Globalization and Palm Oil Production in Malaysia

Subject: Industry
Pages: 11
Words: 3082
Reading time:
14 min
Study level: PhD

Introduction

Today’s dynamic industries have stimulated the need for creativity and innovative capabilities re-emphasizing the realities of globalization. In view of increasing pressure from globalization, one of the terms of interest in our study is international trade. Trade is indeed a major driving force in any economy and critical to economic development. The advent of the export and import era has created opportunities with threats within the very economy. Global supply of fats and oils specifically in the Malaysian region has intensified globalization. In order to provide a better understanding of various issues pertaining globalization, the study was undertaken on palm oil industry in Malaysia.

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The study is divided into five parts; biological, technical, managerial, social-political aspects as well as environmental impacts as theoretical models in attempt to define the relationship between nature and culture as brought about by globalization. It starts by giving an overview of palm oil industry in Malaysia and its key players. These diverse interests and upstream producers and their derivatives are introduced by defining a strong linkage between nature and culture. Their inter-relationships are reflected in the presentation of main palm oil industry. Thus, the reason for this research is to generate more knowledge and improve understanding on aspects of nature and culture on the concept of globalization and its impact on Malaysian palm oil.

Changes within economies as a result of nature and culture as stimulated globalization are continuously reducing operation costs for government and business alike. In this regard, both businesses and governments are realising the advent of export and import era that has created opportunities and threats within their very economies. Creativity and innovative capabilities are major driving force in any economy as utilisation of these virtues is critical to economic development. Trade is virtually important in today’s fast-pace world for the creation of efficient and competitive environment. Being able to import and exports goods using international networks is an important requirement today. This means, a country should be able to communicate with other countries to exchange information and to perform business transactions. Malaysian palm oil production is my primary interest for this study as data collected from various resources gives a comprehensive examination of corporate cultures and offers extensive discussion on the actual role of globalization while observing its inherent benefit.

Background of the Malaysian Palm Oil Industry

Over the last two decades, Malaysia has become centre of central palm oil production in South East Asia contributing about 83% of world palm oil production and second as a major exported of vegetable oil with 60% of world market shares1. The increased demand of palm oil has led to the expansion of transaction volumes increasing pressure for cost-effective and accelerated environmental pollution and degradation. Attempts to produce bio fuels from the tree has furthered forest depletion and contributed to global warming2. In the study of globalization of external imbalances, I intend to investigate the existence of any co-integrating factors between the export and import of oil palm in Malaysia. The relationship between nature and culture was approached via analysis of Oil palm as a major exporter of fats and oils.

World Oils & Fats Production Share
World Oils & Fats Production Share (Oil World-2008).

International trade systems have provided viable means for utilization of excess goods and services to facilitate cross border and inter-organisation transaction. Being the centre of central palm oil production in South East Asia, Malaysia contributes to the 33.58% of world palm oil production as illustrated by the tables below;

Major oils Share in the world production.
Major oils Share in the world production: 2008: 127.8Mn.
Oil Crop Production % of total production Total area
(million ha)
% of total Area
Oil Palm 42.99 33.58 10.50 4.74
Soya bean 36.87 28.80 94.25 42.50
Rapeseed 19.82 15.48 27.15 12.25
Sunflower 10.80 8.52 24.09 10.87

Source: Oil World Jan 30, 2009 and Oil World 2008.

The rapid expansion of globalization has expanded transaction volumes and increased pressure on finding cost-effective methods of production which have In turn increased environmental pollution and degradation. This has however meant that Malaysia is moving from an embryonic, innovative phase into a phase of exponential global growth. Palm oil extensively grown in South-east Asia is estimated to contribute 60% of World market shares ranking it second as a major exported of vegetable oil. Occupying around 3.7 million hectares of palm oil production, Malaysia produces an estimated 30 percent of palm oil1. Being farmed for almost 10 years, numerous studies have flourished on the external imbalances the crop has brought about. In the study of globalization of external imbalances, I intend to investigate the existence of any co-integrating factors between the export and import of the above category3.

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The strong global demand for oils and fats has caused the rapid growth of the oil palm in south-east Asia, leading to the controversies of globalization since statistics present that the plantation covers four million hectares of the country3. According to 2005 statistics, oil palm plantation covers 56% of the country’s forest and woodland covers, yet the major reason for forest depletion and toxic gas emissions from pesticides and herbicides, another compromising relationship between nature and culture. The specific research question that this study aims to address is the relationship between nature and culture towards palm oil production and how their implementation led to greater transaction volume. Thus, the reason for this research was to generate more knowledge and improve understanding aspects of nature and culture on the concept of globalization and its impact on Malaysian palm oil.

