing countries for establishing palm oil plantations.
Some have even acquired downstream operations, such as refineries, directly in consuming
countries. This testifies to the growing involvement of Malaysian palm oil actors at all stages of
the global value chain rather than merely being producers of raw materials.
However, palm oil production is increasingly confronted with a number of sustainability
challenges, including deforestation, loss of biodiversity and climate change. While many
Malaysian actors are members of the RSPO and the MPOA has even developed a local version
of sustainable palm oil certification, the MSPO, the extent to which the industry manages to
address and resolve such sustainability challenges will be critically watched by all actors
involved.