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Volume 6 Number 2/2006
Published in September 2006 by the  Malaysian Palm Oil Board

TABLE OF CONTENTS

The Elasticity of Foreign Demand for Malaysian Palm Oil
by Faizah Shariff; Ayat K Ab Rahman and Mohd Nasir Amiruddin
Full text [PDF 47KB] Abstract

Indonesian Oil Palm Competitiveness: PT Socfindo as a Private Sector Example
by Baskett, J P C and Jacquemard, J-C H
Full text [PDF 182KB] Abstract

Cosmetics and Personal Care Products - Recent Trends in the Asia Pacific Markets
by Masataka Fukuda
Full text [PDF 86KB] Abstract

Blending of Palm Biomass and Coal: An Alternative Fuel for Power Generation in Malaysia
by A B Nasrin; Ma, A N; Chow, M C; H Hamdan and Choo, Y M
Full text [PDF 56KB] Abstract

Labour Constraints in the Plantation Industry
by Daud Amatzin
Full text [PDF 86KB] Abstract


 
Comments & Feedbacks:
Oil Palm Industry Economic Journal is published twice a year
in September and March by the
Malaysian Palm Oil Board (MPOB)
http://mpob.gov.my

Views of writers expressed in this publication are not necessarily those of MPOB.

MPOB welcomes contributions and comments from all individuals and organizations.  Its inclusion is however, the prerogative of the Director-General of MPOB.

Contributions and comments should be addressed to :

Director-General
MPOB
P.O. Box 8073
46781 Kelana Jaya
Selangor
Malaysia

faizah@mpob.gov.my

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This online publication is electronically compiled by Palm Information Centre, MPOB
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ABSTRACT
The Elasticity of Foreign Demand for Malaysian Palm Oil
The price elasticity of export demand is expected to receive considerable attention due to the current economic climate of volatile export markets and prices. The export demand elasticity is used to predict the change in demand for an export for a unit change in its price and to model the behaviour of foreign buyers. This project estimated the elasticity of foreign demand for Malaysian palm oil for the major importing countries - China P R, India, Pakistan, Egypt and South Korea. The error correction mechanism (ECM) method was used for the estimation considering its usefulness in quantifying the short-run and long-run effects of explanatory variables on the dependent variables using timeseries data. It was found that the price of palm oil plays a very significant role in its export; thus, the price needs to be stable and competitive with those of its substitutes, especially soyabean oil. From panel data research, the effect of a unit change in the soyabean oil price is greater on the exports of crude palm oil than the effect of the same change in the palm oil price. This means that both oils are highly substitutable.

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Indonesian Oil Palm Competitiveness: PT Socfindo as a Private Sector Example
PT Socfindo is a long established, foreign owned, plantation company with operations in North Sumatra and Aceh. This paper provides a brief review of the background situation to the Indonesian oil palm industry, whilst noting the continued rapid expansion of this sector. The paper also provides a detailed example of how, over the past 30 years, PT Socfindo has retained its competitive advantage in terms of production costs and profitability through the twin mechanisms of increased productivity (internal factor) and rupiah devaluation (external factor). Provided the continued improvement in productivity of every hectare of planted land can be sustained by progressive improvements in planting materials and agricultural practices, the future prospects of this company remain extremely positive. Therefore, the experience gained by PT Socfindo over this extended period of increasing competition and a declining trend in palm oil commodity prices, could act as an example for the new players to follow in order to sustain the competitiveness of the Indonesian oil palm sector.

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Cosmetics and Personal Care Products - Recent Trends in the Asia Pacific Markets
The cosmetics and personal care product markets of Asia Pacific are growing rapidly. Various players are entering these markets. These markets are the most expanding market among Asia Pacific for the moment. Recent trend of China and ASEAN markets are reported with statistical data of market trend. The largest market of Asia is Japan market. Products of some global players are penetrating into Japanese consumers. Japanese players are fighting against them. Hard competition of this market is reported. There are some product categories in cosmetic and personal care market such as skin care and hair care in general. However, sign of new market trends are observed in more precise product categories. New market trend in skin care field is introduced.

