US urges Malaysia stay committed to trade talks
US urges Malaysia stay committed to trade talks
The case for a US-Malaysia free trade agreement is "stronger than ever," a top US trade official said on Friday, a day after Malaysian opposition groups urged the government there to suspend talks.
"We have seen recently a downtick in foreign investment in Malaysia" that appears to reflect doubts over the country's continued commitment to economic reform, Deputy US Trade Representative Karan Bhatia told reporters.
He argued that a free trade agreement with the United States would help reverse that trend and give Malaysia a significant advantage over other Southeast Asian countries. "I think the case for Malaysia to conclude an FTA (free trade agreement) with the United States is stronger than ever, from Malaysia's perspective," Bhatia said.
The United States and Malaysia launched talks in June with the goal of reaching a free trade pact by the end of the year. A coalition of 30 rights and opposition groups urged the Malaysian government on Thursday to halt the negotiations, saying it would hurt the trade-dependent country.
The two countries are set to hold their third round of negotiations the week of October 29 in Kuala Lumpur. The talks have been hampered by a recent change of Malaysia's lead negotiator, as well as internal deliberations over some of Malaysia position in the talks.
"I think the third round coming up is important. It's important to demonstrate there is momentum here and that the Malaysians are engaged," Bhatia said. Bhatia cast doubt on the goal of the two sides finishing by the end of the year, but said it was important that a deal be reached by early 2007 so it can be submitted to Congress before US trade promotion authority expires.
That legislation allows the White House to negotiate trade agreements that Congress can only approve or reject without making any changes. "We stand ready to move as fast as the Malaysians are able to and it remains our hope that they're able to get their positions prepared to get this thing done before TPA expires, but that largely will rest on Malaysia's ability to be proactively engaged in the negotiations," Bhatia said.
Malaysian PM and Mahathir to meet on Sunday to resolve feud: report
Highly-anticipated peace talks between Malaysia's former premier Mahathir Mohamad and his successor Abdullah Ahmad Badawi will take place on Sunday, sources and reports said.
An official in the prime minister's office told AFP that the meeting, aimed at resolving a bitter feud which has raged this year, will take place at 3:00pm local time (0700 GMT) at Abdullah's residence in the administrative capital.
Sunday newspapers also said the meeting would be held at that time on Sunday, but differed over the venue.
Mahathir's office was unreachable for comment and an aide to Abdullah said the time and date for talks was a private matter and up to the prime minister himself to decide.
Abdullah and Mahathir last week agreed to hold talks to try to resolve their differences after months of public brawling which sent shockwaves through the ruling party, and brought warnings the government could be destabilised.
Both sides said they want to meet before the Hari Raya festival, which marks the end of the Muslim fasting month of Ramadan and is expected to be held Tuesday.
Mahathir has said that at the meeting he will raise the issues that he has "been keeping in my heart" since he handed the top job to Abdullah in 2003 - a decision he now says he regrets.
Infuriated by the axing of pet projects conceived during his two decades in power, including an abandoned proposal to build a new bridge to Singapore, Mahathir has accused Abdullah of incompetence, nepotism and corruption.
Abdullah-Mahathir Meeting: Pak Lah Gives No Clue To Date Or Venue
-- The guessing game on the meeting between Datuk Seri Abdullah Ahmad Badawi and Tun Dr Mahathir Mohamad continues as the prime minister declines to say anything on their meeting date and venue.
Swarmed by reporters after attending the Deepavali open house hosted by Works Minister Datuk Seri S. Samy Vellu, Abdullah kept mum to questions posed by reporters who followed him from Dewan Merdeka of the Putra World Trade Centre to his official car parked outside the hall.
Abdullah and Dr Mahathir had agreed to meet before Hari Raya Aidilfitri to discuss issues raised by the former prime minister.
Dr Mahathir had openly criticised Abdullah for reversing some of his policies including scrapping the "crooked bridge" project to replace the Johor Causeway linking Malaysia and Singapore.
