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Could Ecotourism Replace the Palm Oil Industry in Malaysia? A Comparative Analysis of Sustainability

Bachelor Thesis 2014 61 Pages

Tourism - Miscellaneous

Excerpt

Outline

List of abbreviations

List of illustrations

List of tables

1. Thesis

2. Exposé

3. Executive Summary

4. Malaysia – Quick Information

5. Significance of palm oil production in Malaysia -
5.1 Oil palm industry
5.1.1 Description
5.1.2 Production
5.1.3 Products
5.1.4 Planting & Processing
5.1.5 Development of the industry
5.1.6 Reasons for high growth
5.2 Challenges
5.2.1 Limited industry growth
5.2.2 Environmental impacts
5.2.3 Socioeconomic impacts
5.3 Sustainable production
5.4 Summary Part 1 & Conclusion Part 1

6. Ecotourism
6.1 Tourism in Malaysia
6.2 Definition of ecotourism
6.3 Current situation & future growth of ecotourism
6.4 Ecotourism in Malaysia
6.4.1 Potential of ecotourism
6.4.2 Challenges
6.5 Target market
6.5.1 Geographic description
6.5.2 Demographic description
6.5.3 Psychographic description
6.6 Malaysia’s competitiveness
6.7 Summary Part 2

7. Sarawak and ecotourism
7.1 Description of the state Sarawak
7.2 Tourism industry in Sarawak
7.3 Socioeconomic impacts of tourism in Sarawak
7.4 SWOT Analysis Sarawak

8. Comparative Analysis & Conclusion

9. Outlook/Guidance

Appendix
Illustrations
Data table
Interviews

Sources (Literature)

Sources (Illustrations)

List of abbreviations

illustration not visible in this excerpt

List of illustrations

Illustration 1: Oil Palm Yield in comparison to other oil-bearing plants

Illustration 2: Oil palm age & yield profile

Illustration 3: Production of crude palm oil in Malaysia – in million tons

Illustration 4: Malaysia: Historical palm oil yield statistics

Illustration 5: Carbon footprint of biofuels

List of tables

Palm Oil Industry - Pros and Cons

Ecotourism - Pros and Cons

SWOT Analysis Sarawak

Comparison of three industry sectors

1. Thesis

The expansion of ecotourism in Malaysia is a viable source of income that would outcompete the oil palm production with regard to ecological, economic and social benefits.

2. Exposé

Malaysia is home to some of the world’s oldest rainforests with a rich biodiversity. However, deforestation of the country’s rainforests is a prevalent issue. One of the main reasons for deforestation besides for logging timber is to make room for oil palm plantations. Palm oil production is a major industry in Malaysia. This industry offers direct employment for about 570,000 people (Sime Darby, 2014) and accounts for three to six percent of the country’s GDP making it the fourth largest contributor to the Malaysian economy (RSPO, 2013). These days Malaysia and Indonesia account for almost 90 % of the global palm oil production with prospective increases (WWF, 2014). Around 40 % (4,85 million hectares) of oil palm plantations of the worldwide (12,2 million hectares) are in Malaysia (MPOB (b), 2011). On these palm oil plantations 17,73 million tons of palm oil and 2.13 tons of palm kernel oil are produced (MPOB (b), 2011), which accumulates to 39 % of the world production (Malaysian Palm Oil Council, 2012). This makes the country the second largest producer after Indonesia, which overtook it since 2006 (MPOB (b), 2011).

Along with the deforestation goes the issue that already endangered species, especially the orangutans, become extinct as their natural habitat gets destroyed. Another issue is that oil palms are planted in huge monocultures all over Malaysia, which is a fatal development from an ecological viewpoint. Prices for palm oil fluctuated in the last 13 years between $ 250 and almost $ 1,300 per ton, but they were profitable in the long run (Sime Darby, 2014). However, forecasts state that prices will decline (United States Department of Agriculture, 2011).

