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Plantation Industry

100 Years of Oil Palm“Surging Forward”

13TH ISP NATSEM 2017

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The last 100 years… MALAYSIAN SUCCESS STORY

Rapid growth to 5.5 mil ha since the 1st commercial oil palm planting in 1917 by the Frenchman, Henri Fauconnier at Tennamaram Estate, Selangor

Felda Scheme introduced in 1961 by the late TunAbdul Razak, Prime Minister of Malaysia, to eradicate hard-core poverty in rural areas

Poverty reduced from 58% to less than 2% today

Now, Malaysia is a major global palm oil producer

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A major driver of economic development in Malaysia

Accounts for approximately 31% of world palm

oil production and 37% of world exports

On average, the industry contributes

around 4 to 7% of GDP

The industry has contributed export revenues

ranging from RM60 bil to RM70 bil from

2012 to 2016; with an average RM64.2 bil or

9% to Malaysia’s total export revenue over the

5 years

Source of income/ livelihood for >1 mil people,

including 640,000 farmers and their families

National Key Economic Area: targets to

generate RM178 bil in gross national income by 2020

Malaysian Palm

Oil Industry

Source: International Institute of Sustainable Development, The Star, Department of Statistics, Malaysia, Pemandu, Oil World 2015/16

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To Sum Up the last 100 years…

Poor Country Emerging Economy

Malaysia was not even an independent nation in 1917, but in less than a century, we transformed Oil Palm from a minor subsistence crop in Africa one of the world’s major agricultural crops

This showcases the brilliance and solid Integration of the Malaysian Government Agencies, Plantation Companies, Researchers, Universities and Smallholder Societies at large, to make the Malaysian Palm Oil Industry a Global Leader today

The Malaysian Success Story spread to Indonesia, Thailand, Papua New Guinea, and to some African and South American Companies

Transformation of the Malaysian economy and the palm oil industry

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Pertinent Questions – The Next 100 Years

Will the industry remain a

significant part of our economy?

Will palm oil continue to be relevant to the World 100 years

from now?

Will there be an efficient substitute

to palm oil?

How will our plantation evolve and transform?

No other Edible Oil or Agricultural Crop has gone through challenges like Palm Oil

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100 Years of Oil Palm - “Surging Forward”

The Malaysian Palm Oil Industry can achieve anything it conceives as it has a successful story to prove it

However…

Business Cannot be as Usual

Time to re-position and re-brand the Malaysian Palm Oil

Industry Players must be willing to change and work collectively

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Immense Opportunities Await…

Our competitive edge: Malaysian Palm Oil is renowned for high quality and usability

Growing population (9.7 bil by 2050) + increased life expectancy, raising concerns over Food Security, Food Safety and Sustainability

Global oils and fats consumption expected to increase

From 180 mil MT to 250 mil MT in the future

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Global Vegetable Oil Demand & SupplyPopulation Growth is a Key Driver

Source: LMC Oilseeds & Oils Report 2016, United Nations, USDA

8.8

0

6.8

6

6.0

7

4.0

3

3.9

3

3.5

1

EU-28 India Africa Latin

America

US China

Palm Oil Demand per Capita(2016)

44

.85

35

.03

25

.03

24

.25

15

.86

10

.98

US EU-28 China Latin

America

India Africa

Vegetable Oil Demand per Capita(2016)

kgkg

Note: Europe consumption per capita for EU-28 only, excludes Russia & Eastern Europe countries

10

6

13

7 17

4

19

0

21

0

23

3

25

8

>2

60

11

1

14

1 17

6

18

3

20

2

22

4

24

8

>2

506.5 6.9 7.3 7.4 7.8 8.1 8.5

9.7

0.0

2.0

4.0

6.0

8.0

10.0

0

50

100

150

200

250

300

2005 2010 2015 2017 2020 2025 2030 2050

BilMil MT Vegetable Oil Demand & Supply vs Population

Demand Supply Population (RHS) Demand/Capita (kg)

16.3 19.8 30.427.125.623.6 28.6 >30

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Evidence Today Suggests there is No Vegetable Oil Greater than Palm Oil

Total Vegetable Oil Consumption

178 mil MT (2015/16)

CAGR (2010/11-2015/16)

Palm & palm kernel oil

Soybean Oil

Sunflower Oil

Others

Rapeseed Oil

37%

29%

8%

16%

9%(5.5%)

(5.8%)

(5.2%)

(-1.1%)

(3.7%)

Source: USDANote: Others include peanut, cottonseed, coconut and olive oil

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Huge Potential for the Palm Oil Industry