Comparison between Malaysia and Other Palm Oil Producers in 2008
Comparison between Malaysia and Other Palm Oil Producers in 2008.

Effects of Globalization on Oil Palm Production in Malaysia

Driven by imperatives of the markets, the theoretical supply demand analysis has increased the need for increases production attacking the persuasive assumption about globalization and depletion of natural resources. It’s currently estimated that Malaysian palm plantation covers about 56% of the country’s forest and woodland covers hence the major reason for forest depletion and toxic gas emissions from pesticides and herbicides and yet another compromising relationship between nature and culture. It has been argued that radiation strongly influences photosynthesis capacity and contributes to humidity hence adverse climatic effects4. Its also been argued that low humidity restricts stomatal opening hence carbon dioxide uptake which could have implications by providing climatic perturbation such as haze events.

As a matter of fact, globalization follows a description of climatic monologue of deforestation. Demonstrating a clear line between nature and culture, Pfieffer argues establishment of large scale plantation and the invasive oil palm species are complete eradication of the native fauna and flora as well as the natural habitants of the native communities3. On the other hand however, FAO and Wood studies demonstrated that reduced use of pesticides has reduced the number of emissions from soil and air hence increasing production 4,5,6.

Impacts of palm oil

The good quality planting materials and agronomic practices have significantly contributed to the high status of Malaysia in the oils and fat markets. Understanding the basic physiological processes of the palm oil and related production and crop challenges are important in determining the relationship between nature and culture. In this regard, production processes of the palm oil and crop challenges are important in determining the relationship between nature and culture7,8.

In another analysis, Zamzuri and his colleagues argue that an estimate of 100 million tissue cultures are planted annually adding more strain to the depleted environment8. Globalization is particularly situated to convey indispensable adjunct of new technologies, factors that essentially focus on the financial or economic bottom line. The relationship between forest destruction and loss of biodiversity with the expansion of the palm oil industry extends our understanding of the relationship between nature and culture. On the other hand however, oil palm has greatly contributed to the economy by;

  • Improved living standards
  • Facilitated infrastructure development

Enhanced skills and technology for oil palm extraction

  • Improved on the managerial skills which are coined to the economic development
  • Provided nutritional qualities of palm oil as healthy component of diet
  • Has vegetable characteristics that provide important components such as vitamin E and caratenoids [Vitamin E is a free radical scavenger]

Conclusively, oil Palm is the most productive oil crop since it’s biologically superior to other seed oils in terms of efficiency in land use and productivity.

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In other studies in relation to nature and culture, Cheng argues that being able to fully exploit resources provided benefits such as;

  • water inefficiencies
  • Minimal attacks by pests and diseases attacks are hence Maximum yield of the oil palm
  • Environmental friendly with respect to land use efficiency and productivity
  • Energy efficiency.

Oil palm has the lowest inputs for pesticides and herbicides as shown in the FAO study6. Wood and Corley also add that only 1% of the palm oil was treated by pesticides annually7. Cheng further adds that emissions to soil, water and air during cultivation and during processing of the oilseeds and palm oil fruits are very minimal and contributes effectively to climate change through effective carbon sequestration5.

A number of studies on environmental reporting have documented an increase on environmental pollution and the concerns on the detrimental effects of the product on the natural environment7. Thematic suggestions on nature and culture reinforce the need for substantial efforts of many fronts in copying with the challenges of increased globalization. Accelerated by globalization and increased production, activities such as hill clearing, open burning, toxic waste dumping are once again detriments of natural environment strain signalling the distance between humanity and nature. As plans are underway to add Malaysia to the world’s biggest oil exporter, the government plans to replace 5600 square miles of rain forest with palm plants, yet another strategy of forest degradation6,7,8. In regulating imports and exports of palm oil, Malaysian government has for this instance introduced the zero burning policy, maintained proper waste management and supplied farmers with correct fertilizer has helped minimised emissions of harmful toxics in the air9. In pursuit of these goals, Malaysia will once again through its governmental legislation generate biogas through effluent ponds rather using the trees and use surplus boiler energy to generate their electricity, activities that are environment friendly.

