“A $26 Billion Industry in Malaysia, With High Hopes for Vietnam: “A Gateway to Exceptional Opportunities”

The palm oil industry is a significant economic pillar for Malaysia, currently the world’s second-largest producer and exporter of palm oil. The industry makes substantial contributions to the country’s Gross Domestic Product (GDP), export earnings, and employment, particularly in rural areas.

Palm trees were introduced to British Malaya in the early 1870s as ornamental plants, with the first commercial cultivation starting in Selangor in 1917. The industry has evolved from exporting raw materials to producing higher-value products, catering to global demands.

Palm oil processing is the backbone of Malaysia’s economy, contributing significantly through job creation and export earnings. In 2020, the palm oil sector accounted for an estimated 3.7% of Malaysia’s GDP (up to Q3). Palm oil is one of Malaysia’s leading exports, significantly contributing to the country’s foreign exchange earnings.

Total export earnings from palm oil and palm-based products reached a record high of RM108.52 billion in 2021, a 48.0% increase from RM73.33 billion in 2020, despite lower export volumes. This surge was mainly due to higher prices in the global market.

Palm oil export earnings alone increased significantly by 41.6%, reaching RM64.62 billion in 2021 compared to RM45.65 billion in 2020. In 2024, Malaysia’s palm oil exports rose 12% from 2023 to reach $26 billion (RM114.4 billion).

This sector generates millions of jobs, ranging from plantation workers to those involved in processing and distribution. The industry provides direct and indirect employment to over 3 million Malaysians, including nearly 500,000 smallholders. Most palm oil-related jobs are located in remote rural areas where alternative employment options are scarce, thus fostering rural development and poverty reduction.

Vietnam is an attractive market for Malaysia’s palm oil industry

According to a report by the Malaysian Palm Oil Council (MPOC), before the COVID-19 pandemic, Malaysia consistently exported an average of 572,411 tons of palm oil annually to Vietnam, with the highest volume recorded in 2017 at 633,136 tons. However, starting in 2019, a downward trend emerged, continuing into 2022 due to pandemic-induced demand disruptions.

In 2023, Malaysia’s palm oil imports recovered significantly, surging 46.3% to 459,269 tons compared to 313,881 tons in 2022. Projections indicate that Malaysia’s palm oil imports in 2024 will surpass the 2023 figure, approaching the average recorded from 2014 to 2019.

“Vietnam presents numerous growth opportunities for Malaysian palm oil in the market. As Vietnam’s economy recovers and expands post-pandemic, the demand for Malaysian palm oil is expected to increase further. This favorable prospect offers Malaysian palm oil companies a great opportunity to expand their market presence and strengthen the economic ties between Malaysia and Vietnam,” the report stated.

The report highlights that with a population of nearly 100 million, Vietnam’s demand for oils and fats soared to over 1.5 million tons in 2023, corresponding to a per capita consumption of approximately 15.7 kg. Consequently, palm oil dominates with a market share capture of 62.3%, followed by soybean oil at 14.4% and pork fat at 13.5%.