Source: World Bank, LMC Oilseeds & Oils 2016, Bloomberg

14.424.0 28.5 30.1

37.0 37.1 39.10.8

1.01.1 1.1

1.3 1.7 2.1

2010 2015 2016 2017 2020 2025 2030

Vegetable Oil Consumption in Biofuels(mil MT)

Biodiesel Direct Burning

4.2 4.8 4.7 4.8 5.1 5.76.7

3.54.9 5.1 5.3

5.97.3

8.6

2010 2015 2016 2017 2020 2025 2030

Lauric Oils Palm Products

Vegetable Oil Consumption in Oleochemicals(mil MT)

Note: CIF-North West Europe CPO prices; actual historical exchange rates used for conversion of prices from 1970-2016; constant rate of USD1:RM4.00 used for 2020-2030

260

584

290 310

901

700782

839900

1970 1980 1990 2000 2010 2016 2020 2025 2030

CPO Prices (1970 - 2030) (USD/MT)

788 1,270 784 1,179 2,900 2,900 3,128 3,356 3,600RM/MT

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Immense Opportunities Await

Palm Oil plays a critical role in helping to feed 3 billion people in more than 150 countries worldwide

Feeding another 2 billion people by the year 2050 is NO small feat

Palm Oil will remain relevant as it is now an Irreplaceable part of the Global Food Supply Chain

Palm Oil is expected to account for 55% of the Global Edible Oil Consumption in the next 35 years! (Global Oils & Fats, June 2017)

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THERE AGAIN - The Challenges…

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Palm Oil Industry will continue to face these challenges

Unpredictable & extreme weather patterns

Breakthrough in genetically modified crops and competition from other oilseeds

Increasing political

instability and regional conflicts

Consumer demand for sustainable CPO & green products

Talent –reluctance to work in Plantation sector

Green and Social NGOs’ Focus on

plantation companies

Volatility of Commodity/ Crude Oil prices

Increasing protectionism and regulatory changes

Depleting Resources and

Rising costs

Challenging Global

Environment

Focus on R&D, Innovation and Sustainability to withstand these Challenges

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Technological Advancements, Emerging Competitors and Rising Costs have made many renowned businesses obsolete

Kodak MotorolaNokia Blackberry

These Companies are either: Business as Usual Refuse to Change Just Complacent

Sticking to Conventional Ways Or Simply Arrogant

Filed for Bankruptcy in 1998 (U.S.)

Malaysia

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Scrutiny and Criticisms against Palm Oil will get more Immense

Cause of Deforestation

Green House Gas (GHG) Emission

Climate Change/ Global Warming/ Haze

The Killing of Orang Utans & Other Endangered Species

Health Issues

Land Grabbing

Forced/ Child Labour

What’s NEXT???

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Campaigns Against Oil Palm will Escalate

“Nutella Tax”“No Palm Oil” Labeling

EU Resolution Against Palm Oil

• The use of palm oil in biofuels to be phased out by 2020

• A single EU certification standard palm oil entering the EU

European Food Safety Authority (EFSA) report on 3-MCPD & Glycidyl Esters (GE)

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The Palm Oil Industry Must Strictly…

Commit to conservation of Forests, Peat areas, Wildlife and Community Well-being

Governed by the RSPO, ISPO, MSPO, HCS and other Sustainability Initiatives

Bornean Pygmy Elephant

Tembadau/ Banteng

Sumatran Rhino

Orang Utan

Proboscis Monkey Hornbill Sun Bear

Malayan Tiger

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Competitive Forces can be Disruptive to the Palm Oil Industry

Pongamia Safflower Algae

• Non-food oil crop

• Can be grown in marginal conditions

• Rich in triglyceride oils Converted into biodiesel & aviation fuel

• Vegetable oil for food & non-food usage

• High level of oleic acid

• Versatile usage: biolubricants, bioplastics, biochemicals, cosmetics & pharmaceuticals, oleochemical industry

• Food & non-food applications

• Grows much faster than food crops

• Algae oil Biodiesel production

• Algae biomass Organic fertilizer & animal feed

• Refined algae oil Culinary applications

Source: MPOB, FAO, USDA, various research articles

These crops need much smaller land footprints

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Sustainable Growth

Operational Efficiency

Industry Rebranding

The next 100 years - Focus on challenges in three important areas

Unpredictable and extreme weather patterns due to global warming

WEATHERTALENTS

• Shortage of competent talent

• Labour Intensive• Unable to attract

local talents/ younger generation

GROWING CONSUMER CONCERN

& AWARENESS

Consumer demand for sustainable CPO and other green products

STRINGENTPOLICIES

Increasing protectionism and regulatory changes

RESOURCES & COSTS

Depleting resources and rising costs

ANTI-PALM LOBBYISTS

Threat of green and social NGOs on plantation companies

INNOVATION

Mechanization & Automation

Cleaner & greener development of palm products

RISING SUSTAINABILITY

DEMAND

SUPERIOR OIL YIELDS

Oil Yields have been stagnant

ADVENT OF INTERNET & SOCIAL MEDIA

Easy access to information & allegations/ complaints

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Propelling the Industry into the Next 100 Years