There are no conditions or mediators for the "four-eye" meeting.
Abdullah had confirmed that he would meet Dr Mahathir before Hari Raya. Hari Raya is expected to fall on Tuesday.
With only two days to go for Hari Raya, many are eagerly waiting when the two leaders will meet and to what extent the closed-door meeting will resolve the differences between them.
Dr Mahathir had said he would raise again the issues that he had been keeping in his heart since he left the government.
The meeting was proposed by Mubarak, the former elected representatives' council.
Abdullah wished Malaysian Indians of Hindu faith a Happy Deepavali while walking towards his car.
Deputy Prime Minister Datuk Seri Najib Tun Razak, ministers, corporate figures and community leaders were among the 10,000-odd guests at the open house.
US 'arrogant and stupid' in Iraq
A senior US state department official has said that the US has shown "arrogance and stupidity" in Iraq.
Alberto Fernandez told al-Jazeera TV the US was now willing to talk to any insurgent group apart from al-Qaeda in Iraq, to reduce sectarian bloodshed.
His remarks came after President George W Bush discussed changing tactics with top military commanders.
A report that officials are drawing up a timetable for Iraq's government to improve security has been denied.
The New York Times reported that the Bush administration was preparing a timetable for the government to meet objectives - including disarming sectarian militias - that would stabilise the country and allow US troops to take a reduced role.
I think there is great room for strong criticism, because without doubt, there was arrogance and stupidity by the United States in Iraq
Alberto Fernandez
The plan is "to get the Iraqis to step up to the plate", the newspaper cited a senior administration official as saying. "We can't be there for ever," the official added.
But White House spokeswoman Nicole Guillemard denied the report. "The story is not accurate, but we are constantly developing new tactics to achieve our goal," she said.
Meanwhile, British Foreign Office Minister Kim Howells, in an interview with the BBC, has suggested that the Iraqi security forces could take over much of the work of US-led forces within a year.
'Regional disaster'
Mr Fernandez, an Arabic speaker who is director of public diplomacy in the state department's Bureau of Near Eastern Affairs, told Qatar-based al-Jazeera that the world was "witnessing failure in Iraq".
"That's not the failure of the United States alone, but it is a disaster for the region," he said.
"I think there is great room for strong criticism, because without doubt, there was arrogance and stupidity by the United States in Iraq."
On talks with insurgent groups, he said: "We are open to dialogue because we all know that, at the end of the day, the solution to the hell and the killings in Iraq is linked to an effective Iraqi national reconciliation."
'Goal is victory'
Mr Fernando's comments came after Mr Bush said in his weekly radio address that US troops were changing tactics to deal with the insurgency.
"Our goal in Iraq is clear and unchanging," he said. "Our goal is victory. What is changing are the tactics we use to achieve that goal."
He later held a teleconference call with senior military commanders, as violence continued in Iraq.
Saturday saw 17 people killed in a mortar attack on a market near the capital, Baghdad, while three US marines killed in Anbar province, bringing the total number of US troops killed in Iraq in October to 78.
The BBC's James Westhead in Washington says that while there is no official change in US strategy, change is on everyone's lips.
A new poll weeks before key Congressional elections shows two-thirds of Americans believe the US is losing the war in Iraq.
War against North Korea would cost USA 100 billion dollars and 100,000 lives !
The situation connected with the nuclear tests conducted by North Korea continues to exacerbate. US intelligence detected a suspicious vessel in North Korean waters today. The destination of the vessel was unknown. US special agents presumed that the ship was probably carrying nuclear weapons on board. It goes without saying that the US administration believed that Pyongyang was trying to share its nuclear technologies with other states, Iran for example.
The economic sanctions, which the USA has recently imposed against North Korea, have already brought certain results. During an official meeting with a Chinese ambassador, N.Korean leader Kim Jong-il apologized for the recently conducted nuclear test and stated that North would be ready to resume the talks if the USA agreed to withdraw financial restrictions.
