Malaysia’s RM114 Billion Palm Oil Industry Charts Path To Profitable Sustainability

Malaysia’s palm oil industry, long considered the backbone of its agricultural exports, is emerging as a global case study for balancing profitability with sustainability.

According to data released by Datametrics Research & Information Centre (DARE), the sector contributed a staggering RM114 billion in export value and accounted for 2.3% of Malaysia’s GDP in 2024, reinforcing its strategic role in the national economy.

The report, “Advancing Sustainability in Malaysia’s Palm Oil Industry”, spotlights a nuanced evolution in how Malaysia cultivates and trades palm oil with a growing emphasis on traceability, environmental protection, and smallholder empowerment.

Approximately 26.4% of Malaysia’s total oil palm planted area, or 1.48 million ha, is managed by smallholders, supporting nearly 450,000 families. This makes the sector not only an economic driver but also a pillar of rural livelihood.

“Palm oil is too often misunderstood,” DARE Managing Director Pankaj Kumar said, adding that the report highlighted that Malaysia is taking bold steps to prove that palm oil can be both profitable and sustainable.

Central to this transition is the Malaysian Sustainable Palm Oil (MSPO) certification, a legally mandated, independently audited scheme that aligns local practices with global environmental and ethical standards. As of March 2025, over 3.86 million ha have been certified under the MSPO, including nearly 645,000ha operated by independent smallholders.

“Unlike major competitors, Malaysia has opted not to expand oil palm plantations further, resulting in a 4.2% reduction in planted area over the last four years.

“This restraint contrasts sharply with Brazil’s soybean sector, which grew by six million ha, surpassing Malaysia’s entire oil palm area of 5.61 million ha,” the report noted.

It then shared that the industry’s focus has shifted from expansion to optimisation, aiming to increase yield and efficiency without compromising forest reserves or biodiversity. This decision positions Malaysia as a more responsible supplier in global markets increasingly wary of deforestation-linked commodities.

Meanwhile, the report also emphasises on the importance of the newly enforced MSPO 2.0 standard, which strengthens Malaysia’s ability to meet the sustainability requirements of key markets such as the European Union (EU).

However, with the EU implementing tighter trade barriers, Malaysia is simultaneously diversifying its export destinations.

“Malaysia must double down on communicating its sustainability progress,” Pankaj said. “Positioning MSPO as a credible, inclusive global standard aligned with the UN Sustainable Development Goals is critical to securing long-term market confidence.”

Looking ahead, DARE recommends ongoing investment in the MSPO ecosystem, especially to help smallholders adapt to higher certification standards. The think tank urges stronger collaboration between government, industry stakeholders, and international partners to sustain Malaysia’s role as a global leader in responsible palm oil production.

Tags: MSPO, profitability, smallholders, planted area, Malaysian Sustainable Palm Oil, exports, Production, Malaysia, palm oil, oil palm, Sustainability