Malaysia is the third most visited country after China and Thailand in the Asia and Pacific region (UNWTO, 2014) ranking it 13th on the world’s top destinations by international tourism receipts in 2012 (UNWTO, 2012). The impact of tourism to the GDP was RM 65,44 billion ($ 19,55 billion) (Tourism Malaysia, 2013) accumulating to 7.2 % of total GDP in 2013 (WTTC, 2014). Malaysia is a destination for nature tourism due to the fact that the country is one of the twelve mega biodiversity countries in the world (ASEAN, 2012) offering a broad range of natural and cultural attractions (Ministry of tourism, 2008). The significance of Malaysia being a nature-based tourism destination is supported by the fact that the country won the “Best Green Destination (World) 2013 award” for the second time in a row (Travel + Leisure – the world’s leading travel and lifestyle magazine, 2013). While precise figures are hard to find, an estimate in 2002 suggested a 10 % share of ecotourism revenues of the overall tourism revenues in Malaysia with a 35 % prospective annual growth of arrivals (WTTC, 2002). This also shows that to the current state, ecotourism in Malaysia is not a developed industry and consequently has potential to be developed.

The question is if ecotourism could be a way to generate sufficient profits as an alternative to palm oil production leading to a better preservation of nature in Borneo. Additionally, ecotourism has the positive attribute to leave tourism expenditures in the local economy (TIES, 2014) and therefore has a positive socioeconomic impact. According to Malaysian forecasts the significance of ecotourism will increase (Ministry of tourism, 2008). By encouraging a sustainable development, ecotourism could serve well to preserve flora and fauna and also generate income for the indigenous populations of Malaysia.

In this thesis it is examined if ecotourism is a viable source of income in Malaysia. Furthermore, the issue arises if this kind of tourism has the potential to be an alternative to the oil palm production in the country. The question is, if ecotourism can protect the environment and also fulfill the principles of sustainability by connecting ecological and social with economic goals.

To examine this case, the current situation of the palm oil production has to be investigated. Afterwards the state of ecotourism in Malaysia will be determined. The results will lead to a comparison of palm oil production versus ecotourism and the benefits of each sector to Malaysia’s ecological, social and economic situation.

3. Executive Summary

This bachelor thesis conducts a systematic comparative analysis of the palm oil industry and ecotourism in Malaysia in order to find out which industry sector would have more potential benefits for the country and if ecotourism has the potential to be an alternative to the palm oil industry. The intention is to find measurable variables to make the two industries comparable resulting in an objective evaluation.

The conclusion is that ecotourism cannot outcompete the economic benefits and the power of the big international palm oil companies that are either private or government-linked and dominate the industry. However, the shift to a more sustainable production is compulsory for future viability. When purchasing sustainable palm oil certificates was taken into account for the current state of the palm oil production, the costs were only slightly higher. Furthermore, CO2 certificates are currently underpriced for conservation to become cost effective. If the government supports a sustainable development of the palm oil industry with corresponding regulations and the key players are educated and encouraged to adopt sustainable standards, the sustainable industry has the potential to become even more profitable than it is to the current state while environmental harm can be reduced and socioeconomic benefits can reach the Malaysian workers.

As long as Malaysia keeps up its policy of protecting 50 % of currently 58 % of its rainforest, the remaining rainforest can be protected by keeping in mind that the highly suitable areas for oil palm plantations are already developed. If further suitable areas should be discovered, they will be developed into palm oil plantations, as the economic benefits are very high. For the remaining areas ecotourism is a viable source of income with vast socioeconomic benefits for the indigenous people and environmental benefits for flora and fauna. Although ecotourism cannot outcompete the palm oil industry, this analysis can serve as model for a sustainable growth for other developing countries.

4. Malaysia – Quick Information

Malaysia is a country in South-East Asia, consisting of a peninsula and an Eastern part which is located on the island of Borneo. The total surface area is 330,803 square kilometers with a population of 28,859 million in 2011 (UN Data, 2014). The country is a federation comprising thirteen states and three federal territories. The states Sabah and Sarawak are on Borneo or East Malaysia. The national currency is Ringgit (RM). More information about the state Sarawak is on page 29 and a map can be found in the appendix on page 44.

