This article first appeared in The Edge Financial Daily on March 7, 2018

KUALA LUMPUR: Malaysia should focus on other markets instead of focusing too much on the European Union (EU) market as the bloc moves to back a ban on using palm oil to make biofuels from 2021, said Felda Global Ventures Holdings Bhd (FGV) group president and chief executive officer Datuk Zakaria Arshad.

Malaysia is the world’s second-biggest palm oil producer after Indonesia, and the two countries together account for nearly 90% of global output.

Zakaria said while Europe is a big palm oil export destination, FGV’s exposure to the European market is only about 2% of its total revenue.

FGV is not dependent on a single market, he noted, adding that the group plans to expand into new markets and new products, hence, spreading out its risks.

“The EU should have a proper discussion [with palm oil players] on its environmental concerns,” he told reporters on the sidelines of the 29th Palm and Lauric Oils Conference and Exhibition here yesterday.

Zakaria believes that the EU ban on palm oil in biofuels is more for commercial reasons, that is, to protect the bloc’s own industry rather than for environmental reasons.

He is also of the view that the impact of India’s move to raise its palm oil import tax to the highest in more than a decade will be “temporary” on FGV.

“We are looking to focus on other countries such as Pakistan, Myanmar and China,” he said.

He added that the group is now growing its presence and market share in Pakistan and Myanmar.

Zakaria noted that FGV has a lot of “potential” in Pakistan, explaining that the group has a refinery there, and it is among the biggest exporters to Pakistan.

It has been five years since FGV penetrated Pakistan, and the market now contributes about 20% to 30% of its total revenue — making it one of FGV’s major customers.

Moving forward, Zakaria said the group plans to produce downstream products there.

Meanwhile, Reuters yesterday reported that FGV is looking to new markets as traditional customers India and Europe take steps to curb purchases.

The group is planning to build palm oil refineries in Myanmar, the Philippines and Cambodia in the next two years, Zakaria told Reuters in an interview.

“We want to spread our sales to various countries, looking at new markets which are looking for additional crude palm oil and olein supply,” he said.

Peanut oil supplies have not been able to keep pace with growing demand in Myanmar, Zakaria said, meaning there is scope to boost palm oil sales there.

The Philippines, which traditionally uses coconut oil, is facing tight supplies of the product as coconut water becomes popular with some health-conscious consumers.

“There is [also] scope to meet growing demand in Pakistan where we have a refinery,” Zakaria said on the sidelines of an industry event here.

FGV’s production of fresh fruit bunches of palm oil is expected to rise 15% in 2018 from a year ago, Zakaria said.

“We are looking at a much better crop this year,” he added. “We have new areas that are starting production and we have sorted out other issues such as labour shortages, and the weather has improved.”

Two thirds of palm oil produced at FGV comes from small-scale farmers across Malaysia, reported Reuters.

FGV shares closed down one sen or 0.53% at RM1.89 yesterday, bringing a market capitalisation of RM6.9 billion.