Palm Oil Sector Research Articles

Malaysian Sustainable Palm Oil (MSPO) Certification Progress for Independent Smallholders in Malaysia

Oil palm sector is one of the major contributors to the Gross Domestic Product (GDP) in Malaysia. In 2019, with oil palm area of 5.90 million hectares, exports of oil palm have contributed RM64.84 billion to the country’s income. Indirectly, it helps the economic growth and socioeconomic of independent smallholders which occupy over 16% of total oil palm planted area in Malaysia. Despite the significant contribution to the economy, Malaysian palm oil industries has been heavily pressurized by the western communities for causing environmental problems such as deforestation and loss of biodiversity. Hence, the mandatory implementation of Malaysian Sustainable Palm Oil (MSPO) starting 1st January 2020 is important for the palm oil industries to ensure their commitment towards sustainability, including smallholders. Malaysian Palm Oil Board (MPOB), a government agency has been tasked to assist independent smallholders in implementing MSPO certification. As of 31st May 2020, 24.3% of independent smallholders with 239,692.34 hectares of oil palm areas have been certified with MSPO. Therefore, implementation of MSPO among smallholders provides competitive advantages for Malaysian palm oil and promotes Malaysian sustainable product worldwide.

Developing Palm Oil Inventory Control System Using Ms Excel Macro

The palm oil sector is just one of the popular sectors in Malaysia that offer one of the highest exports to Malaysia's economy. This study handles the research study of inventory control for Malaysian palm oil plantation. The existing inventory control cannot be running smoothly when the inventory are managed in different user interface systems which is by utilizing manual inventory control like Microsoft Excel and handwriting documents. Data collection was gathered with the targeted respondents, they are core members of the management team who have a great experience as well as understanding of their inventory system. In order to make PSS inventory control much easier as well as organized, an inventory application system is developed utilizing MS Excel Macro. The outcomes of this research study are a computerized supply control system that beneficial, crucial, and also much better substitute for a hand-operated administration system and quick handling.

Pengaruh Return On Assets, Debt To Equity Ratio, Proporsi Dewan Komisaris Independen Dan Ukuran Perusahaan Terhadap Tax Avoidance

Tax Avoidance has its own uniqueness because one side of tax avoidance is permissible, but on the other hand tax avoidance is undesirable because it will harm state revenues. (Judi and Setiyono, 2012). Ten years ago Indonesia had an illegal flow of money of Rp2,254 trillion, this was due to the practice of tax evasion and tax avoidance that occurred in the palm oil sector which cost the country Rp.45.9 trillion (Republika article, 2015). This study aims to find empirical evidence about the effect of retrun on assets, debt to equity ratio, the proportion of independent commissioners and company size on tax avoidance. The sample in this study were 255 company data by determining the sample using a purposive sampling technique and obtained a sample of 51 companies. Data analysis method used in this research is multiple linear regression. The results of this study indicate that retrun on assets and firm size affect tax avoidance. Debt to equity ratio and the proportion of independent board of commissioners have no effect on tax avoidance.

Conflict management of smallholders palm oil plantation: Sustainable business perspective

The palm oil sector development can be a driven factor for conflict in some areas. Smallholders are significant stakeholders that affect the palm oil sector’s condition and development, including conflict conditions and management. Therefore, conflict management of smallholders palm oil is considered necessary to sustainable business. This paper has investigated the conflict management concept of smallholder palm oil plantation using a sustainable business perspective. Most of the conflict between the company and smallholders happens due to obscure land ownership and negative externalities. However, to prevent the conflict’s border impact, the company should have an appropriate method to manage their conflict. Even though the local community does not use violence during the conflict against the company, conflicts may still negatively affect the trust and legitimacy of local communities toward companies. Therefore, we argue that socialization and mediation approaches are successful methods for conflict management. We also argue that integrating social and environmental issues into the core strategies of the company’s decision-making process is necessary because conflict is one of the factors used to make sound business and investment decision-making. This study found that conflict management can likely encourage business investment in the company and reduce the company’s operational risks and costs.

