ASEAN: Regional Trends in Economic Integration, Export ... - USITC

productive in climates further from the equator have not yet proved sustainable. 11
Consequently, only Indonesia and Malaysia are able to grow large numbers of oil palm
trees—and they are doing so on ever-larger numbers and sizes of plantations that are
becoming increasingly efficient. 12
Producers in both Indonesia and Malaysia strive to meet growing global demand for palm
oil. 13 Although the oil palm tree was originally brought to Southeast Asia from Africa, 14
Indonesian palm oil production accounts for 46 percent of global production, and
Malaysian production accounts for 41 percent (table 8.1). Thailand is a distant third, with
3 percent, while there are smaller production locations in other countries situated around
the equator, such as Nigeria, Colombia, and Ghana. 15 Because of their size, 16 as well as
their importance to consumers worldwide desiring affordable vegetable oil, the palm oil
industries of Indonesia and Malaysia continue to be the most competitive suppliers
globally and, consequently, attract the largest amounts of intra-ASEAN and foreign direct
investment in palm oil. 17
TABLE 8.1 Palm oil: Production, by ASEAN country and marketing year (1,000 MT)
Country 2005/06 2006/07 2007/08 2008/09 2009/10 (est.)
Indonesia 15,560 16,600 18,000 20,500 21,500
Malaysia 15,485 15,290 17,567 17,259 18,500
Thailand 784 1,170 1,050 1,200 1,300
Philippines 61 60 65 70 70
Source: USDA, FAS, Production, Supply and Distribution database (accessed May 4, 2010).
Note: The marketing year for Indonesia and Malaysia is October to September; for the Philippines
and Thailand, it is January to December.
ASEAN countries produce approximately 90 percent of the global palm oil supply, but
represent less than 9 percent of the world’s population. Accordingly, most ASEAN palm
oil exports (95 percent in 2008) go to non-ASEAN markets. The sheer size of Indonesian
and Malaysian production means that their competition in the global market comes only
from other vegetable oils. However, much of this competition comes from suppliers far
from ASEAN, in places where other vegetable oils have a long-standing commercial
presence or cultivation and marketing advantages. 18 Nevertheless, in ASEAN markets
and markets throughout Asia, palm oil’s low price and abundant supply, as well as its
nearby production location, make it the vegetable oil of choice. 19
11 USITC, hearing transcript, February 3, 2010, 42 (testimony of Rosidah Radzian, Embassy of Malaysia).
12 One industry representative estimated that 80 percent of oil palm plantation land in Indonesia and
Malaysia is owned by large companies. Industry representative, interview by USITC staff, Bangkok,
Thailand, March 17, 2010.
13 Industry representatives, interview by USITC staff, Kuala Lumpur, Malaysia, March 12, 2010.
14 Basiron, “Palm Oil Production through Sustainable Plantations,” 290.
15 One analysis led to the conclusion that it is unlikely that any other palm oil–producing country will
challenge the supplier roles of Indonesia and Malaysia. BACP, “Market Transformation Strategy for Palm
Oil,” 16–17.
16 USITC, hearing transcript, February 3, 2010, 6–7 (testimony of Rosidah Radzian, Embassy of
Malaysia); Basiron, “Palm Oil Production through Sustainable Plantations,” 290; Law, “Can Palm Oil Help
Indonesia’s Poor?”
17 Industry representatives, interview by USITC staff, Jakarta, Indonesia, March 2, 2010; industry
representative, interview by USITC staff, Singapore, March 5, 2010.
18 For example, in the United States, soybean oil and canola oil dominate the U.S. market because
soybeans are grown throughout the United States, providing nearby, ready markets, and Canada produces
large amounts of rapeseed, from which canola oil is produced, and has enlarged its share of the U.S. market
by capitalizing on canola oil’s health benefits and ready supply.
19 See industry representatives, interview by USITC staff, Kuala Lumpur, Malaysia, March 12, 2010.
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