-  It was reported that Malaysian Palm Oil Association will decide whether to quit RSPO (Roundtable for Sustainable Palm Oil) this Friday.

-  Industry officials were quoted as saying that there has been a stalemate in negotiations between the RSPO and Malaysian companies on a host of contentious issues. This includes the compensation imposed on planters for being unable to meet the RSPO requirements on high carbon stock and green house emissions.

-  Some planters also claimed that the aspirations of RSPO had changed with the increasing involvement of NGOs such as World Wildlife Fund-linked individuals and Western green activists.

-  In spite of this, individual companies may still continue to be a part of RSPO on their own accord.

-  There is minimal impact on the companies under our coverage as some of them are already in the middle of the process of being certified by RSPO. Hence, we believe that companies such as Felda Global, IOI Corporation and Kuala Lumpur Kepong would still continue to be in RSPO.

-  In Indonesia, plantation companies are supposed to be certified by Indonesia Sustainable Palm Oil (ISPO) by the end of this year. We reckon that companies with ISPO would not face problems selling to European and American customers.

-  For other Malaysian companies, we believe that certification would be important if they are targeting European and American customers.

-  Due to pressure from activist shareholders and environmental organisations, an increasing number of global consumer companies may look to adopt a policy of buying palm oil only from sustainable sources.

-  MSPO (Malaysian Sustainable Palm Oil) could be an alternative to RSPO. MSPO is supposed to be launched this year.

-  We believe that implementation is the key. It would take time for MPOB (Malaysian Palm Oil Board) or MPOC (Malaysian Palm Oil Council) to certify every oil palm estate or mill in the country as there might not be enough manpower in the certification team. 

Source: AmeSecurities