An Insight into Palm Oil's Refinery Sector During COVID-19 Pandemic


Mohamad Ismail Abu Bakar - Executive Director, Manufacturing Development (Resource) Of Malaysian Investment Development Authority (MIDA)

Having served in MIDA since 1996 in various leadership positions, he is currently the Executive Director for Manufacturing Development (Resource), responsible to oversee three (3) Divisions, namely:

  • Chemical and Advanced Material

  • Life Sciences & Medical Technology

  • Food Technology & Resource-Based Industries

OTHER CONTRIBUTIONS IN VARIOUS POSITIONS HELD

Mr. Mohamad Ismail is also passionate in sharing about Malaysia and the vast investment opportunities in the country that investors can leverage upon to expand and grow their businesses. He served two terms overseas, heading MIDA’s international office in Dubai as Director during the period of 2008 to 2011, after serving as Assistant Director at MIDA Chicago (2001-2006). Notably, he was responsible to set the ground work and open the MIDA Dubai office, as well as actively scouting, attracting and facilitating investments from regions under his care.

AWARDS

Excellence Service Award 2000


1. Briefly explained on how MIDA assists the refinery sector of the Palm Oil Industry in maintaining a sustainable growth?

In Malaysia, the government together with large and small palm oil producers are working hard to protect national resources from wildlife to forest and their livelihoods. The midstream and downstream sectors of the Palm Oil Industry in Malaysia need to further strengthen its current on-going good public and private partnership.


Companies need to fully support the government initiatives such as the Malaysian Sustainable Palm Oil (MSPO) certification program. To date, refineries lead the certification of the palm oil processing facilities in Malaysia with almost 90% of the refineries already MSPO certified. MIDA will continue to reach out to the companies for inputs and feedback on new or changes to current regulations and policies to be introduced and continues to provide assistance and facilitation.


MIDA is an investment promotion agency, the pre-eminent preferred investment destination, Malaysia’s cutting-edge, dynamic and pioneering force in opening pathways to new frontiers around the globe including to build dynamic and sustainable investment ecosystems.


MIDA evaluates the following applications for projects in the manufacturing sector and selected services sub-sectors:

  • Manufacturing licenses

  • Tax incentives

  • Expatriate posts

  • Duty exemption on raw materials and components

  • Duty exemption on machinery and equipment for the agricultural sector and any selected services sectors

  • Regional establishments



2. Do share with us on MIDA's approach in helping companies in the Palm Biomass Sector.

As the world’s second largest producer and largest exporter of palm oil, this is an opportunity for Malaysia to capture. However, it will require significant coordination and cooperation among multiple stakeholders. The development of partnerships is critical for mobilising the biomass and the government has introduced incentives and strategies to encourage the development as a result of this National Biomass Strategy.


MIDA continues strengthening its delivery system for the ease of doing business for investors.


MIDA also support the biomass company by granting companies a Manufacturing Licence under the Industrial Coordination Act 1975 (ICA 1975) and various grants such Domestic Investment Strategic Fund (including DISF Industry4WRD), Intervention Fund and Smart Automation Grant.


3. Does the recent import ban by the United States affect the Refinery Sector?

In terms of trade, Malaysia Palm Oil Industry does not significantly impact by the import ban as United States is not the major importer of Malaysian palm oil whereby Malaysia’s major importers of palm oil are China, India and Netherlands.


In 2020, Malaysia exported over 540,000 metric ton of palm oil to the United States, reduced by 0.3% from 2019. Of the total, 5% of Malaysia’s palm oil is for the United States market. However, the import ban could prove to be devastating for the long-term good image of the Malaysian Palm Oil Industry especially when the US Customs and Border Protection took a drastic punitive action based on unsubstantiated allegation by an NGO.


The unwillingness by the American agency and the NGO to engage on a civil discussion to confirm the issue and allow the relevant parties to work on rectification programs have given the impact to this industry in general.


4. COVID-19 has caused devastating consequences to the Palm Oil Industry. How does the downstream sectors affected by this situation? What are MIDA's approaches in helping the companies that are struggling due to this situation?

The pandemic may impact global markets, disrupt supply chains and economies, while also triggering a global recession that could also impact the supply and demand of the palm oil worldwide. As food product, palm oil generally has the resilience to ride out the pandemic especially when countries reopen their economy, recover from lockdowns and restock their food supplies. However, the movement restrictions on labour, has impacted the upstream sector directly where it has seen reduction in productivity of crude palm oil and creating a ripple effect on the downstream sector.


A public-private smart partnership is a form of collaboration to further develop and enhance the upstream sector and reduce the labour-intensive agricultural process for plantation sector. The downstream of palm oil sector are depending on the supply of raw material from the upstream sector. Therefore, it is important to ensure a sustainable supply of raw material for the palm oil based production.


In the short term, the government can assist by keeping crude palm oil in the country, ensuring and maintaining the supply of value added processing in the Malaysian palm oil downstream sector. MIDA has been actively involved in proposing and recommending to government through our Malaysia’s annual National budget and in several Stimulus Packages that were recently announced such as PRIHATIN and PENJANA to mitigate the impact of COVID-19.


For instance, the recent stimulus packages have included MIDA’s proposals such as the enhancement of Domestic Investment Strategic Fund (DISF), the establishment of Project Acceleration and Coordination Unit (PACU) which is tasked to provide end-to-end facilitation for projects approved by the National Committee on Investment and PACU@MIDA is part of the government’s initiative that can revitalise the economy and bring benefits to stakeholders, the Relocation Incentive to encourage foreign manufacturing companies to relocate to Malaysia, Fast Track Approval for Manufacturing Licence (ML) and Smart Automation Grant (SAG).


5. Could you elaborate more on the government incentives which is the Industry4WRD Domestic Investment Strategic Fund (DISF) for palm oil players? How does it benefit the companies that have undergone the Industry4WRD Readiness Assessment, especially for the downstream value chain?

MIDA encourage the Malaysian palm oil industry to apply for the Industry4WRD Domestic Investment Strategic Fund (DISF) especially in the downstream value chain such as oleochemicals, food-based products and phytonutrients (supplements). Industry4WRD DISF has been introduced in Budget 2019 to assist companies that have undergone the Industry4WRD Readiness Assessment programme to migrate to Industry Revolution 4.0 (IR4.0). The assessment is to assess their capabilities and readiness in IR4.0 technologies.

Company must adopt the IR4.0 technology pillars big data analytics, cloud computing, augmented reality, cyber security, artificial intelligence, additive manufacturing, system integration, simulation internet of things (IoT), autonomous robots, advanced materials. It will also benefit companies to identify the gaps and areas of improvement for Industry 4.0 adoption as well as opportunities for productivity improvement and growth and develop feasible strategies and plans to perform outcome-based intervention projects.



The grants are for modernization/upgrading facilities & equipment, research and development activities, training and obtaining international standards and certifications.


6. What is your advice to the palm oil players with the current economic situation caused by the pandemic?

The palm oil players are urged to adapt the new norm and new business model driven by the COVID-19 scenario after experiencing a slowdown in exports and prices due to the pandemic. The key to survival is keeping operating costs down and able to manage the supply well. Strictly complied with the SOP recommended by the KKM/ Health Ministry. To provide safe and proper accommodation for the foreign worker to avoid the infection.

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