[KUALA LUMPUR] The European Union’s (EU) new deforestation rules are likely to have a negative impact on Malaysia’s palm oil exports to the bloc, said Malaysian Deputy Prime Minister Fadillah Yusof at a conference on Tuesday (Mar 7).

According to the latest figures, Malaysia – the world’s second-largest producer of the commodity – exported about 1.5 million tonnes of palm oil worth RM8 billion (S$2.4 billion) to the EU bloc in 2022.

This export amount was 10.5 per cent lower than the previous year, and Fadillah – who is also Plantation and Commodities Minister – expects exports to the EU to fall even further once the European Union Deforestation-free Regulation (EUDR) is implemented.

“The implementation of EUDR will create a negative image of Malaysian palm oil, which will lead to a reduction in exports to the EU, and possibly globally,” he said in a keynote speech at the annual Palm and Lauric Oil Price Outlook Conference and Exhibition.

The EU in November 2021 proposed the EUDR as part of the European Green Deal. The regulation seeks to ban the imports of palm oil and five other commodities grown on land that is subject to deforestation or forest degradation.

“We are not taking the issue lightly. The government and the industry are working hand in hand to counter this negative campaign and unfair narrative, which we view as nothing less than an attempt at creating another trade barrier for palm oil,” said Fadillah.

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The minister’s comments came just weeks after Prime Minister Anwar Ibrahim, during a press conference with German President Frank-Walter Steinmeier, called for the EUDR to be reviewed because of the complex challenges that Malaysia’s palm oil industry are set to face.

At the conference, senior executives of Malaysia’s large palm oil producers said that they are on the hunt for better and younger talent and more technology solutions to boost their competitiveness amid declining yields and a more challenging business environment.

Lee Oi Hian, the chief executive of Kuala Lumpur Kepong, said that the rosy days for plantation firms are long over, as the industry is witnessing a decline in crude palm oil (CPO) yield due to a severe labour shortage and the problem of ageing trees.

According to the latest available data, Malaysia’s CPO yield fell to 3.1 tonnes per hectare in 2022 – the lowest level in 24 years.

“It’s time to wake up and move away from the comfort zone,” he said, noting that companies should focus on research and development, as this will be critical for the industry’s future.

He added that there is plenty of potential for research on Ganoderma (microbes that can reduce the use of fertilisers), biotechnology applications on palm breeding, as well as solutions to increase the oil extraction rate.

Another senior figure at the conference, Sime Darby Plantation group managing director Mohamad Helmy Othman Basha, spoke of the need to recruit talent with different expertise or academic backgrounds.

“To get them in, first we need to change the prevailing perception that plantation is a ‘3D’ industry (dirty, dangerous and difficult). Young talents will not go into the plantation estate to do harvesting, but they will be happy to fly a drone or operate the robotic arm to do the harvesting,” he said.

Sime Darby Plantation, the largest oil palm plantation company in Malaysia, has set a target of achieving a fully local workforce by 2027. He added that the aim is to implement a monthly minimum wage of RM3,000, which would be twice Malaysia’s current minimum wage of RM1,500.

Speaking to The Business Times on the sidelines of the event, Mohamad Helmy said that some of the automation and drone technologies are being tested at the company’s research centre in Selangor.

“The automation in the harvesting process still needs more time; it might take us about two years,” he said.

Last month, the Malaysian government announced that there will no longer be any new land clearing or deforestation for oil palm plantations in the country.

With such limitations in place, IOI Corporation group managing director and chief executive officer Lee Yeow Chor said that the industry should transform and expand its downstream segments such as personal care, infant and sports nutrition products.

He suggested that companies offer “multi-oil” solutions by working with other oilseed producers to expand their market reach.

“By going global and expanding downstream, it could help the company to move away from relying on a single oil source,” he said.