5. Significance of palm oil production in Malaysia

5.1 Palm oil industry

The first chapter is supposed to give a better understanding of the palm oil industry by providing a short overview over the sector including the economic significance, the usage for products and planting and processing procedures. Moreover, the development of the palm oil industry and the reasons for high growth are examined in order to complete the list of information.

5.1.1 Oil palm industry - Description

Originally the economically significant oil palm (lat. elaeis guineensis) descends from Central and Western Africa. This tree flourishes in the humid tropics within plus/minus ten degrees of latitude (Moore & Ming, 2008) and develops fruit bunches weighing at least ten (Hartley, 1988) and up to 25 kilograms (Sime Darby, 2014). Each fruit again consists on average of 1,500 and up to 3,000 small individual fruits weighing each between three to thirty grams. They turn to a red-brown color when maturing. These small fruits consist of a hard kernel that is enclosed in a shell, the so-called endocarp, which again is surrounded by a fleshy pulp, the so-called mesocarp (Sime Darby, 2014).

5.1.2 Production

From the crushed mesocarp, an edible orange-red oil is derived which is known as crude palm oil (CPO) with a fat content of 50 to 70 %. From the kernel the clear yellowish crude palm kernel oil (CPKO) is derived which is comparable to coconut oil with a fat content of 40 to 52 %. Both CPO and CPKO can be fractionated into liquid (olein) and solid (stearin) components, which represent the commercial products (Palm Oil Health, 2014). Palm kernel expeller (PKE), which is a waste product from the palm oil production, is mainly used as animal feed and biofuel (WWF (b), 2014).

The high content of the oil of the palm fruits’ mesocarp and kernel with the plant producing the most oil per hectare per year of all oil-bearing plants leads to the economic interest (see Illustration 1). At the same time the advantage of this plant is that the input of working hours, pesticides and fertilizers is quite low (CIFOR, 2009).

Illustration 1: Oil palm yield in comparison to other oil-bearing plants

illustration not visible in this excerpt

Source: MPOB, 2011

The national average cost of production per ha is RM 1,011 ($ 310) with an average rate of return of RM 8,719 ($ 2,675) in 2011 (ERE Consulting Group, 2012). Approximately 130 to 140 oil palms per hectare are planted (Global Palm Oil resources, 2010) of which typically three to seven tons per hectare and up to twelve tons per hectare of palm and palm kernel oil can be harvested. However, in Malaysia the average crop is only about four t/ha consisting of 3.7 t/ha of palm oil and 0.4 to 0.8 t/ha of palm kernel oil (RSPO, 2013).

5.1.3 Products

Global consumption of palm oil was 52,1 million tons in 2012 with the largest consumer being China, followed by the European Union, India and the United States (Sime Darby, 2014). Demand is still increasing globally making it the most important tropical vegetable oil.

Palm oil is the most widely used vegetable oil accounting for 65 % of all vegetable oils traded globally and showing a rising trend as the world’s population increases. In 2020 the use of this vegetable oil is predicted to double (WWF (b), 2014). CPO and CPKO are used in a big number of products in industrialized countries. 80 % of the usage is as edible oil or in food products such as ice cream, pizza dough, margarine, chocolate, cookies, packaged bread, breakfast cereals and instant food items, in pharmaceutics and cosmetics such as lipstick and shampoo, in household products such as candles, soap, waxes, polishes and laundry detergent and in biodiesel as gas, for electricity and heat generation (A-Z Animals (b), 2012). Approximately half of all packed food products sold in supermarkets contain palm oil (WWF, 2014). The rising demand for biofuel led to Malaysia’s and Indonesia’s government regulation of 12 million tons palm oil per year that is allowed to go to the biofuel sector in order to protect the food-related use of palm oil (Moore & Ming, 2008).

5.1.4 Planting & Processing

The time span until the palm seedlings are ready to plant encompasses 100 to 120 days for the seeds to germ and then ten to twelve months of nursery (Ming & Moore, 2008). After another two to three years the oil palm starts to produce fruits with maturity reached after approximately ten years and a decline after 18 years (Global Palm resources (a), 2010; see Illustration 2).

