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The Star
3 days ago
- Business
- The Star
Rethinking taxation in the palm oil industry
RECENTLY, a bright-eyed Gen Y economics student asked me, 'Uncle, what's the oil palm industry really like?' I chuckled and replied, 'It's profitable enough to be taxed, quiet enough to be overlooked, and burdened enough to be running on fumes.' Then I added with a grin: 'Imagine a golden goose that still lays eggs – but now wears a necktie made of red tape and is expected to run a marathon.' If you truly want to test a Malaysian oil palm grower's patience, just whisper one word: Taxation. What usually follows is a monologue hotter than the midday sun blazing over an immature estate – and with good reason. Once hailed as Malaysia's 'green gold', palm oil today feels more like a bottomless ATM, tapped at will. From plantation to port, nearly every step in the value chain is met with a levy of some kind. It's like a relentless game of 'catch and cash', with federal, state, and even local authorities taking turns dipping their ladles into the same pot. Taxation has become a pressure point that refuses to ease. What was once a proud, productive and globally competitive industry now risks being reduced to a fiscal crutch, rather than recognised as a strategic national asset. Methods matter No one disputes the government's need for revenue. But how we raise it matters. From estate to export terminal, the palm oil value chain is saddled with a complex web of taxes, levies, and cesses: windfall profit levy, export duties, cess contributions, and state sales taxes in Sabah and Sarawak, just to name a few. Now, the industry faces a new challenge – the proposed expansion of the sales and service tax (SST), due to take effect on July 1. Details remain vague. Communication has been patchy. And the implementation timeline feels rushed. This new tax regime isn't landing in a vacuum. The upstream sector is already grappling with deep-rooted structural challenges: ageing palms, delayed replanting, rising operational costs, low mechanisation and persistent labour shortages. High input prices and erratic weather patterns compound these pressures. And yet, in this already strained environment, more taxes are expected – many of them on gross revenue, not net profit. This means that levies are paid even when a company is bleeding or barely breaking even. According to the Malaysian Estate Owners' Association's latest report, the industry paid an estimated RM11.5bil in taxes last year alone – nearly 32% of total profitability. At this point, it's no longer just taxation. It's starting to feel like strangulation. To be clear, palm oil remains a cornerstone of the Malaysian economy. It contributes to food security, sustains rural livelihoods, generates foreign exchange, and helps fund public services. Between 2020 and 2024, the windfall profit levy alone pulled in nearly RM7bil in government revenue. Silent sector These are serious numbers. Yet, while sectors like technology, logistics and finance enjoy more tailored, growth-friendly tax structures, palm oil remains an easy target – immobile, visible, and too silent. Unlike industries that can relocate or digitise, oil palm plantations are rooted in soil. The capital sunk into land, palms and mills is long-term and irreversible. This physical immobility may offer governments a sense of fiscal predictability – but it should not translate into vulnerability. Taxation must be fair, strategic, and forward-looking – not opportunistic. Let's zoom in on the SST again. There's broad uncertainty: will it apply to products like fresh fruit bunches, palm kernel shells, palm fatty acid distillates, or by-products like empty fruit bunches? Many of these are intermediate goods critical to downstream processes. Taxing them is like setting up toll booths at every intersection of a major highway – you slow down movement, increase costs and clog the system. One credible estimate suggests that if the SST is applied across the oil palm value chain, it could shave off as much as 11% from industry earnings – an economic haircut we simply cannot afford. Initially, plantation owners might not feel the pinch. But the pain will hit the mid and downstream players – mills, refineries, manufacturers – and that pressure will inevitably boomerang back upstream. In an already fragile ecosystem, this only adds to the uncertainty. Worse still, when policies roll out with vague guidelines, limited stakeholder input, and last-minute exemptions, they don't just frustrate – they erode trust. Seeking clarity And yet, the palm oil private sector industry isn't asking for bailouts or handouts. No pleas for subsidies. What it seeks is something far more foundational: clarity in policy, consistency in enforcement and fairness in taxation. The breathing space to plan, the fiscal headroom to reinvest – in replanting, mechanisation, innovation, training and sustainability. Most of all, it asks for recognition. This is not a sunset industry. It must not be allowed to drift toward sunset through neglect or short-sightedness. It is still a vital, living, breathing engine of national strength. With vision and the right incentives, palm oil can continue to anchor Malaysia's economy – fuelling rural development, securing food systems and advancing our green aspirations. It's worth reflecting on the inconsistency in how we treat high-performing sectors. In technology and finance, we incentivise growth. In palm oil, we tax success. This contradiction must