Sabah, Malaysia

Malaysia is the world’s second largest oil palm producer, accounting for 35% of total worldwide production.  Since the 1970s, production has grown rapidly from an area of less than 1 million ha to 5.6 million ha in 2015. As suitable land in Peninsular Malaysia ran out, production expanded significantly in the states of Sabah and Sarawak which together now account for 54% of national production. Much of this expansion has been at the expense of rainforests, often with HCV. The largest market for Malaysian palm oil is in India, followed by the EU and China. The EU has been putting increasing pressure on Malaysia to make its production more sustainable, and the threat of losing this market is forcing Malaysian producers to consider deforestation in reconfiguring their production practices.

Production is dominated by private estates which cover 4.7 million ha. Roughly 680,000 smallholders account for the remaining 0.9 million ha and account for as much as 33% of the output. Smallholders are the most vulnerable group in Malaysia’s oil palm sector. They often have lower incomes due to lower yields, limited technical knowledge, and access to government schemes. They are the least able to cope with the harmful effects of climate change and market fluctuations.

IDH is focused on improving sustainable oil palm production landscapes in Sabah, Malaysia, and is working on supportive policies at the state and national level. IDH and its partners aim to achieve a national agreement to improve Malaysian Sustainable Palm Oil (MSPO) requirements to meet market demands, establish green growth plans at the state level, and implement PPI compacts and Service Delivery Model evaluations at district levels. This work will also be linked to that of the Sustainable Landscapes Working Group (SLWG), that IDH convenes in Singapore. This group brings together all major growers in Malaysia and Indonesia, traders, brands and some retailers in the international supply chain. The group works to link landscapes to markets and to understand market demands and how this affects field operations.

This program is also part of the wider IDH-Solidaridad partnership on strengthening existing or new national initiatives aimed at enabling sustainable climate smart oil palm production by smallholders.

The program is currently in an inception phase and will move to implementation in 2020.