Illustration 2: Oil palm age & yield profile

illustration not visible in this excerpt

Source: USDA, 2012

Then the palm can be harvested for 20 to 30 years (Moore & Ming, 2008) year-round. Depending on the number of dry periods (Global Palm resources (a), 2010) the tree produces between eight to twelve bunches of fruit per year (Sime Darby, 2014).

It is important to process palm oil fruits within 24 hours after harvesting to keep the quality of the extracted CPO. The following steps must be taken during the processing of the oil palm fruits. Firstly, the fruit bunches are sterilized by cooking them under pressurized steam, then threshed in order to loosen the individual fruits out of the fruit bunches. Secondly, the fruits go into the so-called fruit digester in which the fiber is loosened from the nuts. Thirdly, the fruits are pressed, which leaves the so-called press cake behind. The oil extracted in the pressing stage undergoes purification in the fourth step in order to receive CPO. The nuts out of the press cake are cleaned, dried and then cracked in order to receive CPKO. The press cake is all what is left. It is used as animal feed (Global Palm resources (b), 2010).

5.1.5 Development of the industry

The oil palm was introduced in Asia as an ornamental plant. While the cultivation of these palm trees commenced on the Malaysian peninsula in the 1910s (Berger &Martin), the refinement of crude palm oil only started in the 1970s as part of the Malaysian government’s program to industrialize the country (Malaysian Palm Oil Council, 2012). From 1979 to 2010 research and development led to a growth of the Malaysian palm oil production by almost 600 % with an average annual growth of 7 %. As a consequence, Malaysia emerged as the world’s largest producer of palm oil (USDA, 2011). These days the oil palm plantations are still growing, especially in Sarawak and Sabah (RSPO, 2013).

Since 2000 the Malaysian Palm Oil Board is on top of the Malaysian palm oil industry in order to oversee this sector. Big plantation companies that are either private or government-linked and own 60 % of the plantation land dominate the industry. The rest of the industry consists of smallholders (RSPO, 2013).

5.1.6 Reasons for high growth

There are several reasons for the extraordinary fast expansion of the oil palm industry. This industry grew by 385 % over the last 34 years (USDA, 2011), which is equivalent to an annual growth rate of 19 %. This rate is extremely high compared to for example the popular rubber industry in Malaysia with a growth rate of only 3.8 % (Luan, 2013).

The first reason for its quick expansion is the high oil yield of this tree. At the same time the production costs are lower than the ones of other oil-bearing plants (WWF (b), 2014). Furthermore, the states in which the plant is growing supported its expansion with subsidies and other incentives (USDA, 2011). Moreover, the palm oil market is rather independent of its byproducts as they are offered on different markets and are rather small in quantity. Finally, the palm oil industry is mainly focused only on Indonesia and Malaysia, which facilitates the control, the development of the product, the trade and the acquired technologies in relation with palm oil. In 2006 Indonesia overtook Malaysia as the largest producer of palm oil (Malaysian Palm Oil Council, 2012). Together both countries supply almost 90 % of the worldwide palm oil production of which Malaysia contributes 39 % (Malaysian Palm Oil Council, 2012) on about 40 % (4,85 million hectares) of all oil palm plantations worldwide (12,2 million hectares) (MPOB (b), 2011). Palm oil is the fourth largest contributor to the Malaysian economy and therefore a driving force of the agricultural industry in Malaysia. The steady increase of the palm oil production in Malaysia is illustrated below (see Illustration 3).

Illustration 3: Production of crude palm oil in Malaysia – in million tons

Abbildung in dieser Leseprobe nicht enthalten

Source: MPOB, 2011

The compound annual growth rate of crude palm oil from 1975 until 2011 is around 7 %, which shows that the CPO production increased fast and steadily. As a consequence, “production now accounts for 71 % of the national agricultural land bank” (RSPO, 2013).

5.2 Challenges

Next, the challenges with the oil palm production are introduced with a focus on environmental and socioeconomic impacts in order to understand why a sustainable alternative is necessary.

5.2.1 Limited industry growth

The maximum future oil palm area in Malaysia is estimated to be 5,6 mha in size. Consequently, there is only a growth potential of 0.75 mha left. With ongoing growth rates of 180,000 ha annually this will lead to a peak in 2020 (USDA, 2011). While Malaysian companies invest in plantations abroad, foremost in Indonesia (USDA, 2011), Malaysia’s economy seems to need an alternative or at least a second economic option besides palm oil in the country itself.