On the other hand, the USA is seriously considering a military method of solving the N.Korean problem when experts of many countries confirmed the fact of nuclear weapons test. In this connected US journalists recollected that ex-president Bill Clinton used to ask for a detailed report from the US government regarding all the numbers to study an opportunity of declaring war on North Korea. As it turns out, this war would have cost the US Treasury $100 billion. More importantly, the USA would have sacrificed the lives of its 100,000 soldiers during the battles.
Bill Clinton and William Perry, his Defense secretary, considered going to war against Pyongyang in 1994. On May 19 of that year, Perry, along with the then Joint Chiefs chairman, John Shalikashvili, and the commander of U.S. forces in South Korea at the time, Gen. Gary Luck, briefed the president on the anticipated costs of such a war: roughly 52,000 U.S. military killed or wounded; 490,000 South Korean military ditto, and untold numbers of Northern dead and civilian casualties, all in the first 90 days of conflict—together with a U.S. price tag of more than $61 billion. Luck later calculated the ultimate toll at more than 1 million dead, possibly including as many as 100,000 Americans, and a final bill to U.S. taxpayers in excess of $100 billion—not to mention more than $1 trillion in damage to South Korea’s economy, Newsweek wrote.
Having studied the information in detail, Clinton and Perry made a decision to turn the war idea down and start peace talks with Pyongyang.
The state of affairs is different nowadays. Kim Jong-il said during his meeting with a Chinese Ambassador of Hu Jintao that North Korea would be ready to resume bilateral or six-sided peace talks in the event the US administration could agree to compromise. The hexahedral talks for the N.Korean problem with the participation of the USA, China, Russia, South Korea, Japan and North Korea were launched in 2003 and subsequently suspended two years later in November of 2005.
Southeast Asia's Clean Air Conundrum
Burning of Indonesian forests is causing widespread pollution. But it's done to grow crops for environment-friendly—and lucrative—biofuels
If you live in Singapore or Kuala Lumpur, the last several weeks have been hellish for you. A miasma of choking haze has sent pollution readings off the charts and health authorities are warning of much worse to come. As in years past, the foul air is the direct result of raging forest fires across the waters in Indonesia's Sumatra region as villagers and farmers clear land for logging and the export of tropical timber and planting of a variety of agricultural products.
Yet there is a weirdly paradoxical twist to this year's frenzy of pollution-generating deforestation: Indonesia's slash and burn wave owes much to the soaring demand for environmentally-friendly biofuel.
Plantation companies based in Singapore and Malaysia are willing to pay top dollar for land that they can plant with oil palm trees that bear fruit to be crushed to produce palm oil, typically used for cooking products. However, palm oil is also a key element in the production of Asian biodiesel, which burns more cleanly than traditional diesel fuel.
MONEY MAKER.
The irony of setting fires and creating a pall of dirty air over much of Southeast Asia to boost production of cleaner energy hasn't been lost on environmental groups in the region. "Why are we burning our forests to plant something that we have been told will be clean, environmentally friendly fuel?" asks S.M. Idris, chairman of environmental lobby group Sahabat Alam Malaysia (Friends of the Earth). "This is technology gone mad."
Perhaps, yet there is also a lot of money driving the craze for biofuel, which is a blend of vegetable oils (or in the U.S., soybean oil) and traditional diesel fuel. Diesel blended with up to 10% vegetable oil in the total mix burns cleaner and does not require any engine modifications. Palm oil is one of Indonesia's biggest exports.
Oil palm trees grown close to the equator in Malaysia and Indonesia have a very high oil content. This makes palm oil one of the most economical of the vegetable oils that can be converted to diesel. Palm oil sells at a huge 15% to 40% discount compared with other vegetable oils such as rapeseed and soybean and is therefore commercially a more viable alternative energy source.
GREAT EXPECTATIONS.