Palm oil Sustainable Practices

Over the past years, palm oil plantation in Malaysia has expanded immensely as a major source for oils and fats. From the point of nature conservation, the strong influence of exotic species of oil palm reduces native biodiversity given the large size of these monocultures in a former region of mega-diversity. Pfieffer argues that the main drivers for the establishment of invasive oil palm species are the complete eradication of the native fauna and flora during the establishments of plantations and large scale planting of exotic species, major impacts on native communities 6. Based on the current demand of oil palm seeds in Malaysia and other countries, it’s estimated that about 100 million tissue culture are planted annually putting more strain to the depleted environment10. To preserve the environment, intelligent plantation planning should aim at;

  • Establishment of sustainable and stable agro-ecosystem
  • Enhance and protect native biodiversity to guarantee ecosystem services
  • Reduce exotic invaders

Biological features considered critical to high palm oil productivity are included in the perennial and evergreen nature contributing to a high proportion of incoming radiation, while the year-round production of fruit branches and the high partition of total assimilate into harvested product. Good agricultural practices are also mentioned as;

  • Zero burning policy
  • Good water management
  • Maintain riparian reserves
  • Avoid soil compaction
  • Use correct fertilizer
  • Cover crops maintain soil fertility
  • Proper waste management
  • Good management of pruned fronds and empty fruit bunches
  • Use of integrated Pest Management to decrease reliance on harmful chemical pesticides

Negative effects of palm oil production and why the government is restricting exports

Traditionally, companies have been largely driven by three factors; to maintain their competitiveness (quality), cost and delivery (QCD). These factors essentially focus on the financial or economic bottom line. Respond to the environmental challenge by (people, profit and planet) contribute to the relationship between nature and culture hence increased globalization. Globalization has brought about tremendous changes, not only in bringing about huge opportunities, but also important challenges. In several countries, most notably Malaysia, the rapid development of international trade in the palm oil industry has led to increased productivity and higher economic growth. The standards of living are inextricably tied to the quality of the natural environment. As it is becoming increasingly clear just how far-reaching the implications of globalization are far more devastating. The relationship between forest destruction and loss of biodiversity within Malaysia extends our analysis of the growing relationship between nature and culture.

Oil palm in Malaysia provides a case that illustrates how edible oils sector contribute to the forests extraction process. A range of environmental and social economic impacts of expansion have begun to emerge, but little is done to stop forest loss by key actors (the government bodies and financial institutions) 11. On the contrary, forest loss is expected to increase as land scarcity and government initiatives. A number of studies on environmental reporting have documented an increase on environmental pollution and the concerns on the detrimental effects of the product on the natural environment12. These problems include;

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  • Open burning
  • Indiscriminate land
  • Hill clearing
  • Toxic waste dumping has contributed to the detrimental effects of business operations on the natural environment12.

While the expansions of canopies facilitates radiation (crucial importance to yielding), the exploitation of the rapid leaf expansion is said to increases soil moisture and atmospheric humidity. Its also been argued that low humidity restricts stomatal opening hence carbon dioxide uptake which could have implications by providing climatic perturbation such as haze event.

When balancing nature and culture while ensuring increased production Malaysian farmers should;

  • Minimise use of chemicals
  • Adopt integrated pest control management
  • Use of inorganic fertiliser
  • Consider recycling of palm biomass
  • Zero-burning practices on clearance and
  • Soil conservation measures
  • Terracing hilly areas
  • Construction of drains
  • Preservation of natural water courses
  • Use of silt pits and cut fronds across slopes to minimise erosion and runoff
  • Use of waste products

Man has also been able to use beneficial plants such as Cassia cobanensis and Euphorbia heterophylla as a source for parasitoids, to keep populations of oil palm insects pests in balance with nature. The plantation preserves soil moisture since the cultivation requires little tillage encouraging soil oxidation and maintenance of organic matter. On the other hand however, the government plans to (R&D) to minimise the production of green house gases, which will assist in slowing down of climate change.

In his recent letter to the World Bank, Argumedo relatively spoke obscenely about environmental and health issues oil palm has on human beings by stating that ‘serious health concerns and environmental problems from the use of palm oil in food. We are especially concerned that use of palm oil may increase both cardiovascular disease in developing countries and deforestation and biodiversity loss in Southeast Asia……..’13. Another meta-analysis conducted by Clarke and his colleagues added that ‘use of palm oil increases heart disease by raising blood cholesterol levels…’ 14. In this regard, Malaysian government primary responsibility should include implementing new legislation that will limit toxic emissions into the atmosphere.