Another issue besides the limited area for expansion are stagnating palm oil prices. Malaysian experts see a limited yield at $ 430 to be competitive with crude oil price. In July 2006 a price of $ 426 was reached already (WWF, 2007). An increase of palm oil prices cannot be expected as palm oil can be substituted by any other vegetable oil. With rising oil palm prices, the global demand would just shift to another vegetable oil. Furthermore, the crop yield has been decreasing since 2008 (see Illustration 4). It was 9 % below the maximum yield of 4.7 tons per hectare in 2008 (USDA, 2012).

Illustration 4: Malaysia: Historical palm oil yield statistics

illustration not visible in this excerpt

Source: USDA, 2012

The reason for this development is “a combination of adverse weather, restrictive government labor and immigration policies, ageing trees, and plant disease” (USDA, 2012). It is expected that solutions will only slowly be found while Indonesia’s palm oil production will increase and become even more competitive. The issues of Malaysia’s government of not reforming the current immigrant labor policies and the industry attracting lots of Indonesian workers due to inadequate wages and benefits for Malaysian workers, worsen the situation. Currently, it is estimated that 65 % of Malaysia’s total oil palm plantations is between nine to 28 years old, while 26 % is at the age of 20 to 28 years (USDA, 2012). Consequently, most trees already had their peak yield as it is between the ages of ten to eighteen. So in future further decline is expected. Typically, an ongoing replacement of old trees would take place, but high oil prices in the recent past impeded this development. Most of these old trees are on the peninsula Malaysia and in the state of Sabah. The government tries to change the situation with a number of programs in order to achieve a growing palm oil yield by 2020. Yet Malaysia has the problems of labor shortage and of the plant disease Ganoderma that must be solved first (USDA, 2012).

5.2.2 Environmental impacts

According to an estimate of Princeton University and the Swiss Federal Institute of Technology, 55 to 60 % of the expansion of oil palm plantations in Malaysia and Indonesia from 1990 to 2005 was at the expense of primary forests (Clay, 2004). Since 1980 plantations in Malaysia increased by 3,85 mha (USDA, 2011). Furthermore, there are around 20 mha in Indonesia and Malaysia of abandoned agricultural land that could be used for plantations. However, this kind of land would need chemical fertilizers leading to extra expenses. Additionally, the timber received from this land through deforestation can be sold and serves as a subsidy (Clay, 2004), which is an advantage for the plantation companies.

To make space for planting oil palms, big parts of the “high conservation value tropical forests” (Clay, 2004), which are characterized by most kinds of trees per hectare and a huge biodiversity with 80 % of all on-land-living-beings were deforested, partly even illegally (WWF (b), 2014). Palm oil plantations, which are typically planted as monocultures, are especially harmful to flora and fauna as most other plantations have a higher biodiversity than oil palm plantations (Fitzherbert et al, 2008). In Malaysian peat swamp forests 57 mammal and 237 bird species were found. Yet 51 % of these mammals and 27 % of theses birds are endangered (RSPO, 2013).

The United Nations Environment Programme stated that the increase of oil palms is the major reason for deforestation in Malaysia and Indonesia. A result of deforestation is the destruction of flora and fauna. Especially the habitat of the anyhow endangered orangutans is increasingly threatened in Malaysia (WWF (b), 2014, Appendix Illustrations B & C, p. 44-45). Furthermore, the orangutan does not even have its habitat where the remaining rainforests are. This makes clear how endangered this animal is.

Secondary effects of deforestation are an increased risk of fires and flooding, soil erosion, the waste of oil mills, air pollution and soil and water pollution due to fertilizers and pesticides. Additionally, the high amount of fertilizers and pesticides affects human health badly (RSPO, 2013). Furthermore, deforestation supports climate change, as the forests cannot serve as carbon sinks any more. Climate change occurs through felling plants of the rainforests, fires and destruction of peat soil which all leads to the release of greenhouse gases. Fire is a preferred cheap and fast method of land clearing which leads to additional emissions and haze. Illustration 5 shows that the production of palm oil even leads to more carbon dioxide releases than the production of its close competitors soybean and rapeseed.