All this explains why companies in Southeast Asia are raising serious money to be players in biofuel. When plantation owner Wilmar International—controlled jointly by Malaysian billionaire Robert Kuok and U.S. agricultural giant Archer Daniel Midland (ADM)—listed on the Singapore exchange earlier this year, its stock nearly doubled within four months on the news that it was building one of the region's biggest biofuel plants. (The plant won't come onstream until 2007 at the earliest.)
Another biofuel producer, Indofood Agri-Resources, owned by Indonesian billionaire Liem Sioe Liong, is expected raise several hundred million dollars in an initial public offering at the Singapore Stock Exchange next month.
When crude oil prices rose to the $78 a barrel range earlier this year, Southeast Asia began building up biofuel capacity. Malaysia has already approved over 5 million tons of biodiesel capacity while neighboring Indonesia has approved nearly 3 million tons.
CRAZY SPENDING.
Some 90 biodiesel plants are in various stages of construction and about 40 or so are on the drawing board in the two countries. The U.S. (the world's biggest oil consumer), by comparison boasts 86 biodiesel plants, with another 62 under construction.
Indonesian President Susilo Bambang Yudhoyono has described the biofuels sector as "a key engine of growth" in his country. Jakarta estimates some $2 billion could be spent on the biofuel sector in the country over the next four years and Malaysia could easily top that. "There is a lot of money being thrown at biofuel plants these days," says Yeo Howe, chief financial officer and executive director of IOI, one of Malaysia's largest plantations, whose own company has taken a wait and see attitude. "It's crazy."
But regional officials don't believe things are getting out of hand. Malaysian Commodities and Plantation Industries Minister Peter Chin says countries like his own are only catering to a growing global demand for cleaner alternative fuel. "It's all private-sector driven by plantation companies who obviously know what they are doing," he says. Citigroup estimates global biodiesel capacity will more than double to 13.5 million tons by the end of next year vs. 2005 levels.
AGGRESSIVE EXPLORATION.
Analysts say three catalysts are driving the current biodiesel mania. High crude oil prices, the Kyoto Protocol on global warming, and the need to lessen reliance on crude oil. Though oil prices have fallen 20% from the peak in recent months, anything above $55 a barrel makes palm oil-based biodiesel a commercially viable option.
Moreover, adherence to the Kyoto pact on global warming, which sets limits on greenhouse gases (including carbon dioxide emissions), has made it necessary for countries to aggressively explore cleaner and renewable fuels.
Demand from Europe, where diesel fuel use is widespread, is also driving demand. Palm oil exports from Malaysia and Indonesia to Europe surged 19% last year—higher than the 15% growth in palm oil exports to China. South Korea and Japan are starting to emerge as large consumers of biodiesel as they try to reduce carbon emissions and their own dependence on oil.
HANDSOME REWARDS.
Is this stuff really cost competitive? Some, such as IOI's Yeo, argue no, not at current and more moderate oil prices, especially when you screen out the lavish government subsidies and tax incentives being showered on producers. Malaysian palm-diesel plants, for instance, operate under a so-called "pioneer status."
That means that their profits are tax free for 5 to 10 years. "The key bet you are making right now by investing in a biofuel plant is not whether oil prices will be $70 or $50—but whether there will be political will to support the biodiesel industry" says Yeo.
If there is, the rewards could be handsome for investors. With the help of huge tax incentives, biodiesel plants can be fairly lucrative. Credit Suisse analyst Tan Ting Min figures that biodiesel plants have an annual rate of return of over 30% on invested capital and cover their upfront costs in less than three years. All of this sounds promising except for one thing: the biofuel boom right now seems to be inflicting more environmental damage than it is averting.
(Source : Business Week - Assif Shameen )
Assif Shameen covers Southeast Asia for BusinessWeek.com from Singapore.
