This was stressed by Senen Bacani, former agriculture secretary and chair of the Filipinas Palm Oil industries Inc., at the recently concluded 11th Mindanao Business Conference held here in this city.
He explained that as in most businesses, the overall effort to develop the industry will have to be private-sector led, with the government providing the necessary support.
"This would mean that palm oil industry’s players must sit together and draft an overall industry development plan for the next several years with the corresponding strategies on how to implement it," added Bacani.
At present, palm oil accounts 25 percent or 22 million metric tons (MT) of the world’s total vegetable oil supply, next to soy beans oil. Coconut oil on the other hand only accounts four percent of the total.
The world’s two biggest palm oil producers are Malaysia and Indonesia with total planted area exceeding three million and two million hectares, respectively. In the Philippines, only less than 20,000 hectares are currently planted to oil palms. More than 300,00 hectares of land in Mindanao have been identified by the Southern Philippines Development Authority (SPDA) as possible areas for palm oil production.
Bacani said that in the plan implementation, industry stakeholders must consider the validation at the ground level, and should address concerns such as soil suitability, climate, necessary infrastructure and the availability of financing schemes.
Another factor he identified as vital to the industry’s growth is the whole chain from seed to shelf. Industry players must have access to good seeds, particularly the more recently developed higher-yielding varieties.
He added that good and compatible partners as well as excellent management and efficient labor would result to the effective implementation of integral business plans.
"Judgment calls must be made as to the presence of a common interest between the existing communities and interested investors," he said, adding that a key component is to ascertain long-term sustainability.
Bacani stressed that although suitable lands may exist, project proponents must consider the possibility that these lands may have already been occupied by communities that need to be organized and mobilized.
"In cases such as these, a more proactive option is to work with the community in discussing the whole objective of the project both from their standpoint, as well as that of the project proponents," he suggested.
In addition, Bacani also identified the need for equity financing from both local and foreign investors as a necessary step in the industry’s expansion. He said that a substantial investment must be infused in the industry, especially that oil palm is a long-gestating crop, which bears fruits three years after planting.
"The project payout is long, but reasonably attractive. Currently, only 33 percent of the country’s palm oil consumption is produced locally," he said. "In order to produce the country’s total domestic requirement by 2010, we need at lest 70,000 hectares of palm oil-producing farms."
He explained that in the next three to four years, the country needs to plant an additional 50,000 hectares, besides replanting a significant number of the existing hectarage which was planted about 20 years ago.
A desirable food crop with a wide variety of household and industrial uses, oil palm requires lesser production cost compared to coconut oil. Although it is only placed second to soy beans in terms of world vegetable oil supply, the industry has huge potential to become the leading vegetable oil in the world.
Market opportunities for oil palm exist both domestically and internationally. Domestic demand for palm oil is projected to increase by five percent annually from 1995 to 2015, and may reach 82,000 MT by 2000. By 2010, the country’s total demand is expected to reach about 134,500 MT, and about 171,700 MT by 2015.
Bacani said that industry players have to expand their current plantations and out-grower farms to increase their production to meet the growing demand of the domestic market, and eventually penetrate the industry’s export market.
"Great opportunities exist for the expansion of the palm oil industry, and I feel that Mindanao has the capacity to be competitive," he added. "We need however to fully realize what it takes to do it, and how to address the existing constrains."– (MEDCo-GEM)