Chennai
With stringent European Union Deforestation Regulation (EUDR) norms fast approaching, intense regional competition, and a cap on acreage expansion, Malaysia’s palm oil industry is ramping up efforts to empower its smallholders. These farmers, who form a critical backbone of the sector, are being positioned as key players in driving sustainable growth and global compliance.
The European Union — the third-largest importer of Malaysian palm oil after India and China — remains a vital market, sourcing approximately 7.7 per cent of palm oil and related products annually. Meeting EUDR and other international standards is, therefore, critical for Malaysia to maintain its global market share.
Making it big
Smallholders account for a significant portion of the industry. According to the Malaysian Palm Oil Board (MPOB), they cultivated 26.4 per cent of the total palm oil plantation area in 2023, up slightly from 26.2 per cent in 2022. More than 300,000 smallholder farmers in Malaysia typically manage plantations of less than 40 hectares.
Despite their contribution, smallholders often operate on tight margins. Challenges include limited access to capital, fluctuating palm oil prices, small landholdings and lack of resources or advanced technology. To stay competitive, they rely on support such as seeds, fertilizers, agricultural best practices and regular training in climate resilience and disease management.
Sabah, which contributes nearly a quarter of Malaysia’s palm oil output, is a key focus area for smallholder empowerment. State-owned Sawit Kinabalu, a major regional player, notes that at least 10 per cent of the smallholders in Sabah are associated with the company.
“We’re closely working with the federal government, trade promotion bodies, and certifying agencies such as the Malaysian Palm Oil Council, Malaysian Palm Oil Board, and the Malaysian Sustainable Palm Oil (MSPO) to support more smallholders and ensure EUDR compliance,” said Nazlan Mohamad, Chief Sustainability Officer of Sawit Kinabalu. “Unlike large corporates or state-owned farms, smallholders manage, harvest and sell their own fresh fruit bunches (FFBs), giving them greater autonomy and earning potential.”
Sustainable certification
One of the leading organisations aiding smallholders is Wild Asia, a social enterprise that promotes sustainable palm oil production. Its flagship initiative, the Wild Asia Group Scheme (WAGS), helps independent farmers achieve certification under global standards such as the Roundtable on Sustainable Palm Oil (RSPO) and MSPO. WAGS provides technical assistance, training, and continuous support to improve farming practices and help farmers access premium markets.
“Smallholders contribute 30 per cent of Sabah’s palm oil output. We’ve certified 2,703 farmers covering 27,000 hectares in Sabah alone,” said Peter Chang, Director of Operations at Wild Asia. “Our goal is to reduce their production costs and help them earn more through certified, sustainable practices.”
Chang said the average annual yield for a smallholder is around 12 tonnes per hectare. “Through WAGS, a farmer pays just $270 per year for certification, compared to $2,000 if done independently. They also gain a MYR 16–24 premium per tonne of FFB and can cut fertiliser costs by up to 70 per cent. This isn’t a one-off effort — we support them year-round and conduct annual audits.”
Digital solutions
Several initiatives are also being led by MPOB and the government to integrate sustainability with technology. The Sawit Intelligent Management System (SIMS) helps licensees comply with regulations and offers mobile access to real-time data on FFB transactions and prices, thus increasing transparency and traceability.
As of April 30, 2025, Sabah has achieved a 97.62 per cent MSPO certification rate, covering 30,768 smallholders across 191,204 hectares, according to MPOB. Nationally, the Board aims to certify over 90 per cent of independent smallholders by year-end.
Government programmes such as the Crop Integration Scheme and Livestock Integration Scheme further supports diversification and sustainability in oil palm plantations, helping smallholders improve income while aligning with global environmental standards.
A sustainable future
Malaysia’s palm oil industry is undergoing a quiet but significant transformation. By equipping smallholders with training, technology, certification and global market access, it addresses environmental concerns while also securing livelihoods. As the global demand for sustainably/ethically sourced products rises, smallholders will become a pivotal force in ensuring the industry’s resilience and long-term growth.
The writer was in Malaysia recently at the invitation of MPOC