Malaysia Mahathir Badawi Israel North Korea Ricel Lebanon Beirut Jerusalem Iraq Bush America UN Trade Talks Haze Indonesia
The case for a US-Malaysia free trade agreement is "stronger than ever," a top US trade official said on Friday, a day after Malaysian opposition groups urged the government there to suspend talks.
"We have seen recently a downtick in foreign investment in Malaysia" that appears to reflect doubts over the country's continued commitment to economic reform, Deputy US Trade Representative Karan Bhatia told reporters.
He argued that a free trade agreement with the United States would help reverse that trend and give Malaysia a significant advantage over other Southeast Asian countries. "I think the case for Malaysia to conclude an FTA (free trade agreement) with the United States is stronger than ever, from Malaysia's perspective," Bhatia said.
The United States and Malaysia launched talks in June with the goal of reaching a free trade pact by the end of the year. A coalition of 30 rights and opposition groups urged the Malaysian government on Thursday to halt the negotiations, saying it would hurt the trade-dependent country.
The two countries are set to hold their third round of negotiations the week of October 29 in Kuala Lumpur. The talks have been hampered by a recent change of Malaysia's lead negotiator, as well as internal deliberations over some of Malaysia position in the talks.
"I think the third round coming up is important. It's important to demonstrate there is momentum here and that the Malaysians are engaged," Bhatia said. Bhatia cast doubt on the goal of the two sides finishing by the end of the year, but said it was important that a deal be reached by early 2007 so it can be submitted to Congress before US trade promotion authority expires.
That legislation allows the White House to negotiate trade agreements that Congress can only approve or reject without making any changes. "We stand ready to move as fast as the Malaysians are able to and it remains our hope that they're able to get their positions prepared to get this thing done before TPA expires, but that largely will rest on Malaysia's ability to be proactively engaged in the negotiations," Bhatia said.
Malaysian PM and Mahathir to meet on Sunday to resolve feud: report
Highly-anticipated peace talks between Malaysia's former premier Mahathir Mohamad and his successor Abdullah Ahmad Badawi will take place on Sunday, sources and reports said.
An official in the prime minister's office told AFP that the meeting, aimed at resolving a bitter feud which has raged this year, will take place at 3:00pm local time (0700 GMT) at Abdullah's residence in the administrative capital.
Sunday newspapers also said the meeting would be held at that time on Sunday, but differed over the venue.
Mahathir's office was unreachable for comment and an aide to Abdullah said the time and date for talks was a private matter and up to the prime minister himself to decide.
Abdullah and Mahathir last week agreed to hold talks to try to resolve their differences after months of public brawling which sent shockwaves through the ruling party, and brought warnings the government could be destabilised.
Both sides said they want to meet before the Hari Raya festival, which marks the end of the Muslim fasting month of Ramadan and is expected to be held Tuesday.
Mahathir has said that at the meeting he will raise the issues that he has "been keeping in my heart" since he handed the top job to Abdullah in 2003 - a decision he now says he regrets.
Infuriated by the axing of pet projects conceived during his two decades in power, including an abandoned proposal to build a new bridge to Singapore, Mahathir has accused Abdullah of incompetence, nepotism and corruption.
Abdullah-Mahathir Meeting: Pak Lah Gives No Clue To Date Or Venue
-- The guessing game on the meeting between Datuk Seri Abdullah Ahmad Badawi and Tun Dr Mahathir Mohamad continues as the prime minister declines to say anything on their meeting date and venue.
Swarmed by reporters after attending the Deepavali open house hosted by Works Minister Datuk Seri S. Samy Vellu, Abdullah kept mum to questions posed by reporters who followed him from Dewan Merdeka of the Putra World Trade Centre to his official car parked outside the hall.
Abdullah and Dr Mahathir had agreed to meet before Hari Raya Aidilfitri to discuss issues raised by the former prime minister.
Dr Mahathir had openly criticised Abdullah for reversing some of his policies including scrapping the "crooked bridge" project to replace the Johor Causeway linking Malaysia and Singapore.
