One of the key points that Tan Sri Shahrir Samad, chairman of the Malaysian Palm Oil Board (MPOB) has been pushing for of late has been the formation of cooperatives as a way for palm oil smallholders to have a chance to enjoy a better quality of life.
This is a concept that is new to the plantations sector in Malaysia but it has worked very well in the developed world. Shahril gives the example of Frontera in New Zealand and notes the positive change it had brought to it members by making by making farming more professional, productive and ultimately a commercial success. He hopes that when the cooperative concept takes off here, similar results can be seen.
But first the MPOB has to convince the independent smallholders, of which there are 190,000 individuals who own a collective 700,000 hactares of land, that this change will be beneficial. “As you know, change is not easy especially when it requires people to work together,” he notes adding that his father was once a cooperative officer and he knows how tough it can be to get people to work together.
But work together they must, he feels, especially with their circumstances. He share that most of the independent smallholders in the peninsula are in their 50s with an average age of 55. It is not going to get any younger as the next generation are not taking over. Instead they have become professionals, thus leaving the running of their palm oil plantations to their elderly parents.
However, the average age is younger in Sabah and Sarawak at the mid 40s as independent smallholdings there only started recently.
Perhaps because they are younger and less set in their ways, MPOB has already launched two pilot cooperatives since 2010, one in each state, and is now closely monitoring the results to share and inspire other smallholders around the country on its merits. That is if the cooperative concept proves successful. Early results are good.
This comes mainly from being able to pool smaller pieces of land together, getting some grants to mechanize and introducing better operational and soil management of the cooperative members. The pooling of buying power helps them enjoy lower costs for fertiliser while enjoying higher prices when selling in volume.
A higher level of operational management is also enjoyed. Indeed, Shahril notes that ensuring each smallholder achieves Good Agriculture Practices (GAP) certification is advantageous as MPO gets a good picture of the management capabilities of each smallholder. “We are then able to provide the specific training that they need,” says Shahril.
To incentivize the formation of cooperatives, each region is given a RM190,000 launch grant. “They use part of the money to buy a lorry so that they can collect everyone’s fresh fruit bunches. They have also built a weighing and collection station.
Grouping everyone’s land together in these cooperatives also makes it more feasible to invest in mechanization as the machines are expensive and you don’t want an expensive piece of machinery that is not utilised well,” says Shahril.
Besides the GAP certification, Shahril shares the progress of the Code of Practice certification, which he terms as being a higher level of plantations management.
There are even plans to introduce RSPO (roundtable on sustainable palm oil) standards for the smallholders who join the cooperatives says one of the MPOB officers.
The end game of all these quality certifications is to enhance the productivity of the smallholders. “We are trying to solve all their productivity problems,” share a MPOB official. The idea is to move smallholders from the 15 tonne per ha productivity to 22 tonne by end of 2013 and eventually on to 40 tonnes.
With the government recognising the untapped potential of the independent smallholders, Budget 2013 saw the sector getting RM438 million in funding, specifically for replanting by individual smallholders. Plantations in East Malaysia will be given a RM9,000 grant per hectare and for those in the peninsula, it is RM7,500 per ha.
It is a large sum of money but as a MPOB executive says, “In palm oil, every RM1,000 the government invests can potentially bring in RM10,000.” The 190,000 smallholders will be hoping so.