Malaysia and Oil Palm

Oil Palm Tree

The single crop can literally lift a developing country out of poverty all by itself. The most famous example of this is of course Malaysia, the world's largest palm oil producer. In the early years after independence from Britain, the country was still very much an underdeveloped, poor nation, with per capita incomes of less than US$ 400 per year (in 2005 dollar terms).

But today, Malaysia has become one of the strongest Asian economies, with continuous growth and a current per capita GDP of over US$ 11,000. GDP incomes grew 31% in the sixties, and an amazing 358% in the seventies led primarily by export-oriented industries. Palm oil contributed in the sense that the crop became the centre-piece of agricultural reforms included in the so-called Second Malaysia Plan (1971-1975), which turned the country into an export-driven economy. Palm oil production was increased massively as the result of the vast program. Today in Malaysia, palm oil brings export earnings worth US$ 6.2 billion, only trailing crude oil exports. But compared to crude oil, palm plantations create considerably more jobs, currently employing around 14% of the countries entire workforce. Around half of all palm oil is still produced by smallholders, that is, by individual farming families. In short, the Malaysian economy and society as a whole benefits immensely from the African palm.

Given these numbers, it is not difficult to understand why many developing countries are looking into replicating Malaysia's success story. With Peak Oil around the corner, and continuously rising energy prices, the temptation to massively use one's land to cultivate the energy crop is strong.

Source: The Guardian - 28/04/2009