The frst focus area is the expansion of existing upstream activities, which is expected to generate RM44.8 billion of GNI by 2020. This growth will be driven by two major factors: expansion of Malaysian plantations abroad and organic growth in yield levels.
Malaysian companies currently hold an estimated 1.3 million hectares of palm oil plantations abroad, including over 1 million hectares in Indonesia. As acreage expansion in Malaysia is slowing down (3.3 percent yearly from 2000 to 2009 versus 2.5 percent expected from 2010 to 2020) due to the scarcity of arable land, Malaysian companies are expected to invest more aggressively in plantations abroad. By 2020, Malaysian plantations will have an additional 2 million hectares in Indonesia, other parts of Southeast Asia and Western Africa. This will translate into an additional GNI contribution of RM17.6 billion by 2020 and will require a total private investment of RM17.6 billion over the next 10 years.
Organic growth in yield levels will be the key to drive upstream developments. Planting material will improve due to wider utilisation of quality clonal material, hybrid seeds, bi-clonal and semi-clonal seeds and better crop recovery through marginal improvement in collecting practices. As a result, plantations and organised smallholders will gradually increase their productivity. This will generate an additional GNI contribution of RM27.2 billion by 2020. Hence, the total GNI expected contribution from this business opportunity in 2020 is RM44.8 billion.
Malaysia is a major global basic oleochemical player, producing 2.8 million tonnes of the total annual global production of 12.2 million tonnes. Growth in the non-food segment will be driven by the expansion of basic oleochemicals. Palm feedstock availability, lower operating costs and increasing regional demand are expected to further shift production to Southeast Asia in the future. The food segment, though much smaller, will expand due to rising consumer demand for packaged foods. The funding requirement for this business opportunity is RM46.9 billion, which will come entirely from the private sector. The downstream investment plans of leading companies will generate an incremental GNI contribution of RM11.2 billion by 2020 while creating an additional 26,500 jobs.
There are 25 biodiesel plants in the country with a total capacity of 2.6 million tonnes. However, current production is a mere 228,000 tonnes, almost all of which is exported. There is negligible local consumption, as the production cost of biodiesel is much higher than the retail diesel pump price; a Government subsidy of 19.6 sen per litre is needed to compensate the producers in order for them to break even. Globally, countries are taking active steps to implement mandatory biodiesel usage, driven by Government incentives ranging from RM1.20 to RM2.50 per litre. The incremental GNI for this opportunity is expected to come from the introduction of mandatory 5 percent biodiesel blend with petroleum diesel (B5) usage in Malaysia from 2011, an expected further increase to 10 percent biodiesel blend with petroleum diesel (B10) and export growth.
This business opportunity will translate into an additional GNI of RM1.6 billion by 2020 and create an additional 2,100 jobs. Apart from the economic benefts, this opportunity will further bolster Malaysia's commitment to reduce greenhouse gas emissions in the coming decade