Oil palm cultivation in the Americas: review of the social, economic and environmental conditions of its expansion

In the Americas, the palm oil sector has been gaining importance in the last 20 years. Although in 2018 the region only accounted for 7.1% of global palm oil production, it is one of the largest suitable areas for oil palm cultivation. We conducted a literature review on how the sector developed and how its development influenced private and public actors in their choice among three categories of arrangements between oil palm growers and palm oil extraction units. We grouped cases reported in the literature in three categories: corporate models, contract farming, and growers’ organizations. The two latter categories emerged in response to the call for better inclusion of growers in the value chain, for local development, and for sustainable production; they now represent almost 30% of production in the region. All the parties involved are pushing for more sustainable production. National governments intend to regulate production, and private companies are engaging in certification and fair partnerships with producers of fruit bunches. However, there are still many negative impacts on the environment, on local populations, and on biodiversity. Thus, although the Americas appear to be on the way to being leaders of sustainability in the palm oil sector, challenges remain.

Implementation of Four Terminal Fruit Battery With Charge Switching

Palm oil sector is considered one of main economical contributions in countries such a Malaysia where approximately 6.1% of their Gross Domestic Product (GDP) is contributed. Low Oil Extraction Rate (OER) from poor quality fresh fruit bunches have led to a decrease the oil palm production. The traditional method of using human naked eye to inspect the Fresh Fruit Bunches (FFB) during reception process is one of common methods that is still being practiced which eventually would lead to inaccuracy in grading and harvesting. This paper presents a new approach to identify the maturity of oil palm fruit using fruit-based maturity sensor and the electronic circuit. The study utilizes multiple terminals to evaluate the sensitivity of the sensor by analyzing the relation between the load voltage and the moisture content in the oil palm fruit. The sensitivity of the sensor increased by three-fold when four terminal fruit battery was used compared to single terminals with 47.61% for the moisture range of 50-80% value. This proposed approach significantly improved the accuracy in grading the oil palm fruit which is the most common challenge posed during the reception process.

The SPOTT index: A proof-of-concept measure for tracking public disclosure in the palm oil industry

The production of palm oil has considerable implications for tropical biodiversity. Increasing the environmental, social and governance (ESG) transparency and disclosure of the industry will contribute towards sustainable consumption and production practices. Here, we present a method for producing an index to measure changes in ESG disclosure in the palm oil sector over time based on data collected on SPOTT (Sustainability Policy Transparency Toolkit). The SPOTT Index is based on the number of points scored by a company during an annual assessment, and the number of companies that were included in that assessment time period. The SPOTT Index shows that ESG disclosure of palm oil companies measured improved between 2014 and 2018. Although we demonstrate proof of concept based on a limited number of companies, continued growth of SPOTT will enable the production of a powerful metric in ESG disclosure beyond palm oil and also serve to incentivise sustainable production and consumption in the sector.

Financing Commodities and Human Rights: The Case of ABN AMRO in the Palm Oil Sector

Financing Commodities and Human Rights: The Case of ABN AMRO in the Palm Oil Sector

New evidence regarding the effects of contract farming on agricultural labor use

AbstractContractual agreements between smallholder farmers and agribusiness companies have gained in importance in many developing countries. While productivity and income effects of contracting in the small farm sector were analyzed in many previous studies, labor market and employment effects are not yet well understood. This is an important research gap, especially against the background of continued population growth and structural transformation. Here, we investigate the effects of two types of contractual agreements between large international processing companies and smallholder farmers on agricultural labor use, household labor allocation, and hired labor demand in Ghana's palm oil sector. We use cross‐sectional survey data and a willingness‐to‐pay approach to control for unobserved heterogeneity between farmers with and without contracts. We find that agricultural labor intensity is substantially reduced through the contracts, because contracting in Ghana is associated with the adoption of labor‐saving procedures and technologies. Simple marketing contracts lead to reallocation of the saved household labor to off‐farm employment, whereas resource‐providing contracts lead to a stronger reallocation of labor within the farming enterprise. Household labor is more affected by labor savings than hired labor.

A review of the financial costs and benefits of the Roundtable on Sustainable Palm Oil certification: Implications for future research

In light of growing social and transnational activism against palm oil, governmental, non-government and private sector organizations have begun to advocate a package of sustainable management practices through the Roundtable on Sustainable Palm Oil (RSPO) standard. Since its adoption involves voluntary compliance, understanding the financial costs and benefits is critical. This study reviews the existing literature to identify the financial outcomes associated with RSPO certification. Seventeen analyses qualified. However, only three were considered robust: two revealed positive returns, one negative. While the quality of past research has limited our understanding of the profitability issue, it has provided insights into issues such as incentive and knowledge deficiencies. Comparative research using a standard data template and analytical method is recommended. Given that the standard modifies management practices and that business dynamics affect financial outcomes, it is concluded that research efforts will have to be better tailored for local management.