There are no conditions or mediators for the "four-eye" meeting.
Abdullah had confirmed that he would meet Dr Mahathir before Hari Raya. Hari Raya is expected to fall on Tuesday.
With only two days to go for Hari Raya, many are eagerly waiting when the two leaders will meet and to what extent the closed-door meeting will resolve the differences between them.
Dr Mahathir had said he would raise again the issues that he had been keeping in his heart since he left the government.
The meeting was proposed by Mubarak, the former elected representatives' council.
Abdullah wished Malaysian Indians of Hindu faith a Happy Deepavali while walking towards his car.
Deputy Prime Minister Datuk Seri Najib Tun Razak, ministers, corporate figures and community leaders were among the 10,000-odd guests at the open house.
**********
US 'arrogant and stupid' in Iraq
A senior US state department official has said that the US has shown "arrogance and stupidity" in Iraq.
Alberto Fernandez told al-Jazeera TV the US was now willing to talk to any insurgent group apart from al-Qaeda in Iraq, to reduce sectarian bloodshed.
His remarks came after President George W Bush discussed changing tactics with top military commanders.
A report that officials are drawing up a timetable for Iraq's government to improve security has been denied.
The New York Times reported that the Bush administration was preparing a timetable for the government to meet objectives - including disarming sectarian militias - that would stabilise the country and allow US troops to take a reduced role.
I think there is great room for strong criticism, because without doubt, there was arrogance and stupidity by the United States in Iraq
Alberto Fernandez
The plan is "to get the Iraqis to step up to the plate", the newspaper cited a senior administration official as saying. "We can't be there for ever," the official added.
But White House spokeswoman Nicole Guillemard denied the report. "The story is not accurate, but we are constantly developing new tactics to achieve our goal," she said.
Meanwhile, British Foreign Office Minister Kim Howells, in an interview with the BBC, has suggested that the Iraqi security forces could take over much of the work of US-led forces within a year.
'Regional disaster'
Mr Fernandez, an Arabic speaker who is director of public diplomacy in the state department's Bureau of Near Eastern Affairs, told Qatar-based al-Jazeera that the world was "witnessing failure in Iraq".
"That's not the failure of the United States alone, but it is a disaster for the region," he said.
"I think there is great room for strong criticism, because without doubt, there was arrogance and stupidity by the United States in Iraq."
On talks with insurgent groups, he said: "We are open to dialogue because we all know that, at the end of the day, the solution to the hell and the killings in Iraq is linked to an effective Iraqi national reconciliation."
'Goal is victory'
Mr Fernando's comments came after Mr Bush said in his weekly radio address that US troops were changing tactics to deal with the insurgency.
"Our goal in Iraq is clear and unchanging," he said. "Our goal is victory. What is changing are the tactics we use to achieve that goal."
He later held a teleconference call with senior military commanders, as violence continued in Iraq.
Saturday saw 17 people killed in a mortar attack on a market near the capital, Baghdad, while three US marines killed in Anbar province, bringing the total number of US troops killed in Iraq in October to 78.
The BBC's James Westhead in Washington says that while there is no official change in US strategy, change is on everyone's lips.
A new poll weeks before key Congressional elections shows two-thirds of Americans believe the US is losing the war in Iraq.
War against North Korea would cost USA 100 billion dollars and 100,000 lives !
The situation connected with the nuclear tests conducted by North Korea continues to exacerbate. US intelligence detected a suspicious vessel in North Korean waters today. The destination of the vessel was unknown. US special agents presumed that the ship was probably carrying nuclear weapons on board. It goes without saying that the US administration believed that Pyongyang was trying to share its nuclear technologies with other states, Iran for example.
The economic sanctions, which the USA has recently imposed against North Korea, have already brought certain results. During an official meeting with a Chinese ambassador, N.Korean leader Kim Jong-il apologized for the recently conducted nuclear test and stated that North would be ready to resume the talks if the USA agreed to withdraw financial restrictions.
