Palm Oil Economic Review and Outlook Seminar 2017 Pullman Kuala Lumpur City Centre, Kuala Lumpur 17 January 2017 Eastern Europe: The Untapped and Potential Growth Markets for Malaysian Palm Oil Puah Chiew Wei, Ph.D. Malaysian Palm Oil Board Ministry of Plantation Industries and Commodities
Content Introduction Overview Eastern Europe Current status Challenges faced by Malaysian palm oil industry Opportunities for Malaysian Oil Palm Industry Development in Eastern Europe Potential growth for Malaysian palm oil Conclusion
Introduction
Malaysian Oil Palm Industry (2016) CPO production: 17.32 million tonnes Exports (CPO and PPO): 16.05 million tonnes Export value of oil palm products: RM64.6 billion
Exports of Malaysian Palm Oil to Selected Destinations Destination Exports of Palm Oil ( 000 tonnes) 2013 2014 2015 2016 India 2,325 3,252 3,686 2,826 EU 2,337 2,411 2,433 2,059 China, P.R. 3,700 2,839 2,380 1,882 Pakistan 1,435 816 728 880 USA 1,027 783 703 590 Philippines 207 494 648 625 Vietnam 500 604 584 556 Japan 501 514 545 456 Turkey 84 78 399 657 Singapore 492 483 393 353 Source: MPOB
Overview Eastern Europe
Eastern Europe The term Eastern Europe is often used to refer to all European countries that were previously ruled by communist regimes (the Eastern Bloc), due to the concept of the Iron Curtain separating Western Europe and Soviet-controlled Eastern Europe throughout the period of the Cold War. Prior to German reunification, East Germany was often described as an Eastern European country. Source: New World Encyclopedia
Eastern Europe Boundaries of Eastern Europe subject to considerable overlap and fluctuation depending on the context in which they are used, which makes differentiation difficult. The United Nations Statistics Division defines Eastern Europe as Belarus, Bulgaria, Czech Republic, Hungary, Moldova, Poland, Romania, Russia, Slovakia and Ukraine.
Population (2015) Country Population (est.) Belarus 9,513,000 Bulgaria* 7,177,990 Czech Republic* 10,551,220 Hungary* 9,844,690 Moldova 3,554,150 Poland* 37,999,490 Romania* 19,832,390 Russia 144,096,810 Slovakia* 5,424,050 Ukraine 45,198,200 Total 293,191,990 * EU-28 Countries Source: World Bank Group
Consumption ( 000 tonnes) Consumption of Vegetable Oils (2015) 4000 3500 3000 2500 2000 1500 Total: 7,408,000 tonnes EU Countries 1,298 3,631 Non- EU Countries 1000 500 0 162 Bulgaria 460 Czech Republic 699 440 249 257 168 44 Hungary Poland Romania Slovakia Belarus Moldova Russia Ukraine Sunflower oil Palm oil Soya bean oil Rapeseed oil Palm kernel oil Corn oil Other vegetable oils Source: Oil World
Challenges Faced by Malaysian Palm Oil Industry
Issues and Challenges Traditional oils and fats Competition from other palm oil producers Demographics Influence from Western European countries
Consumption ( 000 tonnes) Russia: Consumption of Major Vegetable Oils 2500 2000 1500 2011 2012 2013 2014 2015 Increase oil consumption: mainly sunflower and palm oils Palm oil is substituting sunflower oil Other oils constant 1000 500 0 Sunflower oil Palm oil Soya bean oil Rapeseed oil Other oils Major Vegetable Oils Source: Oil World
Imports of Palm Oil ( 000 tonnes) Russia: Imports of Palm Oil 900.0 800.0 Malaysia Indonesia Others 773.4 700.0 600.0 614.7 607.0 500.0 400.0 405.0 448.9 300.0 200.0 100.0 139.7 126.3 135.2 109.4 81.1 87.4 84.4 56.7 72.5 91.5 0.0 2011 2012 2013 2014 2015 Total imports of palm oil into Russia (tonnes) 671,000 693,500 783,200 784,100 937,400 Source: Oil World
Consumption ( 000 tonnes) Ukraine: Consumption of Major Vegetable Oils 600 2011 2012 2013 2014 2015 500 400 Overall decrease in consumption 300 200 100 0 Sunflower oil Palm oil Soya bean oil Rapeseed oil Other oils Major Vegetable Oils Source: Oil World
Imports of Palm Oil ( 000 tonnes) Ukraine: Imports of Palm Oil 220 200 180 160 140 120 100 80 60 40 20 0 Malaysia Indonesia Others 190.1 145.7 131.1 124.1 123.9 49.1 45.8 46.6 29.0 9.6 0.2 0.8 0.6 11.6 0.9 2011 2012 2013 2014 2015 Total imports of palm oil into Ukraine (tonnes) 189,800 170,100 237,500 175,300 136,400 Source: Oil World