Implementing Ethical Recruitment of Migrant Workers: Evidence from the Palm Oil Sector in Malaysia

Growing allegation of irregularities in the conduct of migrant workers’ recruitment drives global effort to eliminate unethical practices in the migration industry. As part of the international value chain, palm oil companies in Malaysia are expected to implement ethical recruitment practices. This study is an attempt to assess the employers’ commitment and practices in implementing ethical recruitment in Malaysia. Deriving from four palm oil mills (employers) and further validated through a survey conducted against 92 Nepalese workers – this study argues that while employers have committed to cover certain costs of their migrant workers’ recruitment, they lack a clear policy commitment, due diligence and monitoring against the labour recruiters. Consequently, the labour recruiters (including the intermediaries) mainly in Nepal have imposed another set of recruitment costs which already covered by the employers in Malaysia. Alarmingly, the Nepalese workers have paid even a higher cost of recruitment than the cost borne by the employers. For ethical recruitment to be effectively implemented, the employers’ monetary commitment to cover the cost of their workers’ recruitment must be complemented with efforts to engage and monitor the conduct of the labour recruiters in migrant workers’ origin country.

Conceptual Development of Automated Harvester for Tall Oil Palm Tree

Innovation and invention in field mechanization for oil palm sector has created a variety of advancement in technology. The change in oil palm operation to mechanization will overcome the problem of labour shortage occurrence in oil palm sector. The problem occurs in harvesting tall oil palm is the height of oil palm that causes difficulty to cut the fresh fruit bunch by using manual labour. Moreover, the use of automated harvester also will make the harvesting operation easier without the requirement of skilled labour and ensuring labour safety. The automated harvester has advantages and disadvantages that need to be improved in meeting the oil palm requirement. This study overviews the mechanization that are used in harvesting tall oil palm. This research project has resulted in the development of high technology mechanization based on previously developed machine for harvesting fresh fruit bunches (FFB) at 10 meter and above of oil palm age tress. However, the previous developed machines cannot be accepted in the current and widely practiced Industrial revolution 4.0 (IR4.0). Mechanization approach makes harvesting tall oil palm a reality to overcome the problem that normally occur in oil palm sector due to height of oil palm.

Intangible economic benefit of remote sensing data in Indonesia

Indonesian National Institute of Aeronautics and Space (LAPAN) as a space ecosystem runner government institution of the space agency in Indonesia is mandated by Indonesia space law of 2013 to carry out remote sensing activities that are not only strategic nationally in nature but also charged being benefits economically. This study investigated the intangible economic benefits of remote sensing activities in Indonesia. This research explored qualitatively the advantage of the use of remote sensing information by users obtained from the results of questionnaires and in-depth interviews. The conceptual framework of intangible benefit is based on the information system success model by the De-Lone and McLean Information Value model. The results showed that the quality of remote sensing was good. This can be seen from most responses of user respondents on the Perceived System Quality and Information Quality indicators giving a good rating. The response of the user respondents caused a sense of satisfaction and also caused the use of the system to be more intense. These had a good impact on the performance of respondents, both individually and organizationally. Strengthened by in-depth interviews showed that economically provide benefits with an average of 64% increasing in the efficiency of the performance by Agriculture and Palm Oil sectors. In short, space agency in Indonesia is proven to provide intangible economic benefits on remote sensing activities.

Formal rules and its role in centralised-diffusion systems: A study of small-scale producers of oil palm in Colombia

This paper explores the different pathways of technology diffusion and the resulting impacts on technology adoption that can emerge following a strategy to incorporate vulnerable communities of small-scale producers into traditionally top-down governance agribusiness systems. Building on the Contract Farming Arrangements (CFA) literature, we suggest that despite high levels of top-down control and the mono systems of diffusion that these practices imply, diffusion forms can vary considerably according to the motivations that drive different types of producers and the variances in local governance. We summarise these diffusion forms as a diffusion pathway of governance dictated by dominant change agent control and a diffusion pathway of governance dictated by change agent control and user participation. An important contribution of the paper is to highlight the critical role of formal rules in defining the types of governance for the creation of these different pathways. However, additional factors associated with the participation of smallholders such as attachment to land, engagement in collective action and long-term sustainability visions also introduce variations in these pathways and define the results of technology adoption. The study focuses on the Colombian oil palm sector; a key agribusiness sector targeted by policy makers with a strategy to integrate small-scale farmers into the agribusiness value chain as a means to relieve poverty and reduce levels of rural violence associated with conflicts over land and production of elicit crops.