Some key milestones to Focus…

1. Achieving Superior Oil Yields

2. Developing Sustainable Plantations

3. Becoming Industry 4.0

4. Scaling High Value-Adding Palm Products

5. Strengthening Human Capital Dynamics

6. Creating the Malaysian Brand of Palm Oil

Advanced R&D, Innovation and Transformation are key enablers for the industry

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1. Achieving Superior Oil Yields remains Paramount

Future Planting Material(Post-2016)

11 MT/Ha

New Progenies

9 MT/Ha

Oil Yield

Oil Yield

Genome Select Material

Dami Super Family Seeds

The whole industry, including smallholders, must aim for Superior Oil Yields

Malaysia must produce more Palm Oil from less land

Plantations of the Future must be highly Productive –Achieve Superior Oil Yields of 10 MT/Ha or higher

Replanting with Best Planting materials will be crucial

Using planting materials with desired traits, we can consider Replanting at 16 to 18 years age instead of 20 to 25 years

With the use of ultra-advanced Genome Science, Sime Darby Plantation has successfully developed and commercially planted Genome Select Palms

Genome Select Palms bearing fruits at <1 year

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Molecular Breeding and Marker Assisted Selection to get Palms with Desired Traits

INCREASE OIL YIELD

These Desired Traits will give the Palm Oil Industry a Competitive Edge

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2. Developing Sustainable Plantations

To produce Low Carbon or Carbon Neutral Palm Products

Plantations of the Future must be fully Sustainable, Traceable & Carbon Neutral

Sustainably Driven Plantation

Team

Engagement• Communities• NGOs• Other Stakeholders

Conservation• Minimal water usage• Efficient energy usage• Sustain HCV, HCS,

Biodiversity• Renewable Energy• Balanced Eco-system

between Oil Palm, Forest & Communities

Zero Discharge• Pristine rivers/

streams• Minimal GHG

emissions

Enriching• Soil Fertility• Organic fertilizers• Microbes• Balance C:N ratios• Minimal spraying

Compliance• To Government/ RSPO/

Other Environmental mandatories

• No New Peat Developments

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Preserving Natural Habitats/ Wildlife in our Plantations

Zero Burning Replanting Technique Eco-Diversity

Conserving Water Area within Estates

Integrated Pest Management (IPM)

Rehabilitation of Orang Utanhabitat in Sabah

2. Developing Sustainable Plantations

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3. Becoming Industry 4.0 Plantation

Plantations of the Future

Lessen dependency on Labour

Transform our Plantations into a Hi-tech and more attractive place to work for the Younger Generation and the locals

Integrating new breakthrough technologies and Innovation offers vast opportunities to the Oil Palm Industry – Advanced Mechanization, Automation and Digital Technologies

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3. Becoming Industry 4.0 Plantation

Industry 4.0 Mills & Refineries refers to what we commonly call “Smart Factories” – use of computers and robotics connected remotely to IT System

Effective Process Monitoring & Achieve Higher Productivity

Efficient Decentralized Decision Making

Eliminate human need to do routine and repetitive works

Digital Technology Advancement, Artificial Intelligence (AI) and Modern Trends will eventually replace 50-60% of Jobs by 2030

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4. Scaling High Value-Adding Palm ProductsOil Palm is a Gift to MankindVersatile Usages for Food & Non-Food

Cheese Analogue

Creamer

Cooking oil

MargarineSource of

pro Vitamin A & E

Non-dairy food

products

Industrial frying fats

Ice cream

Vegetable ghee

Filled milk

Shortening

Confectionery fats

Food

Food Non-Food

Oleochemical

Biodiesel

Renewables –Biochemical/

Biomass

Bio-Chemicals

Base Oils

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4. Scaling High Value-Adding Palm ProductsImmense Health Benefits of Palm OilA healthier, high-carotene & trans-fat free alternative

Carotene & Lycopene

Source: MPOC

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4. Scaling High Value-Adding Palm Products