Illustration 5: Carbon footprint of biofuels

illustration not visible in this excerpt

Source: Energywise, 2013

Especially harmful is the expansion of oil palm plantations on peat land. The United States Department of Agriculture defines peat as “soil that contains at least 65 % organic material, is at least 50 cm in depth, covers an area of at least 1 ha and is acidic in nature” (RSPO, 2013). In Malaysia there are around 2,4 mha of peat soil, which is equivalent to 10 % of the global amount of tropical peat and compromises 7.5 % of Malaysia’s overall land area. Sarawak has the largest area of peat soil equivalent to 69 % of the total peat soil in Malaysia. In Sarawak were 37 % of the 1,167,000 ha of oil palm plantations on peat in 2009, which is more than four times as high as on the peninsula. Peat soil has the unique feature of storing 40 to 60 % of the worldwide carbon. Rainforests on peat land can store 50 % more than regular rainforests. So clearing and draining of peat swamps release huge amounts of carbon dioxide into the atmosphere (RSPO, 2013). Additionally, peat land absorbs water like a sponge during floods and serves as a water storage during dry periods. The consequence of drainage is a runoff of water from the surface while underground storages get destroyed (Mamit, 2009). Therefore it is especially dramatic that the average deforestation rate of peat land was the highest in Sarawak since 2007 with about 8 % while the total deforestation rate was around 2 %. In total the 17 % oil palm plantations on peat land in Malaysia and Indonesia account for 66 % of all climate change emissions from oil palm plantations (WWF (b), 2014). The major problem is that the release of carbon emissions is an ongoing process with four to sixteen tons of carbon dioxide emissions per hectare annually as long as the soil is drained (CIFOR, 2009). In total “the production of 1 ton of palm oil causes more than 2.30 tons of carbon dioxide equivalent of greenhouse gas emission in the worst scenario and about 0.65 tons of carbon dioxide in the best case scenario” (Energywise, 2013). Besides being carbon storages, peat land usually has a high biodiversity (RSPO, 2013), which makes their ongoing degradation even more harmful.

It is important to note that whichever sustainability measures are taken, peat land once drained cannot be turned into carbon sinks any more. Consequently, the remaining peat soil areas should be highly protected.

5.2.3 Socioeconomic impacts

Besides having ecological impacts, the increase of oil palm plantations has significant socioeconomic effects. The advantage of oil palms is that they have the highest yield of tons of oil per hectare and per year of all oil-bearing crops with a lifespan of 25 to 30 years while the inputs for production are relatively low e.g. the tree requires only 0.26 hectares of land to produce one ton of oil (Palm Oil Health, 2014). This leads to positive effects for local communities such as rising incomes, employment and therefore it is alleviating poverty overall (WWF (b), 2014). The industry employs about 570,000 people (Sime Darby, 2014). However, 69 % were foreign workers (RSPO, 2013). This already shows that there are a number of socioeconomic downsides involved with the palm oil industry. Furthermore, deforestation forces indigenous people off their land, takes away their access to resources and consequently leads to conflicts about ownership of land. At the same time the indigenous population has to suffer under haze caused by forest fires and the pollution of air, water, and soil. To avoid further conflicts, local governments started the smallholder system by giving a plantation area of two hectares to local families. However, the big companies govern this part of land so that the smallholders have to obey the rules of planting monocultures instead of diversifying the crop. Consequently, these families are not self-sufficient any more, can’t sell their crop and become dependent on the big companies, on crop failure and on oil price fluctuations. As a result, lots of families migrate to the cities. Furthermore, the big palm oil companies prefer to hire workers that are already experienced in this sector. This also leads to conflicts with the indigenous population (RSPO, 2013).

5.3 Sustainable production

An obvious solution would be to produce sustainable palm oil. Therefore the land that already has agricultural use or is grassland and lies idle should be used for plantations to avoid the usage of untouched land. There are around 20 mha in Indonesia and Malaysia of abandoned agricultural land that could be used whereas deforested land like peat swamps should be transformed back into secondary forests (RSPO, 2013).

