Abstract

The Malaysian palm oil sector is an example of how a developing country can manage to establish itself as a world leader in the production and processing of an agricultural crop. This paper examines the formative period (1970–1990) of the Malaysian palm oil industry by focusing on the productivity at the plantation level, the first level of production, to understand how this process influenced the establishment of the higher value-added refineries. The paper finds that the official productivity figures, the oil yield (metric tonnes of crude palm oil per hectare), is inconsistent and estimates more consistent productivity figures. In addition, the paper briefly considers labour productivity as the Malaysian palm oil sector is more labour-intensive than its competitors. The main finding is that the improvements in plantation productivity were crucial for the development of the palm oil processing refinery sector, which might hold important implications for other developing countries wishing to promote agricultural processing industries.