Operations at a Palm Oil Plantation in Malaysia
KUALA LUMPUR: The European Union Deforestation Regulation (EUDR) which is scheduled to commence from Dec 30, 2024, is anticipated to have a wide-ranging impact on the various industries in Malaysia moving forward.
According to industry players, the EUDR has significant implications upon Malaysian players operating within the palm oil and rubber supply chains.
Apart from the raw material, the new regulations are seen to impact key strategic export oriented downstream industries in the country, such as rubber gloves, palm oil and tyre manufacturing.
The regulation’s objective is to ensure the European Union (EU) does not import produce that contributes to deforestation or forest degradation – it will need businesses or exporters to be EUDR-compliant once it is in force.
It also necessitates more extensive checks on the various industries and company supply chains since exporters to the EU will need to prove the land the produce is cultivated on has not been subject to deforestation or forest degradation since Dec 31, 2020.
According to the Malaysian Rubber Council (MRC), the EUDR is expected to have a far wider ranging impact upon the rubber industry, given most of the rubber produced in the country are by smallholders.
“Rubber is mostly produced by smallholders by some 75% to 80%, unlike palm oil in Malaysia.
“So it will be a little bit difficult since these are mostly managed by individuals.
“When we compare our rubber producing industry with the Ivory Coast, Indonesia or Thailand – most of the rubber plantations in these countries are owned by larger organisations and as such monitoring is easier,” MRC’s chief executive officer Muhammad Eizaaz Muhammad Redzuan told StarBiz.
Muhammad Eizaaz said MRC is liaising with various stakeholders in the EU to consult and see what must be done to comply with these new incoming regulations.
“I believe the larger rubber-related companies already have their own master plan on how to move forward with regards to the new EUDR.
“At MRC, we also advocate for the industry to step-up their sustainability practices game,” he added.
Meanwhile, the director-general of Malaysian Palm Oil Board (MPOB) Datuk Dr Ahmad Parveez Ghulam Kadir said the EUDR represents a “significant” trade barrier that will increase administrative burden and production costs.
“Such challenges, emanating from protectionist stances by stakeholders including other vegetable oil-producing countries are not new.
“They stem from the competitive edge palm oil holds due to its nutritional value, versatile use and cost-effectiveness compared to other vegetable oils,” Ahmad Parveez said.
“The Plantation and Commodities Ministry as well as MPOB fully understand the concerns regarding the impact of the EUDR regulations on our commodity exports, particularly palm products to the EU and its disproportionate effect on smallholders and the small and medium exporters,” he added.
He said the government has been actively negotiating and refining the implementation approach of the EUDR through the joint committee involving Malaysia, Indonesia and the EU, which was established last year.
“The first meeting of this committee took place in Aug 2023, in Jakarta, Indonesia that was followed by a second meeting in February this year.
“We are committed to continuing these negotiations with the EU to safeguard the interests of the Malaysian oil palm industry. Sustainability remains a paramount concern, especially in light of the EUDR,” Ahmad Parveez said.
“While the regulation poses significant challenges, it also offers a unique opportunity to underscore our commitment to environmental stewardship.
“Through initiatives like the Malaysian Sustainable Palm Oil certification, we are setting high standards for sustainable production, ensuring our practices meet global expectations and opening doors to new markets,” he added.