Specialty Products

Bio-LubricantsFood & Non-Food

Segment

Green Products

Sustainable & Traceable

Agro-Chemicals

Bio-Chemicals

Value-AddingLow Carbon/

Carbon Neutral Footprint

Mitigate Health Issues: 3-MCPD & GE

Consumer Confidence

High Value Oleochemicals

Food Safety & Quality

Trusted Products

Total Solutions Provider

Surfactants

Diacids

Customer Sophistication

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5. Human Capital DynamicsIndustry Branding and Employer Branding are critical to attract and retain plantation workforce

Advanced Technology

Industry Branding

Employer Branding -Attractive

Remuneration & Benefits

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Transform our Plantations to be high-tech and attractive to the younger generation

Plantation workforce must be upskilled, re-skilled and multi-skilled to remain relevant in the next 100 years

Breeding new generation of planters to take the Industry to the next 100 years

Employer branding is equally as important as industry branding

The world will change – the plantation industry must be agile enough to adapt to the changes

The resilience of the Planters of today and the brilliance of the next generation will decide the legacy into the next 100 years

5. Human Capital Dynamics

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6. Creating the Malaysian Brand of Palm Oil

The Industry needs to work towards creating a Malaysian brand of Palm Oil as the Preferred Global Choice

The Sustainability standards of our Plantation Industry must be impeccable and beyond doubt

The Entire Malaysian Palm Oil must be Certified and Traceable

Malaysia is already on track in building good reputation for its industry

Malaysia pioneered many Oil Palm best practices that are Internationally recognized

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6. Creating the Malaysian Brand of Palm Oil

Time to be more aggressive with our communications using Internet/ Social Media

Innovative communication strategies to transform/shape global perception

Broader communication on the Facts and Goodness of Palm Oil must reach out to consumers and the younger generation at schools, universities etc.

Enhance the Global Image of Palm Oil through the Council of Palm Oil Producing Countries (Malaysia, Indonesia, Thailand, Papua New Guinea, Nigeria, Colombia, etc.)

Food Manufacturing Companies/ FMCGs that have been using Palm Oil for decades must also promote Malaysian Palm Oil, like Ferrero in Europe recently

Ultimately, one global sustainability standard for All Edible Oils to avoid discrimination against Palm Oil

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Edison Awards 2017 – Sime Darby Plantation

First Malaysian company in Asean to win an Edison Award: This sort of Global Credentials is what the Palm Oil industry needs to

rebrand itself It showcases the advanced development of Malaysian R&D in the field

of Genome Science

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6. Creating the Malaysian Brand of Palm OilMalaysian Palm Oil to be 100% Certified and Traceable

Council of Palm Oil Producing Countries (CPOPC) to enhance Image at the Regional and Global levels

Malaysian Palm Oil Certification Council

Malaysia 100%

Sustainable Palm Oil

To focus on smallholder certification

Roundtable on Sustainable

Palm Oil

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Planters must know and Preach the Great Facts of Oil Palm

Green cover for 97% of the total oil palm areas

The oil palm industry is a net sink (Remover of

CO2)

Oil Palm plantations are capable of removing as much CO2 as tropical

forests

Source: MPOC, The New Straits Times, MPOB, Oil World, Palm Oil Action Group Australia, Oil World 2015/16

Oil Palm is the most efficient oilseed crop in the world

~37% of Global Vegetable

Oil Production

Almost 10x higher yielding

than the other oilseeds

6 to 8 MT/Ha of oil yields

can be achieved by more efficient Oil Palm producers

0.37

0.53

0.69

4.14

Soybean

Sunflower

Rapeseed

Oil Palm

Oil Yield (MT/Ha)

Oil Palm accounts for:

0.3% of Total World

Agricultural Land(18 mil Ha vs 5 bil Ha)

6% of Global Oilseed

Harvested Area (18 mil Ha vs 274 mil Ha)

18

120

33

25

78

274

Oil Palm

Soybean

Rapeseed

Sunflower

Others

Total

Global Oilseed Harvested Area

(mil Ha)

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“The future cannot be predicted, but futures

can be invented”

Dennis Gabor (1963), Nobel Prize winner for the invention of Holography

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In Conclusion

To Surge Forward in the Next 100 years, the Malaysian Palm Oil Industry MUST…

Continue to take the Leadership:

Achieve Superior Oil Yields

Transform into a High-tech and Digital Industry 4.0

Renowned Globally for its Impeccable Sustainability and Quality

Be the Preferred Global Palm Oil Brand

Dynamic Plantation Human Capital

Business Cannot Be As Usual as the next 100 years journey has started

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Thank You