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SOPPOA wish list for Budget 2020 to enhance and sustain Oil Palm Industry in Sarawak

Wednesday, 9 October 2019

With the highly anticipated announcement of the new budget for 2020, the Sarawak Oil Palm Plantation Owners Association (SOPPOA) has compiled a wish list for the Government to consider which would greatly assist the Palm Oil Industry in Sarawak.

  1. To extend accumulated business losses and unutilized capital allowances from the proposed 7 to 14 years for oil palm plantation companies operating in Sarawak. Based on MPOB (Malaysian Palm Oil Board) statistics, average yields in Sarawak are comparatively lower to the oil palm producing areas in peninsula and Sabah and production cost are also relatively higher here. Extending the accumulated business losses and unutilized capital allowances to 14 years in this high capital investment industry will enable plantation companies operating in Sarawak to remain competitive in the industry.

  2. More other Government incentives for methane gas capture or avoidance like biogas plant for renewable energy to reduce carbon footprint of CPO production and to enhance its marketability. Palm oil mills operating in Sarawak need to adhere to one of the directives for palm oil mills to be green, methane gas capture is mandatory for new palm oil mills license in Sarawak. Unlike the grid line supply in peninsula and Sabah, the captured gas from mills in Sarawak have no uptake for conversion to energy for the grid line here; the gas will have to be burned off with no income generation. Incentives for gas capture have to be provided for mills to comply with the directive as otherwise, the expensive exercise will only make the palm oil industry in Sarawak even less competitive and a longer period to break even.

  3. To consider duty free import for all categories if agricultural machines for plantation use. With escalating cost for labor in the Palm Oil industry, more companies are resorting to the use of machineries where possible to reduce cost of labor and increase productivity. It is most urgent to provide duty-free imports of machineries that are to be imported into the country for use in the palm oil industry, especially in the estates which will increase efficiency and also reduce labor. Currently, the Customs Department and Ministry of Finance are still taxing field machineries for use in palm oil industry which will not encourage companies to venture into mechanization and to continue to rely on foreign labors.

  4. Incentives, tax or otherwise for downstream investments in the palm oil related industries in Sarawak. Total planted area in Sarawak has reached over 1.5 million hectares, making the state the largest single area for oil palm planting in Malaysia. It is expected that crude palm oil (CPO), palm kernel oil (PKO) production and related by products will increase in Sarawak in the coming years. To reduce dependency on export of CPO, PKO, incentives for setting up processing plants using CPO, PKO in Sarawak will attract foreign investors. It is timely that more generous incentives be provided to investors expressing to set up processing plants in Sarawak to make use of the high stock of CPO, PKO available and the vast land and cheaper hydro power electricity supply in well located industrial sites.

  5. Setting up of m Oil Industrial Cluster (POIC) in Sarawak. To encourage investments in more downstream activities related to the palm oil industry in Sarawak, there is a need to have the Palm Oil Industrial Cluster (POIC) set up as this will provide the necessary oleochemicals and related products from the industry for other applications in various spin-off industries. With the cluster in place, services and supply link industries will converge on the area to provide the necessary services and logistics for the cluster industries around the POIC. Apart from the current excellent port facilities, there will be new jobs creations for the locals.

  6. With the completion of the Pan Borneo Highway expected within the next five years, the government has to also consider the accessibility of feeder roads to the highway. Currently the feeder roads to the main trunk roads urgently need upgrading works to enhance connectivity and mobility of heavier vehicles. This is much needed for movement of palm products and raw materials like fertilizers, building materials needed for the plantations. It is timely that well maintained and accessible feeder roads are upgraded from these rural settings to provide the ideal environment to encourage the opening up of lands in such rural settings for development purposes and to bring amenities and other facilities to thousands of rural people in the state.

  7. To consider setting up a Plantation Academy in Sarawak and customized for the needs for the plantation sector in order to maintain a constant and sustainable supply of plantations professionals to meet the demand of the expanded industry. Outsourcing from outside Sarawak is now more difficult as they are fewer professionals available and competitions from neighboring countries and logistics issues for expatriated families.

  8. Request MPOB to set up a Research Centre with proper laboratories in Sarawak to cater to the needs of research and developments in the State and especially in the marketability of CPO and its increasing demands on sustainability practices like MCPD and GE threshold parameters. This will enable the plantations in Sarawak to keep pace with sustainable development in areas of research as Sarawak is a sizeable state when compared to peninsula with different sets of local soil types, weather conditions, terrains and issues. The Centre with its new facilities will complement the current existing research and development activities in peninsula and Sabah.