Consumption ( 000 tonnes) Poland: Consumption of Major Vegetable Oils 1000 900 800 700 600 500 400 300 200 100 0 2011 2012 2013 2014 2015 Increase oil consumption: mainly rapeseed oil Other oils constant Rapeseed oil Palm oil Soya bean oil Sunflower oil Other oils Major Vegetable Oils Source: Oil World
Imports of Palm Oil ( 000 tonnes) Poland: Imports of Palm Oil 240 220 200 180 160 140 120 100 80 60 40 20 0 Malaysia Indonesia Others 210.2 178.2 173.8 176.7 185.2 28 27 36 35 37 11 8 0 3 0 2011 2012 2013 2014 2015 Total imports of palm oil into Poland (tonnes) 216,700 208,700 246,100 214,500 222,600 Source: Oil World
Demographics Euromonitor International projected Eastern Europe region to experience depopulation in 2012 2030 Net migration will remain positive overall, but not enough to mitigate depopulation Country Population growth rate (%) (2016 est.) Belarus -0.21 Bulgaria* -0.6 Czech Republic* 0.14 Hungary* -0.24 Moldova -1.04 Poland* -0.11 Romania* -0.32 Russia -0.06 Slovakia* 0.01 Ukraine -0.39 * EU-28 Countries Source: CIA The World FactBook
Influence from Western Europe The Western Europe countries influence the development of tariff and non-tariff barriers on palm oil in the Eastern Europe region Anti palm oil campaign including non-tariff barriers disguised as sustainability requirements
Opportunities for Malaysian Oil Palm Industry
Positive Economic Outlook The growth dipped due to geopolitical tensions, however recovery in 2016 Positive GDP growth and lower inflation rate contribute to better economic performance Higher growth rate boost per capita disposable income Per capita consumer expenditure is recovering and expected to increase
GDP per capita (USD)* 35,000 30,000 25,000 20,000 15,000 GDP per capita (USD) Czech Republic Slovakia Poland Hungary Russia Romania Bulgaria Belarus 10,000 5,000 Ukraine Moldova 0 2013 2014 2015 Year *Data are in 2015 US dollars Source: CIA The World Factbook
Consumption per Capita (kg) Consumption of Oils and Fats Per Capita (kg) 45 40 35 30 25 20 15 10 Slovakia Belarus Czech Republic Russia Poland Bulgaria Romania Ukraine Hungary Moldova 2011 2012 2013 2014 2015 Year Source: Oil World
Palm Oil in Russia Palm oil is widely used and increasing but at the same time relatively unknown. Palm oil products gaining exports volume: cocoa butter substitute and shortening
Palm Oil in Ukraine Palm oil imports and consumption increased while consumption of domestic sunflower oil decreased for 2015/16 Palm oil is ideal due to its price competitiveness and suitable as the substitute for more expensive vegetable oils for the food industry Palm oil is used as substitute for butterfat in the confectionary industry Source: Global Agricultural Information Network
Events to Boost Tourism The travel industry has strong potential for further growth, which will be mainly driven by the country s upcoming hosting of various cultural and sport events The current economic environment provides additional advantages these countries as a travel and tourism destinations for both international and domestic travellers
FIFA Confederations Cup Russia 2017 2018 FIFA World Cup Russia TM
Key Inferences Russia and Ukraine are two (2) largest non-eu potential growth markets Poland is the potential growth in the EU countries Population growth has stagnated in Eastern Europe Potential demand growth will be in per capita consumption in line with GDP growth Growth in palm oil imports will be satisfied mainly from Indonesia palm oil Aggressive and innovative marketing strategies are required by Malaysia to capture greater market share
Conclusion MPOB continues to work with MPOC to intensify promotional activities in the Eastern Europe region R&D to introduce new innovative products to substitute local products through collaboration with local companies Continue to cultivate good networking and strategic partnership with potential buyers
Thank you