Conclusion

The strong relationship between forest destruction and loss of biodiversity with the expansion of the oil industry are diverse. Contrary to the opinion that globalization facilitates easier production of goods and services, our essay attacked the persuasive assumption about the increased industrialisation and globalization by exposing the adverse environmental effects it brings about. Research on globalization generates more knowledge and improves understanding on aspects of nature and culture on the concept of globalization and its impact on Malaysian palm oil. Trade is indeed a major driving force in any economy and critical to economic development, but before a country decides to capitalise on it, it should consider the relationship between palm oil and the environmental factors such as biological, technical, managerial, social-political aspects as well as environmental impacts it has had to the locals as well as to the international borders. The increased demand of palm oil that has led to the expansion of transaction volumes increasing pressure for cost-effective and accelerated environmental pollution and degradation should be minimised. In the study of globalization of external imbalances, our investigation on the existence of co-integrating factors between the export and import of oil palm in Malaysia establishes a strong relationship between nature and culture in the production of Oil palm as major as a major exporter of fats and oils.

Being farmed for almost 10 years, numerous studies have flourished on the external imbalances the crop has brought about. In this regard, Malaysia should have by now implemented long term solutions to minimise forest depletion and toxic gas emissions from pesticides and herbicides which compromise relationship between nature and culture. Good quality planting materials and agronomic practices that contribute to the high status should be included in Malaysian long term plans. Understanding the basic physiological processes of the palm oil and related production and crop challenges are important in determining the relationship between nature and culture and implementing long term solutions. In this regard, production processes and crop challenges should be extensively assessed. As plans are underway to add Malaysia to the world’s biggest oil exporter, the government should plan to replace the allocated land for palm plants with rain forest to minimise forest degradation, encourage zero burning policy, maintain proper waste management and supply farmers with correct fertilizer.

In pursuit of these goals, Malaysia will once again through its governmental legislation generate biogas through effluent ponds rather using the trees and use surplus boiler energy to generate their electricity, activities that are environment friendly. Preserving the environment should be conducted by establishing sustainable and stable agro-ecosystem, enhancing and protecting native biodiversity that will guarantee ecosystem services and by reducing exotic invaders. Conclusively, results of this study suggest that the levels of current environmental conservation measures in Malaysia are low. There is need to provide reconcilable agricultural practices in the aspects of environmental conservation when balancing nature and culture while ensuring increased production. Conclusively, globalization is particularly situated to convey indispensable adjunct of new technologies, factors that essentially focus on the financial or economic bottom line. These conclusions are in line with those from the study of Morgan and his colleagues that stated that ‘globalization of the food sector is uniquely constrained by nature and culture: food production requires the transformation of natural entities into edible form while the act of eating itself is a profoundly cultural exercise. In other words, food chains never fully escape ecology and culture…’15.

Reference List

Argumedo, A., Tan, L.,& Noor R, A letter to Mr. Paul Wolfowitz President of World Bank, Washington, DC 20433, 2005.

Cheng, T H, ‘Selling the Green Palm Oil Advantage?’, Report of WWF Malaysia, vol.1, 2002, pp.1-10.

Clarke, R, Frost, C & Collins,R, ‘Dietary lipids and blood cholesterol: quantitative meta-analysis of metabolic ward studies’, Brit Med Journal, vol. 314, 1997, pp.112–7.

FAO, ‘Environment, Sustainability and Trade Linkages for Basic Food Stuffs’, Food and Agriculture Organization of the United Nations, vol.3, 1966, pp. 51.

Henson, IE, ‘Modelling the effects of ‘haze’ on oil palm productivity and Yields’, Journal of Oil Palm Research, vol. 12, 2000, pp.123-134.

Morgan, K, Marsden T, &, Murdoch, J, Worlds of Food: Place, Power and Provenance in the Food Chain, Oxford University Press, Oxford, 2006. [HD9000.5.M675].

MPOB & APOC, ‘Palm oil development and performance in Malaysia’, USITC Washington DC, vol.1, 2010, pp 1-.49.

Pfeiffer, M, Cheng, H & Theus, C L, ‘Exploring arboreal ant community composition and co-occurrence patterns in plantations of oil palm Elaeis guineensis in Borneo and Peninsular Malaysia’, Ecography, vol. 31, 2008, pp. 1-12.