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Blending of Palm Biomass and Coal: An Alternative Fuel for Power Generation in Malaysia
Palm oil mills in Malaysia generate vast amounts of biomass wastes such as empty fruit bunches (EFB), fibre and shell. The mills burn the shell and pressed fibre to generate their own heat and electricity, but the EFB is surplus to its requirements although a legitimate fuel in its own right. With growing environmental consciousness, high petroleum prices and depleting fossil fuels, the palm biomass can be burnt in coalfired generating plants to produce green electricity for the country. How this can be done in Malaysian scenario is discussed.

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Labour Constraints in the Plantation Industry
In the case of modern Malaysian plantation scenario, there is already ample legislation in place to create conducive labour relations environment as well as to enhance industrial and economic growth. Its main functions are: protection of the economic and social interest of workers, assist in enhancing national productivity and in promoting and preserving industrial harmony in the country. It also encourages employers in the private sector to employ disabled persons, promoting activities to facilitate and improve the planting environment so as to enhance the participation of unutilized workforce into the labour market.
Certainly, the quality development of human capital will ensure continued progress for the nation. Hence, employers are duty-bound to invest in training. However, with a population of about 25 million and a vast area under cultivation of tropical crops such as oil palm, rubber, cocoa and paddy covering about 6 million hectares and a thriving manufacturing, construction and services sectors, intense competition to recruit suitable and available local workers is the norm. Today, it is evident that through the process of Malaysianization, the ownership of plantation equity is predominantly under Malaysian hands. Thus, conflicting priorities set by decision-makers, both in public and private sectors at times create a challenging situation as well, which may be one of the reasons discouraging the local population from being attracted to plantation life. Overall, there is a shortage of manpower in the plantation sector.
In order to sustain economic growth of the country, the government has been pragmatic in their approach to fulfill the manpower needs. Thus, employment of guest workers (generally known as foreign workers) from approved source countries were allowed in order to alleviate the shortage of manpower in certain sectors, including the plantation and construction industry. However, with the influx of migrant workers with various background and disposition, many challenges are encountered. There has been some tension between the local community and guest workers. Cases of abuse and mistreatment attracted the media into reporting them as sensational news and may have influenced policy-makers. Policies change frequently, employer’s dependency on guest workers increases with the area under cultivation. Local workers shun the plantation sector in favour of better working environment in and around urban setting. Over reliance on one particular group of guest workers has proved to bring negative impact. Additionally, of late (05/05/05), the Prime Minister (PM) had just outlined that addiction to cheap foreign labour as being one of the three Malaysian few bad habits, If we are not serious about combating this problem, maybe it is time for us to venture into other businesses which is non-labour intensive. The PM also called for employers to invest into the necessary areas in order to become more labour-efficient and adopt high technology.
Despite efforts from both the government and private sectors on automation of the work processes, the nature of work in the oil palm and rubber estates has inherent limitations such as biological and geographical factors. Much R & D work must focus in the area of mechanization especially the harvesting of fresh fruit bunches. Motivation and incentives to promote innovation and automation can be intensified. The employment of special people or inmates from Pusat Serenti, for example, has been tried out by some responsible employers with some degree of success. This effort can be expanded further. The development of the National Occupational Skills Standards (NOSS) for the plantation sector by National Vocational Training Council (MLVK) under the Minister of Human Resources must be implemented. The plantation sector must grow in tandem with the rest of other business activities towards k-economy.
The productivity-linked wage system (PLWS) concept may be in practice but to go forward, can Malayan Agricultural Producers Association (MAPA) and National Union of Plantation Workers (NUPW) come up with alternative wage system rather than one solely based on collective agreement? If both conventional and creative approaches in the manner of employment in the plantation sector have proven unsustainable, perhaps we should learn from our forefathers. Migrant workers were offered Malaysian citizenship then, land ownership by private individuals or through land cooperatives were encouraged. Today, we may not have the luxury of ample land for new planting by individuals but, ownership through shares may be another option.
In the interim, the key is to enforce a clear, consistent and manageable policy on recruitment of guest workers. Adopting a constructive engagement approach such as by direct consultation of all parties involved in recruitment of guest workers rather than a unilateral action by the authorities working in isolation, perhaps can work better. As a last resort, legislation can be formulated to safeguard the interest of all stakeholders by disallowing other urbanized economic sectors such as the services industry from employing guest workers. Remember that we also have about 3.5% unemployment, untapped to consider.

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