On the other hand, the USA is seriously considering a military method of solving the N.Korean problem when experts of many countries confirmed the fact of nuclear weapons test. In this connected US journalists recollected that ex-president Bill Clinton used to ask for a detailed report from the US government regarding all the numbers to study an opportunity of declaring war on North Korea. As it turns out, this war would have cost the US Treasury $100 billion. More importantly, the USA would have sacrificed the lives of its 100,000 soldiers during the battles.
Bill Clinton and William Perry, his Defense secretary, considered going to war against Pyongyang in 1994. On May 19 of that year, Perry, along with the then Joint Chiefs chairman, John Shalikashvili, and the commander of U.S. forces in South Korea at the time, Gen. Gary Luck, briefed the president on the anticipated costs of such a war: roughly 52,000 U.S. military killed or wounded; 490,000 South Korean military ditto, and untold numbers of Northern dead and civilian casualties, all in the first 90 days of conflict—together with a U.S. price tag of more than $61 billion. Luck later calculated the ultimate toll at more than 1 million dead, possibly including as many as 100,000 Americans, and a final bill to U.S. taxpayers in excess of $100 billion—not to mention more than $1 trillion in damage to South Korea’s economy, Newsweek wrote.
Having studied the information in detail, Clinton and Perry made a decision to turn the war idea down and start peace talks with Pyongyang.
The state of affairs is different nowadays. Kim Jong-il said during his meeting with a Chinese Ambassador of Hu Jintao that North Korea would be ready to resume bilateral or six-sided peace talks in the event the US administration could agree to compromise. The hexahedral talks for the N.Korean problem with the participation of the USA, China, Russia, South Korea, Japan and North Korea were launched in 2003 and subsequently suspended two years later in November of 2005.
**********
Southeast Asia's Clean Air Conundrum
Burning of Indonesian forests is causing widespread pollution. But it's done to grow crops for environment-friendly—and lucrative—biofuels
If you live in Singapore or Kuala Lumpur, the last several weeks have been hellish for you. A miasma of choking haze has sent pollution readings off the charts and health authorities are warning of much worse to come. As in years past, the foul air is the direct result of raging forest fires across the waters in Indonesia's Sumatra region as villagers and farmers clear land for logging and the export of tropical timber and planting of a variety of agricultural products.
Yet there is a weirdly paradoxical twist to this year's frenzy of pollution-generating deforestation: Indonesia's slash and burn wave owes much to the soaring demand for environmentally-friendly biofuel.
Plantation companies based in Singapore and Malaysia are willing to pay top dollar for land that they can plant with oil palm trees that bear fruit to be crushed to produce palm oil, typically used for cooking products. However, palm oil is also a key element in the production of Asian biodiesel, which burns more cleanly than traditional diesel fuel.
MONEY MAKER.
The irony of setting fires and creating a pall of dirty air over much of Southeast Asia to boost production of cleaner energy hasn't been lost on environmental groups in the region. "Why are we burning our forests to plant something that we have been told will be clean, environmentally friendly fuel?" asks S.M. Idris, chairman of environmental lobby group Sahabat Alam Malaysia (Friends of the Earth). "This is technology gone mad."
Perhaps, yet there is also a lot of money driving the craze for biofuel, which is a blend of vegetable oils (or in the U.S., soybean oil) and traditional diesel fuel. Diesel blended with up to 10% vegetable oil in the total mix burns cleaner and does not require any engine modifications. Palm oil is one of Indonesia's biggest exports.
Oil palm trees grown close to the equator in Malaysia and Indonesia have a very high oil content. This makes palm oil one of the most economical of the vegetable oils that can be converted to diesel. Palm oil sells at a huge 15% to 40% discount compared with other vegetable oils such as rapeseed and soybean and is therefore commercially a more viable alternative energy source.
GREAT EXPECTATIONS.