Beyond four decades of Elaeidobius kamerunicus Faust (Coleoptera: Curculionidae) in the Malaysian oil palm industry: a review

AbstractOil palm (Elaeis guineensis Jacq) is an economically important crop in South-east Asia, especially in Malaysia and Indonesia. In Malaysia, oil palm is the most profitable commodity in the agriculture sector. The future of oil palm lies in obtaining a higher yield that is aligned and directed towards achieving the Sustainable Development Goals (SDG) by 2030. Elaeidobius kamerunicus was introduced into Malaysia during the late 1980s to boost the production of oil palm fruit bunches. Almost 40 years since the introduction of E. kamerunicus, significant improvements have been witnessed in the increase of oil palm yield. Nevertheless, the current concern in the oil palm sector is regarding the decreasing of fruit set that may be affected by E. kamerunicus. The weevil population plays a crucial factor in the pollination of oil palm. Several factors had been reported to reduce the weevil population such as natural enemies, interaction with local insects, pesticides, climate and male inflorescence. These factors have been addressed in this article based on various studies conducted since the first investigation in Cameroon by Syed in 1977. The role of the pollinator in terms of its biology, behaviour and pollination mechanism is also described in this article, together with the population management of the weevils. This review article will provide a summary of the current state of Elaeidobius kamerunicus in Malaysia and other neighbouring oil palm-producing countries.

Sustainable Production Policy Impact on Palm Oil Firms’ Performance: Empirical Analysis from Indonesia

Sustainable production is a key element of sustainable development. The concept was first introduced in the United Nations Rio Earth Summit in 1992 and has become an important item on the management of industries. In conjunction, the government of Indonesia introduced the Indonesian Sustainable Palm Oil (ISPO) policy in 2011 to adhere to international sustainability standards of Sustainable Palm Oil and of reducing emissions from deforestation and forest degradation (REDD+). This study investigates the impact of ISPO policy on palm oil firms’ performance. Using a sample of 409 palm oil firms of the Indonesian palm oil sector for the years 2010 and 2015, we employed a regression discontinuity (RD) with a difference-in-differences approach to explore the effect of the policy on firms’ performance. The RD results show that the introduction of the policy significantly reduced large firms’ profit by IDR 75m (equivalent to USD 5250); the negative effect of the policy increased with firm size. Furthermore, there was a significant reduction in performance for firms that promptly purchased land before the policy’s ban on land expansion. These findings suggest that a punitive sustainable production policy does not sustain the palm oil sector. Nevertheless, large companies that complied with international sustainability measures ahead of the introduction of the domestic policy benefited.

The Challenges of a Biodiesel Implementation Program in Malaysia

The palm biodiesel industry is facing many challenges implementing biodiesel program in Malaysia. This paper addresses the importance of the B10 blend (10% biodiesel, 90% petroleum diesel), global challenges of palm oil import and export, and protective measures for continuous positive growth of the palm oil sector. Palm oil is the backbone of Malaysia’s economy, covering more than 5% of its gross domestic product (GDP). The key steps taken by the Malaysian government for the successful implementation of the B10 program are discussed in this review study. Till now, B5 and B7 biodiesel programs have been successfully implemented in Malaysia. The B10 biodiesel program is attractive because of the developed local palm oil sector. The B10 biodiesel program will increase the use of renewable energy sources, and is expected to increase the productivity of palm oil and biodiesel implementation in the country. Despite successful B5 and B7 programs, Malaysia is facing challenges for the implementation of biodiesel due to fluctuation in crude palm oil prices, low domestic usage of palm oil, and vehicle warranty. The improvement of palm oil and promotion of B10 through targeted agencies in the central region of Malaysia will help to implement the biodiesel program successfully.

