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Determinant Factors of Domestic Demand for Palm Oil Downstream Products

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Palm oil is one of the most important commodity in Malaysia as the second largest palm oil exporter in the world. However, recent global issues are negatively impacting the export of palm oil. The industry is continuously related with environmental issue as its plantation causing deforestation of some of the world’s most biodiverse forest, namely Malaysia and Indonesia. Palm oil industry contribute significantly on Malaysia’s economy and source of income for many people. Beside, palm oil in fact is very useful to human being. It can be used to produce various useful products. Thus, it is crucially important to explore more new markets to ensure the sustainability of palm oil industry and not relying too much on global demands. The COVID-19 pandemic outbreak somehow benefits palm oil industry. As the government enforces movement control order (MCO), people are force to stay at home. The demand for palm oil remains high as the panic buying of essentials like edible oils as well as oleo-chemical products such as personal and home care hygiene products result in a sharp increase in March’s domestic consumption,

According to the Performance Management and Delivery Unit (Pemandu), and Malaysian Palm Oil Board (MPOB). The local palm oil sector which has been driven by the upstream segment in the past decades is set to change its course through increased contribution from the downstream segment in the coming years. the future of the palm oil industry in the country lies in downstream activities, thus reducing its dependency on the fluctuation of crude palm oil (CPO) prices and increased margins. In 2019, palm oil export was highly biased toward the upstream and midstream segments, with total contribution to the overall industry at 74%, while downstream contribution came in low at 17%.

For further information: laiws@ukm.edu.my

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