be addressed if Malaysia hopes to remain competitive in an increasingly volatile global landscape. The way forward lies in constructive dialogue and data-driven policymaking. The industry must step up in articulating its role, challenges and contributions. Policymakers, in turn, must engage more intensely with stakeholders, not just during crises, but as part of a regular and transparent policy cycle. So, here's a heartfelt invitation to decision-makers: step out from behind the spreadsheets. Walk the estates. Talk to the growers. Visit the mills and downstream factories. See the people, the infrastructure, the resilience and quiet pride that fuel this sector. Before crafting policies that may clip the wings of a bird still capable of soaring, come and understand what's truly at stake. Yes, Malaysia needs revenue. And yes, taxation has its place in nation-building. But let's not tax the golden goose into extinction or turn it into a sitting duck. Overburdening this sector risks stifling reinvestment, crippling competitiveness and compromising long-term national interests – including food and energy security. This opinion is written not out of despair, but out of hope – hope that we can still get this right. With foresight, fairness and genuine consultation, we can shape policies that protect the nation's coffers while preserving and empowering one of Malaysia's most enduring and strategic industries. For 118 years, oil palms have stood tall in this country – not by accident, but by the grace of God, who blessed Malaysia with the right climate, rich soils, deep expertise and enabling policies. This legacy must not be squandered. It must be sustained, strengthened and passed on with pride. Because if we keep plucking feathers every fiscal season, don't be surprised when all we're left with is one lonely golden egg – and a very bald, very silent bird. Joseph Tek has over 30 years of experience in the plantation industry, with a background in research, leadership and advocacy. The views expressed here are the writer's own.
The Star
27-05-2025
- Business
- The Star
Sim: Investing on human resources will ensure further growth
KUALA LUMPUR: It is time for Asean countries to work together to become a self-sustainable region in the face of economic uncertainties arising from conflicts between global powers, says Steven Sim. The Human Resources Minister said this must include improving the sustainability of key sectors of economic and human resource (HR) development for all Asean countries. He called on the region to enhance its collaboration on human development by sharing best practices and solutions to regional challenges. 'Malaysia itself spends RM80bil on education annually, with up to another RM7bil on skills education, making it almost RM100bil spent a year on HR development. 'If this number is an average even among just 10 of our Asean member states, we are looking at about a trillion budget a year from Asean governments alone for HR development. 'This is why initiatives like the Asean Human Capital Development Investment Symposium (AHCDIS) are key to help us better utilise our HR best practices and solutions among us. 'Combined with our almost 60-year long collaboration as its core, we must utilise our logical and natural tendency to work towards making our economies sustainable,' he said in his speech during AHCDIS here yesterday. Sim said this was especially due to the current turmoil of global geo-economic dynamics that could leave Asean countries to suffer economically. 'For the last half decade, our region has been defined by its mass production model economy, offering low- to mid-skill and low-cost labour input for everyone, which has lifted many members from poverty. 'But it has become unsustainable to offer continual cost cutting to the global economy, especially in an age where global players are calling for more inward nationalism and declining global cooperation. 'We are now constantly depressed and threatened by the big boys despite decades of offering cheap labour and resources to build some of their biggest companies in our region,' he added at the two-day event here. AHCDIS is part of the Human Resources Ministry's Asean Year of Skills (AYOS) 2025 initiative and organised by Human Resources Development Corp (HRD Corp) in collaboration with the International Labour Organisation (ILO) and supported by the Asean Secretariat (ASEC). HRD Corp chairman Datuk Abu Huraira Abu Yazid said the symposium seeks to provide a platform for all stakeholders to explore innovative workforce skills financing solutions. 'This symposium is not just a gathering of experts but a regional action platform where policymakers, employers' organisations, worker representatives, development partners and education institutions come together. 'They can then use this collaboration to identify actionable solutions, share best practices and build momentum for long-term investments in human capital across the region,' he said in his speech at the event. AYOS 2025 organising chairman Rony Ambrose Gobilee said the symposium serves as a key platform to help industries shape and train their workforce for a sustainable future. 'Skills in digitalisation. and technical and vocational education and training (TVET) in particular, are the focus of the symposium as they are the most key skills going into the 21st century. 'While knowledge of concepts is important, these two skills (digitalisation and TVET) will be the most in-demand if we wish to become a sustainable economic region,' he added.
