Revitalizing the Palm Oil Sector

KUALA LUMPUR: As an initiative to revitalise the palm oil and related

industries, RM297mil will be set up for the enhancement of productivity

by encouraging replanting activity to replace aged trees with high

quality new clones under the Budget 2011.

Besides, a sum of

RM127mil is allocated to support domestic oleo derivatives companies as

well as a sum of RM23.3mil to expand downstream palm oil industries

including production of vitamins.

ECM Libra head of research

Bernard Ching said the RM297mil allocated to encourage replanting

activity by replacing aged trees with high-quality new clones was

generally in line with Pemandu’s suggestion that replanting activities

should be prioritised.

The current replanting back log at the moment amounted to 365,414ha (7.6% of total Malaysia hectarage).

This is the amount of replanting that Pemandu hopes to achieve over the next three years and amounts to some 91,353ha per annum.

He

said the RM297mil budget divided by 91,353ha amounted to an allocation

of RM3,251 per ha, higher than the previous allocation of RM1,000 per ha

of replanting.

“It is not clearly spelt out yet how this

RM297mil will be allocated but nonetheless, it is more generous that

previous replanting allocation of roughly RM50mil for 200,000ha. To

note, replanting costs still stand at roughly RM12,000 per ha,” he said.

On

the oleochemical industry allocation of RM127mil, he viewed minimal

impact to listed plantation players, adding that it would likely help

smaller players to expand further downstream and value add to their

businesses.

An analyst from a local brokerage said the initiative

of setting up the RM297mil fund was positive for the industry but it

would likely benefit the small companies in general.

“This might

benefit those small companies that don’t have access to good clones and

seeds. However, we have to wait for the detail for the allocation in

order to see the impact to the industry,” she said.

She said it was hard to judge whether the RM127mil allocation would be in terms of tax benefits or funds for companies to apply.

However,

she said the RM23.3mil allocation to expand downstream palm oil

industries including production of vitamins might be a research and

development fund for the industry.

Source : The Star

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