Speech at the Launch of Sime Darby Genomics Sdn Bhd

By Tuesday May 12th, 2009 No Comments

ON 12TH MAY 2009 (TUESDAY), AT 3.00 PM


Assalamualaikum Warahmatullahi Wabarakatuh dan Salam Sejahtera

Y.A.Bhg Tun Musa Hitam;
Chairman Sime Darby Berhad

Y.Bhg. Dato’ Sri Zubir Murshid;
President and Managing Director of Sime Darby

Your excellencies

Distinguished guests

Ladies and gentlemen,

1. First of all, I would like to thank Sime Darby for inviting me to launch their discovery today. From a financial and economic standpoint, we are currently living through the most harrowing period in the history of the global financial markets. In fact, within the context of what we are announcing here today, the financial events of the past year have been characterized by one significant feature: the extreme volatility in global financial asset prices, in particular commodity prices.

2. Extreme movements in the prices of key commodities such as oil and crude palm oil were key drivers in influencing financial asset prices and eventually, the real economy. Exactly a year ago, crude oil prices peaked at USD 144 and market experts were expecting crude oil prices to rise to USD 200. What we eventually saw was oil prices declining to a low of about USD 30 in a matter of months. Similarly, CPO prices reached a peak of RM4,400 before falling to RM1,200 within a short space of time.

3. Nevertheless, we are beginning to see some green shoots of recovery in the global economy, as a China led recovery is driving the revival in electronic and commodity exports. Indeed, even as global macro economic conditions are only barely stabilising, commodity prices have already begun to increase. Crude oil price are already approaching USD 60 and CPO prices are hovering in the RM2,400 level. This increase has been driven by expectations of rising global demand for commodities while production remains weak or lags behind.

4. So commodity prices are again exerting its influence on the outlook of the global economy and perhaps will continue to do so for the foreseeable future. As such, the issues and debates surrounding the sustainable production of commodities as well as the moral dilemma of food versus fuel remains at the center of any discussion on commodities and its impact on our daily lives. And today, we are witnessing a crucial step in contributing towards alleviating some of these concerns.

Ladies and gentleman

5. Malaysia is fortunate because we have a planned development strategy that has fostered and augmented our diversified economy. We are blessed with natural resources such as oil and natural gas but we have enhanced what nature has given us with the type of oil that we can grow – palm oil.

6. Palm oil is important to Malaysia. Export earnings of oil palm products rose to record RM65.2 billion in 2008 from RM45.17 billion the previous year. The industry provides employment to more than half a million people and livelihood to an estimated one million people. In Malaysia we have 270,000 smallholders involved in the industry, other than the mid and large planters such as Sime Darby. Last year, when crude palm oil prices reached all time highs of more than RM4,000 a tonne, the average income of the Felda settlers increased to RM3,489 per month. This compares to the income levels of RM1,930 per month in 2007. However, when prices fell in November 2008 to about RM1,400 a tonne, incomes of the smallholders retreated to just about RM750 per month as at end-2008.

7. This smallholder is important to us because prior to the implementation of programmes such as the Felda scheme, these farmers were poor and landless. Today they are self-sufficient and contributing to the economy of the country. Our task is to ensure that they are able to generate a steady and sustainable income as opposed to one that peaks and troughs with global demand – beyond their control and ours.

8. Another downside of volatile commodity prices is volatile food prices. While a planter may celebrate record prices, the rest of the world will pay the price for it – literally. For instance, last year’s record prices caused much hardship at many levels, not just here but around the world. The disappearance of edible oils for non-traditional uses has wrecked havoc with demand and supply chains. Thus, I believe price stability and steady growth are far preferable to sharp swings even if they may be on an upward trajectory.

9. That is why today’s announcement by Sime Darby is to my mind, truly a milestone for the industry. While the government will strive to ensure that the income levels of smallholders continues to be enhanced, we need to do so without opening up vast new tracts of plantations whilst sacrificing our priceless virgin rainforests. Our challenge therefore was to find ways to achieve growth without compromising our environment.

10. And now a Malaysian company has the means to raise palm oil yields for existing plantations. From Dato’ Azhar’s presentation, I gather that it will be possible for us to raise yields so high, food supply needs never be an issue again. And we will be able to feed the need for alternative fuels as well with increased palm oil production. What I hope this means is that we can expect more price stability as we will be able to control palm oil supply to fulfill all sorts of new demand.

11. According to data from MPOB, Malaysia’s production of CPO reached a record 17.73 million tonnes in 2008, an increase of 1.91 million tonnes or 12.1% from last year. This was mainly due to the recovery in fresh fruit bunches (FFB) yields from biological stress last year. The national average FFB yield increased by 6% to a record 20.18 tonnes/hectare as against 19.03 tonnes per hectare achieved in 2007. In addition, the expansion in matured areas by 151,534 hectares coupled with the improvement in the national average oil extraction rate (OER) to 20.21% also contributed to higher CPO production. The average oil yield per hectare also posted a 6.5% year-on-year increase to 4.08 tonnes/hectare, the highest yield since 1987. The production of crude palm kernel oil (CPKO) also rose by 11.7% to 2.13 million tonnes.

12. While this indicates that there is growth, we can see that it is still minimal. In other words, the industry has reached stagnation in productivity (oil yield per hectare) and thus, a paradigm shift, through biotechnology, is required to increase productivity, efficient processing and the production of novel high value products. It is therefore, critical that the industry consistently adopts innovative techniques and sustainable practices, through the availability of new knowledge and technology, to ensure that oil palm cultivation remains in harmony with the environment.

Ladies and gentlemen,

13. I am very encouraged to see the rapid growth of the Malaysian Biotechnology industry since the launch of the National Biotechnology Policy in 2005. As of today, 104 companies have been awarded the BioNexus Status by Malaysian Biotechnology Corporation (BiotechCorp) with a total approved investment of RM1.37 billion.

14. The Malaysian Biotechnology industry has attracted both domestic driven investment as well as foreign direct investment. Malaysia has managed to attract investors from the United Kingdom, France, Germany, Italy, Belgium, USA, India, China, Japan, Hong Kong, Singapore, Thailand, Australia and New Zealand – in all key focus areas such as agriculture biotechnology, healthcare biotechnology and industrial biotechnology. On the commercial front, the robustness of Biotechnology business has led to the listing of 2 BioNexus companies, one on MESDAQ and the other on the London Stock Exchange’s Alternative Investment Market. I was also informed that one BioNexus company is currently undertaking a reverse takeover of a listed Australian Biotechnology company. These early successes reflect the strong potential of Biotechnology as an engine of economic growth

Ladies & gentlemen,

15. Allow me to congratulate Sime Darby on this breakthrough discovery. You have discovered new frontiers for the industry and for us as a country. We will all be able to surge forward with what Sime Darby has achieved. I am sure the other industry players who are here today will be equally gratified by what you have achieved.

Thank you.

Leave a Reply