The Star
09-05-2025
- Business
- The Star
Eco-Shop launches the year's biggest IPO to date
PETALING JAYA: Main Market-bound Eco-Shop Marketing Bhd aims to raise RM419.87mil via an initial public offering (IPO), which comprises 347 million new shares at a retail price of RM1.21 apiece. Slated to debut on the Main Market of Bursa Malaysia on May 23, 2025, Eco-Shop is estimated to have a market capitalisation of RM7bil upon listing, making it Malaysia's biggest IPO for this year as of now. Operating as a dollar chain store, Eco-Shop currently has about 350 stores nationwide and is planning to expand by opening up another 70 stores within one year after listing. Executive director and chief executive officer Jessica Ng said there are ample opportunities and space to increase the number of outlets in Malaysia. Despite not disclosing the specific locations for the planned outlets, she said the majority will be in underserved areas in the Klang Valley and states on the east coast. 'In the last 12 months, we focused a lot on Johor to maximise operational efficiency. 'But this year, we would like to open more stores in the Klang Valley. 'So, we hope we can make our presence more visible in the sector,' she explained during a press conference after the launch of Eco-Shop's prospectus here yesterday. That being said, the group has allocated about 13.4% of the proceeds or RM56.27mil for the expansion of new chain stores. When asked about the duration to reach breakeven per store, Ng said it would usually take about one year for each store to be profitable. She stated that the group is looking to enhance its warehouse and distribution capabilities by developing a new semi-automated distribution centre in Klang, Selangor. Eco-Shop will be acquiring a 307,560 sq- m-freehold medium industrial land for the construction of the distribution centre, with the deal to be financed via IPO proceeds amounting to RM200mil. 'This is in line with the growth in the number of our outlets,' Ng said. An allocation of RM10.9mil or 2.6% of the proceeds has been put aside as the group also plans to invest in IT hardware and software to further enhance and support daily operations. The remainder of the proceeds will be used to finance the repayment of bank borrowings, working capital and listing expenses at RM100mil, RM24.7mil and RM28mil, respectively. On that note, Ng stated that the group remains confident in its future prospects despite the current uncertainties within the global economic landscape. 'The consumer sentiment is definitely shifting and people are more budget-conscious as well. So, Eco-Shop is a brand that really fits into this good value proposition,' she said. On the trade war between the United States and China, she views it to be more advantageous for the group considering the opportunities presented from China's exports. About half of its products are imported and the remaining half are supplied locally. Additionally, Ng shared that the group will be expanding its house brands by improving product display and revamping packaging and products as well as product innovation. 'Our house brand represents 70% of our stock keeping units and reflects close to 56% of our sales participation. 'Hence, our house brand plays a very critical role,' she explained, adding that house brands bring in higher margins. Eco-Shop has 29 house brands as of today. On top of its public offering, Eco-Shop will offer 675.37 million shares to institutional investors at a price to be determined through a book-building process – of which 10 investors were identified as cornerstone investors who collectively subscribed for 90.91 million shares or 90.31% of the institutional offering. The cornerstone investors include Aham Asset Management, Albizia Capital Pte Ltd, Areca Capital Sdn Bhd, Eastspring Investments Bhd, Kairous Equity Sdn Bhd, Kenanga Investors Bhd, Kenanga Islamic Investors Bhd, Lion Global Investors Ltd, RHB Asset Management Sdn Bhd and RHB Islamic International Asset Management Bhd. An offer for sale of up to 515.15 million existing shares was also made available. Applications for the IPO are now open and will close on May 7, 2025 at 5pm.
