The government's initiatives in Budget 2025, which includes tax incentives and replanting support, provide a significant boost to the competitiveness of the palm oil industry.
One of the key highlights is the increase in the windfall profit levy threshold from RM3,000 to RM3,150 per tonne in Peninsular Malaysia and from RM3,500 to RM3,650 per tonne in Sabah and Sarawak.
While the increase is modest, it is seen as a positive step in alleviating rising production costs in the palm oil sector, allowing plantation companies to operate more efficiently.
This adjustment is expected to help businesses, particularly in facing the challenges of the highly competitive global vegetable oil market.
The increased threshold provides companies with the opportunity to plan long-term investments, particularly in the replanting of aging palm trees, which will significantly enhance productivity in the future.
The government’s balanced approach highlights its commitment to supporting the palm oil sector’s sustainability while providing room for companies to thrive.
In addition, the government’s extension of replanting incentives for small-scale palm oil farmers to use high-quality seeds reflects a proactive effort to recognise the vital contribution of these smallholders.
The allocation of RM100mil is expected to benefit over 1,500 smallholders, covering 5,900 hectares of land. This initiative will encourage smallholders to replace less productive palm trees, thereby improving their yields and long-term income.
The announcement of RM65mil to counter negative perceptions of palm oil internationally, particularly in the European Union, is a strategic move to bolster Malaysia's palm oil market.
This initiative will not only strengthen anti-palm oil campaigns but also address misconceptions about palm oil, promoting sustainability through the Malaysian Sustainable Palm Oil (MSPO) certification.
The MSPO certification plays a crucial role in enhancing the reputation of Malaysian palm oil, both locally and internationally, by aligning the industry with international sustainability standards.
MPOB also recognises the need to allocate these funds to empower independent smallholders through the Sustainable Palm Oil Cluster (SPOC) approach.
This initiative provides smallholders with advisory services from MPOB on sustainable practices, ensuring that smallholders play a significant role in Malaysia's palm oil supply chain.
Furthermore, the government's provision of automation tax incentives and the increase of the minimum wage to RM1,700 per month are expected to attract more local workers to the plantation sector.
The automation tax incentive will encourage palm oil companies to adopt modern technologies such as drones and artificial intelligence (AI), which will enhance productivity and reduce dependence on foreign labor.
The increase in the minimum wage is a positive step that will boost the income of workers involved in the palm oil industry's supply chain.
The introduction of automation and more competitive wages is expected to strengthen the overall competitiveness of Malaysia’s palm oil industry.
Datuk Dr Ahmad Parveez Ghulam Kadir is the Malaysian Palm Oil Board director general.
