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Oil palm a lucrative crop for Indonesia, Malaysia

Published on Jun 26, 2013 8:22 AM
 
Firefighters in Riau battling the flames on Sunday. Less land is needed to produce palm oil than other vegetable oil crops, but firms and farmers often use slash-and-burn methods to clear the land. -- PHOTO: AGENCE FRANCE-PRESS

Palm oil is the liquid gold of South-east Asia, accounting for billions of dollars in the economies of Malaysia and Indonesia - as well as the livelihoods of millions of people there.

The two countries together account for some 85per cent of global production, and this contributed about $42.3billion to their economies last year, going by the average price of US$750 (S$960) a tonne. This was estimated by Dr Dodo Thampapillai, an economist at the Lee Kuan Yew School of Public Policy.

Some 4.5 million people in the two nations earn a living from the crop, said World Wide Fund for Nature Singapore (WWF).

The labels of many products show how ubiquitous palm oil is - it can be found in everything from ice-cream and chocolate to soap and shampoo.

 "It is almost impossible to avoid palm oil," said Ms Khor Yu Leng, a visiting research fellow at the Institute of Southeast Asian Studies who specialises in agribusiness research. "It is everywhere."

Palm oil has come under scrutiny after an Indonesian Forestry Ministry official accused Malaysian and Singapore palm oil companies there of being responsible for the fires in Sumatra.

But substituting it with another oil crop may not be a solution.

Compared to other vegetable oil crops such as sunflower, soyabean and rapeseed, palm oil requires less than half the land to produce the same amount of oil, say experts.

This means production costs and the eventual price will be lower than alternatives, Ms Khor noted. Palm oil also has health benefits, as it does not need to be chemically processed and has no transfat, she said.

Substituting palm oil with other oils may thus create "similar,

if not even larger, environmental and social problems", WWF said.

"The issue here is not around the usage of palm oil, but around the way it is produced today," it stressed.

Unsustainable production could involve the indiscriminate clearing of rainforests, said Dr Thampapillai.

Ms Khor said sustainable practices should be encouraged, although they carry a "slight premium" as they need to comply with global protocols. The WWF said this premium could be as little as 1 per cent.

Forests and oil palm plantations with less-usable crop may be cleared using heavy machinery such as bulldozers. But errant companies and farmers tend to use the slash-and-burn method, which some believe improves soil fertility.

This involves chopping down trees, piling up dead wood and leaves, and razing the heap.

When this is done on highly flammable peat land, the fires can spread great distances underground and make fires difficult to extinguish, said the Roundtable on Sustainable Palm Oil, a non-profit body promoting sustainable oil palm farming.

The WWF said: "To find a long-term solution, a multi-stakeholder method must be employed, beyond governmental rule and regulation."

waltsim@sph.com.sg

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