Knowing the potential yield of oil palms of up to twelve tons per hectare and per year leads to the conclusion that there is a huge potential for improvement from the current four tons. There are different kinds of improvement possible. One technique can be the cultivation of seeds with resistance against diseases. Better cultivation can also be achieved through education of the use of sustainable fertilizers, pesticides, irrigation and the right time of harvesting (IIED, 2006 and Theo, 2009). Socioeconomic improvement can be achieved through higher wages and more benefits. Governments of importers and exporters and banks as well as other providers of capital should subsidize palm oil that is produced in a sustainable way according to the standards of the Roundtable on Sustainable Palm Oil (RSPO).

A study of the WWF examined the potential costs and benefits of a sustainable palm oil production. Additional costs occur for land assessment and management, certifications and optional costs for segregation meaning separated transport and storage of sustainable palm oil. Smallholder engagement is both a cost factor through training and monitoring and a benefit through productivity increases. Benefits are firstly improved community relations through the reduction of social conflicts, which accounts for over $ 10 mil to15 mil during a period of 10 years for a single estate. Furthermore, there can be found better relations with local stakeholders. Secondly, the cost for pesticides can be reduced by up to $ 250,000 and the cost of herbicides by almost $ 74,000 annually per estate. Furthermore the accident rate can decline by 42 % through improved safety regulations. Thirdly, there is a better access to capital. Fourthly, the labor turnover can be reduced by 6 % along with an increased motivation of administrative staff. Finally, the revenues can be increased between $ 10 to 50 per ton. Smallholder, mid-sized estates and large estates profit differently in each category (WWF, 2012). Consequently, each estate will put its priorities on different categories, but a potential benefit from sustainable operations can be found for every estate size.

Currently, most sold palm oil is not produced in a sustainable way. According to a WWF press release, only 1 %, which is equivalent to 15 thousand tons of the more than 1 million tons of sustainable produced palm oil, was sold due to reasons of profit margins. Furthermore, under European legislation companies can label palm oil as ‘vegetable oil’ on the packaging, which leads to a lack of control (A-Z Animals (a), 2012).

5.4 Summary Part 1 & Conclusion Part 1

In summary the palm oil industry has the financial benefits on the pro side while the con side shows a vast range of environmental and socioeconomic disadvantages.

Palm Oil Industry

illustration not visible in this excerpt

Source: Own illustration

Palm oil is the fourth largest contributor to the Malaysia’s economy and a driving force of the agricultural industry. However, there are a number of downsides involved. First of all, a huge area of primary forests, partly on peat land, was cleared and burned to make room for oil palm plantations. Especially the clearing of peat swamps leads to a huge release of carbon dioxide into the atmosphere. Furthermore, the environment is polluted in various ways and biodiversity is destroyed.

Socioeconomic effects are controversial as on the one hand poverty is alleviated by increased incomes and employment. On the other hand, especially the indigenous population suffers under pollution and forced migration. Consequently, the seemingly positive effects are rather small and overcompensated by negative effects. Therefore a sustainable alternative must be searched for.

The ecological and socioeconomic issues require new solutions. Currently, rubber, coconut and cocoa plantations are converted into oil palm plantations to reduce the deforestation of primary forests. This approach is preferable as it has a minor impact on biodiversity (WWF, 2007).

“According to an estimate by the Malaysian government in 2010, “approximately 58 % of the total national land area remained forested, and that its official policy is to keep 50 % of the country forested in perpetuity. The reality is that virtually all highly suitable areas have already been developed, and that even marginal land is now becoming scarce” (USDA, 2011). In order to protect the remaining area an alternative is inevitable. An alternative could be ecotourism.

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Details

Pages
61
Year
2014
ISBN (eBook)
9783668051454
ISBN (Book)
9783668051461
File size
1.9 MB
Language
English
Catalog Number
v300974
Tags
ecotourism malaysia sustainability palm oil
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Title: Could Ecotourism Replace the Palm Oil Industry in Malaysia? A Comparative Analysis of Sustainability