Kota Kinabalu: Sabah has lost control of its lucrative palm oil industry after an estimated 90 per cent of its oil palm plantations fell into the hands of non-Sabah companies, says Datuk John Lo, a retired banker and advisor to the State Government (in his role in the Sabah Economic Advisory Council as well as Institute for Development Studies).
Describing the situation as a “huge loss” to the State, Lo said Sabahans were originally meant to benefit directly from large-scale land allocations for oil palm cultivation.
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He claimed that during the tenure of former Chief Minister Tan Sri Harris Salleh, about 963,000 acres were allocated with the intention of benefiting Sabahans, with each landless Sabahan expected to receive 15 acres.
“After he left office, all this land was sold to West Malaysian companies.
“As I have written many times, this is my estimate and I’m not far from wrong, 90 per cent of our oil palm is now in the hands of non-Sabahans,” Lo said this during the “Sabah Matters” podcast of Daily Express.
He said the consequences extend beyond land ownership, affecting Sabah’s ability to maximise economic returns from one of its most important industries.
Although Sabah remains Malaysia’s leading state in terms of oil extraction rate (OER) and produces about 5.5 million metric tonnes of crude palm oil (CPO) annually, he said much of the commodity is shipped out of the State for downstream processing.
“Most of these CPO are not going downstream in Sabah. Most of it is taken out.
“What does that mean? It means we have no downstream investment, no downstream activities, no downstream jobs and no value-add,” he said.
According to Lo, Sabah is effectively functioning as a commodity producer while higher-value manufacturing and processing activities take place elsewhere.
“People from other states are benefiting from our CPO in terms of downstream value-added income and jobs,” he said.
Lo said the situation has also discouraged potential investors interested in developing palm oil-based industries in Sabah.
He cited growing demand for green fuel and sustainable aviation fuel derived from palm oil, saying several foreign investors possess the technology to establish such industries but require a sufficient supply of feedstock within the State.
“There are a lot of Chinese firms with the necessary technology who wanted to come in. But we don’t have the CPO in Sabah,” he said.
Lo also criticised Sabah’s land assessment rates, describing them as among the lowest in the country.
“On average, we are talking about RM6 per acre. Other states are charging RM20, RM30. Pahang is among the highest at about RM200,” he said.
He further claimed that many plantation companies record their profits at headquarters in Kuala Lumpur rather than Sabah, making it difficult to accurately determine the economic value generated from the State’s resources.
“All the figures are booked in Kuala Lumpur. The headquarters are there. They only have a small branch office here,” he said.
According to Lo, this has implications for Sabah’s long-standing claim for its constitutional 40 per cent net revenue entitlement from the Federal Government, as revenue generated from Sabah’s resources may not be fully reflected within the State.
He noted that Sabah currently has approximately 1.74 million hectares, or more than 4.4 million acres, of oil palm plantations, with the majority owned by non-Sabah entities.
“The best land that we have is in oil palm, so it is a huge loss to Sabah. This is something that we must look into so that we can get our fair share of the industry,” he said.
