Sri Lanka’s palm oil industry, if strengthened, can save $ 84 million in foreign exchange, and enable smallholders to enter into international value chains through value added palm oil production, AEN Plantations CEO Ruwan Goonewardena told The Daily Morning Business.
“By supplanting our own yearly palm oil requirement for the confectioneries, bakeries, cosmetics, lubricants and pharmaceuticals industries, we can save around $ 84 million,” he said.
Central Bank data between January-July 2024 shows that Sri Lanka imported $ 46.2 million worth of animal and vegetable oils, fats, and waxes.
“Sri Lanka’s confectionery and baking market imports palm shortening from Malaysia, which is tailor-made for Sri Lankan taste. If we were to look at developing derivatives produced by palm oil, we would be able to locally produce a product that is affordable for the local industries, and can save us forex,” Goonewardena said.
On exporting product and value chain integration, Goonewardena proposed that Sri Lanka must first produce enough palm oil for local demand, before integrating with value chains that connect Southeast Asian nations like Malaysia and Indonesia, with the West.
Sri Lanka at present produces only 32,000 tonnes of palm oil annually, which falls short by at least 48,000-50,000 tonnes of the local palm oil demand, among the industries, Goonewardena said.
Based on available data, Indonesia, which produces 56% of yearly global palm oil production, exported $ 28.7 billion in palm oil in 2022. The main destinations for Indonesian exports of palm oil were India ($ 5.4 billion), China ($ 3.61 billion), Pakistan ($ 3.21 billion), the United States ($ 1.89 billion), and Bangladesh ($ 1.48 billion).
“Both Indonesia and Malaysia have a significant population of around 4.5 million smallholder farmers growing oil palm, given that it is a long term crop, and is able to withstand weather conditions,” added Goonewardena. “Involving smallholder farmers would enable more farmers a steady stream of income.”
The Government of Sri Lankan banned the importation of palm oil in 2021.