Smith, BG, ‘The effects of soil and atmospheric vapour pressure deficit on stomatal behaviour and photosynthesis in the oil palm’, Journal of Experimental Botany, vol.40, 1989, pp.647-651.

Sulaiman, M, Ahmad, NN, ‘Environmental disclosures in Malaysia Annual reports: A legitimacy theory perspective’, IJCM, vo. 14 , No.1, 2004, pp.1-15.

Wahid, B M,’Oil Palm-Achievements and Potential’, PORIM Occasional paper, No. 40, 1999, pp.1-18.

Wakker, E, Funding Forest Destruction: The Involvement of Dutch Banks in the Financing of Oil Palm Plantations in Indonesia. Amsterdam, Greenpeace Netherlands, 2000.

Wakker, E & Kessler, J J, ‘Forest Conversion and the Edible Oils Sector’, AIDEnvironment, vol. 1, 2000, pp.1-36

Wood, B J & Corley, R H, ‘Recent developments in oil palm agricultural practice. Symposium Proceedings: New Developments in Palm Oil’, PORIM, 1990, pp.1.

Zamzuri, 1, Mohd, AS, Rajanaidu, N & Rohani, O, ‘Commercial feasibility of clonal oil palm planting material production’, PORIM Occasional paper, No. 40, 1999, pp.52.

Footnotes

  1. MPOB & APOC, ‘Palm oil development and performance in Malaysia’, USITC Washington DC, vol.1, 2010, pp 1-.49.
  2. IE Henson, ‘Modelling the effects of ‘haze’ on oil palm productivity and Yields’, Journal of Oil Palm Research, vol. 12, 2000, pp.123-134.
  3. M Pfeiffer, TH Cheng & C L Theus, ‘Exploring arboreal ant community composition and co-occurrence patterns in plantations of oil palm Elaeis guineensis in Borneo and Peninsular Malaysia’, Ecography, vol. 31, 2008, pp. 1-12.
  4. BG Smith, ‘The effects of soil and atmospheric vapour pressure deficit on stomatal behaviour and photosynthesis in the oil palm’, Journal of Experimental Botany, vol.40, 1989, pp.647-651.
  5. Pfeiffe, PP.6.
  6. Ibid, pp.648.
  7. TH Cheng, ‘Selling the Green Palm Oil Advantage?’, Report of WWF Malaysia, vol.1, 2002, pp.3.
  8. FAO, ‘Environment, Sustainability and Trade Linkages for Basic Food Stuffs’, Food and Agriculture Organization of the United Nations, vol.3, 1966, pp. 51.
  9. B J Wood &, R H Corley, ‘Recent developments in oil palm agricultural practice. Symposium Proceedings: New Developments in Palm Oil’, PORIM, 1990, pp.1.
  10. I Zamzuri, AS Mohd, N Rajanaidu,&, O Rohani, ‘Commercial feasibility of clonal oil palm planting material production’, PORIM Occasional paper, No. 40, 1999, pp.52.
  11. Ibid.
  12. Ibid.
  13. Ibid.
  14. B M Wahid,’Oil Palm-Achievements and Potential’, PORIM Occasional paper, No. 40, 1999, pp.1-18.
  15. M Sulaiman & NN Ahmad, ‘Environmental disclosures in Malaysia Annual reports: A legitimacy theory perspective’, IJCM, vo. 14 , No.1, 2004, pp.1-15.
  16. E Wakker, Funding Forest Destruction: The Involvement of Dutch Banks in the Financing of Oil Palm Plantations in Indonesia. Amsterdam, Greenpeace Netherlands, 2000.
  17. E Wakker &, JJ Kessler, ‘Forest Conversion and the Edible Oils Sector’, AIDEnvironment, vol. 1, 2000, pp.1-36.
  18. A Argumedo, L Tan &, R Noor, A letter to Mr. Paul Wolfowitz President of World Bank, Washington, DC 20433, 2005.
  19. R Clarke, C Frost, & R Collins, ‘Dietary lipids and blood cholesterol: quantitative meta-analysis of metabolic ward studies’, Brit Med Journal, vol. 314, 1997, pp.112–7.
  20. K Morgan, T Marsden, &, J Murdoch, Worlds of Food: Place, Power and Provenance in the Food Chain, Oxford University Press, Oxford, 2006, p.8.