Bioenergy potential and technical feasibility assessment of residues from oil palm processing: A case study of Jalapa, Tabasco, Mexico

Bioenergy around the world has proved to be a feasible strategy in terms of environmental, social and economic advantages for the development of our society. Nevertheless, in low- and middle-income countries, wood is the most traditional common biomass resource. At the same time, there is a wide variety of residues from industry processing that can be valorized. In recent years, oil palm production in Mexico has increased significantly; giving rise to the establishment of extraction plants whose process focuses mostly on oil extraction, disregarding solid by-products. The lack of proper management of these residues impacts the environment by piling up without control, open burning or left on the ground. For these reasons, this study aimed to assess the bioenergy potential and identify the most feasible technologies for the sustainable use of oil palm residues. Oil palm residues (fruit fiber, palm kernel shells and empty fruit bunches) were characterized by proximate analysis, calorific value and energy dispersive spectroscopy. A weighted decision matrix was designed to weigh the biomass conversion technologies considering sustainability criteria (environmental, technical, economic and social). As a result, a biomass and energy potential of 33,416 t y−1 and 564.05 TJ y−1 were calculated for Tabasco palm oil sector. Pelletization of residue for thermal applications, followed by anaerobic digestion turned out to be the most feasible technologies for oil palm residue according to the regional context. An opportunity for pellet production from these residues was observed; this could be an alternative to substitute fuel wood and promotes modern bioenergy applications.

Role of trade in natural rubber and palm oil in the composition of GDP in Ivory Coast

Purpose. This paper discusses the effect of natural rubber and palm oil exports on economic growth in Ivory Coast from 1980 to 2016 using World Bank data.
 Methodology / approach. The analysis involved the use of Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests and the ARDL model. 
 Results. This paper discusses the effect of natural rubber and palm oil exports on economic growth in Ivory Coast from 1980 to 2016 using World Bank data. The analysis involved the use of Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests and the ARDL model. The results of the study show that there is a positive and non-significant relationship between natural rubber exports and short-term economic growth. On the other hand, in the long term, they have a positive and significant influence on economic development. However, in the short and long term, palm oil exports have a positive and significant impact on gross domestic product. Finally, labour, investment and market opening have a positive and significant effect on economic growth in the short and long term respectively. Therefore, the Ivorian government needs to promote good agricultural practices and agricultural financing in order to increase the competitiveness of the Hevea –Oil palm sector. 
 Originality / scientific novelty. Previous studies in natural rubber and palm oil focused mainly on its production, constraints to production and processing. However, very few studies on its effects on economic growth have been done so far. This study fills that gap. It expanded the existing literature and the subject of the causal relationship between natural rubber and palm oil exports and economic growth in Ivory Coast and shed light on required efforts to enhance the production and utilization of natural rubber and palm oil at larger scale to bring economic development in Ivory Coast. At last, the ARDL model is used to address this issue.
 Practical value / implications. The generated information will be useful to a number of organizations including: research and development, marketers, producers, policy makers, government and non-governmental organizations to assess their activities and improve their mode of operations, to help better guide the design and implementation of policies and strategies. Finally, knowing the existing relationship between natural rubber and palm oil exports and economic growth, together with impediments faced by natural rubber and palm oil exports, the study provides the various ways to improve these exports by increasing exports capacity of local producers. Research on this issue is too important to inform policymakers regarding resource allocation in the natural rubber and palm oil sector to achieve economic growth.

Upgrading and Global Value Chain 4.0: The Case of Palm Oil Sector in Indonesia

The Industrial Revolution 4.0 promotes digitalization and innovation across many sectors of industries allowing them to thrive by increasing productivity, profitability, product quality and performance. However, the utilization of digital technology especially in agricultural sector, requires effective governance in which must adhere to sustainability practices for upgrading strategies. As one of the main export commodities in Indonesia, the palm oil industry is in alert to face challenges brought by the Industrial Revolution 4.0. This research draws from the latest work of Gerrefi and Lee on Global Value Chain. In the framework of horizontal industrial cluster and vertical global value chain governance, the theory examines how governance and upgrading trajectories produces economic upgrading which correlates to social and environmental upgrading. This research, then scrutinizes the question posed by the role of technology which supports as well as accelerates the upgrading strategies. The GVC analysis of Indonesian palm oil industry will be used as a case study to understand the complexity of how actors operate in every cluster of governance. Economic upgrading is not always associated with social and environmental upgrading. Therefore, a strong linkage between actors suggests that the Industrial Revolution 4.0 is relevant and essential to enhance synergy to cater for economic, social and environmental dimensions in order to harness the potential of sustainable development.