All this explains why companies in Southeast Asia are raising serious money to be players in biofuel. When plantation owner Wilmar International—controlled jointly by Malaysian billionaire Robert Kuok and U.S. agricultural giant Archer Daniel Midland (ADM)—listed on the Singapore exchange earlier this year, its stock nearly doubled within four months on the news that it was building one of the region's biggest biofuel plants. (The plant won't come onstream until 2007 at the earliest.)
Another biofuel producer, Indofood Agri-Resources, owned by Indonesian billionaire Liem Sioe Liong, is expected raise several hundred million dollars in an initial public offering at the Singapore Stock Exchange next month.
When crude oil prices rose to the $78 a barrel range earlier this year, Southeast Asia began building up biofuel capacity. Malaysia has already approved over 5 million tons of biodiesel capacity while neighboring Indonesia has approved nearly 3 million tons.
CRAZY SPENDING.
Some 90 biodiesel plants are in various stages of construction and about 40 or so are on the drawing board in the two countries. The U.S. (the world's biggest oil consumer), by comparison boasts 86 biodiesel plants, with another 62 under construction.
Indonesian President Susilo Bambang Yudhoyono has described the biofuels sector as "a key engine of growth" in his country. Jakarta estimates some $2 billion could be spent on the biofuel sector in the country over the next four years and Malaysia could easily top that. "There is a lot of money being thrown at biofuel plants these days," says Yeo Howe, chief financial officer and executive director of IOI, one of Malaysia's largest plantations, whose own company has taken a wait and see attitude. "It's crazy."
But regional officials don't believe things are getting out of hand. Malaysian Commodities and Plantation Industries Minister Peter Chin says countries like his own are only catering to a growing global demand for cleaner alternative fuel. "It's all private-sector driven by plantation companies who obviously know what they are doing," he says. Citigroup estimates global biodiesel capacity will more than double to 13.5 million tons by the end of next year vs. 2005 levels.
AGGRESSIVE EXPLORATION.
Analysts say three catalysts are driving the current biodiesel mania. High crude oil prices, the Kyoto Protocol on global warming, and the need to lessen reliance on crude oil. Though oil prices have fallen 20% from the peak in recent months, anything above $55 a barrel makes palm oil-based biodiesel a commercially viable option.
Moreover, adherence to the Kyoto pact on global warming, which sets limits on greenhouse gases (including carbon dioxide emissions), has made it necessary for countries to aggressively explore cleaner and renewable fuels.
Demand from Europe, where diesel fuel use is widespread, is also driving demand. Palm oil exports from Malaysia and Indonesia to Europe surged 19% last year—higher than the 15% growth in palm oil exports to China. South Korea and Japan are starting to emerge as large consumers of biodiesel as they try to reduce carbon emissions and their own dependence on oil.
HANDSOME REWARDS.
Is this stuff really cost competitive? Some, such as IOI's Yeo, argue no, not at current and more moderate oil prices, especially when you screen out the lavish government subsidies and tax incentives being showered on producers. Malaysian palm-diesel plants, for instance, operate under a so-called "pioneer status."
That means that their profits are tax free for 5 to 10 years. "The key bet you are making right now by investing in a biofuel plant is not whether oil prices will be $70 or $50—but whether there will be political will to support the biodiesel industry" says Yeo.
If there is, the rewards could be handsome for investors. With the help of huge tax incentives, biodiesel plants can be fairly lucrative. Credit Suisse analyst Tan Ting Min figures that biodiesel plants have an annual rate of return of over 30% on invested capital and cover their upfront costs in less than three years. All of this sounds promising except for one thing: the biofuel boom right now seems to be inflicting more environmental damage than it is averting.
(Source : Business Week - Assif Shameen )
Assif Shameen covers Southeast Asia for BusinessWeek.com from Singapore.
Malaysia Mahathir Badawi Israel North Korea Ricel Lebanon Beirut Jerusalem Iraq Bush America UN Trade Talks Haze Indonesia
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