The Star
29-04-2025
- Business
- The Star
SCALING UP IN THE UK
GAMUDA Land is scaling new heights in the United Kingdom, expanding its footprint in one of the world's most competitive property markets. The company's diversified portfolio now spans residential, commercial and purpose-built student accommodation (PBSA). Its biggest milestone to date is the RM7bil (£1.2bil) redevelopment of 75 London Wall, a major commercial-led regeneration project in the heart of the City of London district. The project, which broke ground in early 2025, represents Gamuda Land's largest overseas investment and a significant step into the UK's institutional-grade property sector. '75 London Wall is a statement of intent. It's a long-term play that reflects our confidence in the UK market and our ability to compete on a global stage, while staying true to our town-making values,' said Gamuda Land chief executive officer Chu Wai Lune. Upon its completion in September 2027, the 14-storey 75 London Wall will have a net lettable office space of over 450,000 sq ft. It is set to become a Grade-A sustainable top-tier office, targeting three sustainability performance ratings – Building Research Establishment Environmental Assessment Method (BREEAM) 'Outstanding', WELL Core 'Platinum' and National Australian Built Environment Rating System (NABERS) UK 5 Star Design. Diversifying into student housing Alongside its flagship commercial development, Gamuda Land is actively expanding into the PBSA sector. Its latest project at City Wharf in Glasgow, Scotland – a joint venture with Dandara Living – features 492 student beds integrated into a broader mixed-use neighbourhood. The development follows the company's first PBSA in Woolwich, London – a 299-bedroom scheme delivered in partnership with Q Investment Partners. Together, these projects form part of its strategy to deliver 3,000 student beds across key cities in the UK by 2029. Gamuda Land's move into the PBSA sector is backed by solid market and economic drivers, including: > Leader in global education: The UK is home to 15 of the world's top 100 universities, with over 2.2 million full-time students. International student enrolment is outpacing the growth of domestic students. > Persistent supply-demand imbalance: The UK has consistently faced a shortage of student accommodation, highlighting the need for quality student housing. Real estate and investment firm CBRE's analysis reveals a deficit exceeding 350,000 PBSA beds across major university towns, with Greater London alone facing a shortfall of 106,000 beds – a 45% increase since 2017-2018. > Changing rental landscape: The increasingly challenging environment for smaller private landlords, with the 5% additional stamp duty hike on April 1 and tighter rental regulations, will further drive demand to professionally managed, institutional-grade PBSA. The UK real estate market offers a blend of transparency, resilience and institutional interest that aligns with the company's growth aspirations. The PBSA in City Wharf in Glasgow, Scotland, addresses the acute shortage of high-quality student accommodation in one of the UK's most vibrant and undersupplied student markets. PBSA is a structurally resilient and counter-cyclical asset class, underpinned by sustained demand from both domestic and international students. It is also viewed as a defensive investment, less exposed to political cycles or volatility, making it a stable asset for long-term capital. 'The PBSA sector aligns well with our strengths. We're not just building accommodation, we're designing better living environments for students through thoughtful planning, sustainability and community integration,' added Chu. In line with Glasgow's climate targets and planning policies, City Wharf's PBSA is designed with a strong emphasis on sustainability, integrating low-carbon and zero-carbon technologies, including air-source heat pumps, to achieve a BREEAM 'Very Good' rating. Strategic expansion Gamuda Land entered the UK market in West Hampstead Central in North London, a boutique residential development, completed and fully sold in 2024. With West Hampstead, Woolwich, City Wharf and 75 London Wall in its portfolio, the developer is growing its presence with a measured approach, combining high-growth sectors with institutional-grade opportunities. 'Our UK strategy is to build a diversified and resilient portfolio, balancing short and long-term assets, from income-generating PBSAs to value-accretive commercial projects,' said Chu. He added that the company is actively pursuing several more PBSA opportunities across key university cities in the UK. Creating value As a homegrown developer with a growing global presence, the company continues to draw from its experience in master-planning award-winning townships like Gamuda Gardens, Gamuda Cove and twentyfive7 in Malaysia. The same principles – placemaking, sustainability and community building – are now being applied in its projects across Vietnam, Australia and the UK. 'Expanding abroad has sharpened our capabilities and broadened our perspective. 'It gives us valuable insights into evolving lifestyles, regulatory frameworks and urban challenges, which, in turn, strengthen the way we plan, design and deliver our projects back home in Malaysia,' said Chu. Looking forward With ongoing projects in Vietnam, Singapore, Australia and the UK, the developer's international ventures are a core pillar of its long-term growth strategy. To date, it has invested over RM1.91bil (£340mil) in the UK market, with plans to invest a further RM1.24bil (£220mil) as it scales up its presence in high-growth corridors. This expansion is part of Gamuda Land's broader investment blueprint, which includes RM10.5bil in capital deployment over the next five years, and a total projected gross development value of RM26bil across key markets. 'With strong capital commitment, we are steadfast in scaling our long-term presence in the UK with confidence. And we are actively seeking like-minded partners to match equity in these developments. 'The UK is a sophisticated and mature market – one that rewards long-term thinking and quality execution. We believe there's a real opportunity for strategic co-investment that delivers both financial and social returns,' said Chu. Over the next five years, the company is targeting a balanced sales contribution of 40% from Malaysia, 45% from Vietnam and 15% from the UK, Australia and other regions. As Gamuda Land strengthens its UK footprint, its priority remains clear: delivering high-quality, sustainable developments that respond to the country's evolving market dynamics and long-term housing needs. 'As we build our footprint abroad, we're proud to bring the same values and quality we're known for at home,' said Chu. 'It's about creating places that stand the test of time – wherever they are in the world.'
