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

Palm Oil Economic Review and Outlook Seminar 2017

Pullman Kuala Lumpur City Centre, Kuala Lumpur

17 January 2017

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

• 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.

Eastern Europe

Source: World Bank Group

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

0

500

1000

1500

2000

2500

3000

3500

4000

Bulgaria CzechRepublic

Hungary Poland Romania Slovakia Belarus Moldova Russia Ukraine

Co

nsu

mp

tio

n (

‘00

0 to

nn

es)

Sunflower oil Palm oil Soya bean oil Rapeseed oil

Palm kernel oil Corn oil Other vegetable oils

Total: 7,408,000 tonnes

Consumption of Vegetable Oils (2015)

Source: Oil World

EU Countries Non- EU Countries

162

460 249

1,298

440

168 257

44

699

3,631

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

0

500

1000

1500

2000

2500

Sunflower oil Palm oil Soya bean oil Rapeseed oil Other oils

Co

nsu

mp

tio

n (

‘00

0 t

on

ne

s)

Major Vegetable Oils

2011 2012 2013 2014 2015

Russia: Consumption of Major Vegetable Oils

• Increase oil consumption: mainly

sunflower and palm oils

• Palm oil is substituting sunflower oil

• Other oils constant

Source: Oil World

139.7 135.2 81.1 56.7 72.5

405.0 448.9

614.7 607.0

773.4

126.3 109.4 87.4 84.4 91.5

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

2011 2012 2013 2014 2015

Imp

ort

s o

f P

alm

Oil

(‘0

00

to

nn

es)

Malaysia Indonesia Others

Russia: Imports of Palm Oil

Source: Oil World

Total imports of palm oil into Russia (tonnes)

671,000 693,500 783,200 784,100 937,400

0

100

200

300

400

500

600

Sunflower oil Palm oil Soya bean oil Rapeseed oil Other oils

Consum

ption (

‘000 to

nnes)

Major Vegetable Oils

2011 2012 2013 2014 2015

Ukraine: Consumption of Major Vegetable Oils

Overall decrease

in consumption

Source: Oil World

49.1 45.8 46.6

29.0

11.6

131.1 124.1

190.1

145.7

123.9

9.6 0.2 0.8 0.6 0.9

0

20

40

60

80

100

120

140

160

180

200

220

2011 2012 2013 2014 2015

Imp

ort

s o

f P

alm

Oil

(‘0

00

to

nn

es)

Malaysia Indonesia Others

Ukraine: Imports of Palm Oil

Source: Oil World

Total imports of palm oil into Ukraine (tonnes)

189,800 170,100 237,500 175,300 136,400

0

100

200

300

400

500

600

700

800

900

1000

Rapeseed oil Palm oil Soya bean oil Sunflower oil Other oils

Consum

ption (

‘000 to

nnes)

Major Vegetable Oils

2011 2012 2013 2014 2015

Poland: Consumption of Major Vegetable Oils

Source: Oil World

• Increase oil consumption:

mainly rapeseed oil

• Other oils constant

28 27 36 35 37

11 8 0 3 0

178.2 173.8

210.2

176.7 185.2

0

20

40

60

80

100

120

140

160

180

200

220

240

2011 2012 2013 2014 2015

Imp

ort

s o

f P

alm

Oil

(‘0

00

to

nn

es)

Malaysia Indonesia Others

Poland: Imports of Palm Oil

Source: Oil World

Total imports of palm oil into Poland (tonnes)

216,700 208,700 246,100 214,500 222,600

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

Source: CIA – The World FactBook

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

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

• 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

Positive Economic Outlook

GDP per capita (USD)

Belarus

Bulgaria

Czech Republic

Hungary

Moldova

Poland

Romania

Russia

Slovakia

Ukraine

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2013 2014 2015

GD

P p

er

cap

ita (

US

D)*

Year

Source: CIA The World Factbook *Data are in 2015 US dollars

Consumption of Oils and Fats Per Capita (kg)

Belarus

Bulgaria

Czech Republic

Hungary

Moldova

Poland

Romania

Russia

Slovakia

Ukraine

10

15

20

25

30

35

40

45

2011 2012 2013 2014 2015

Co

nsu

mp

tio

n p

er

Ca

pit

a (

kg

)

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 RussiaTM

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