Saturday, May 28

Creating a sustainable bio-economy in Borneo

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Globally, almost one-half of the global vegetable oil was used for technical purposes, with about a quarter coming from palm oil and palm kernel oil. — Bernama photo

Borneo is rapidly losing its ‘comparative advantage’ in the land-based sectors, i.e., large tracts of cheap land due to growing concerns over sustainability and the proximity to cheap labourers from neighbouring islands.

The risk from over-reliance on primary products like palm oil and timber was also exemplified alongside the booms and busts of commodity prices in the past two decades.

Realising the bottleneck, the Bornean territories have demonstrated their determination in reconstructing their unsustainable and exploitative land-based development trajectory. Such ambition entails not only the conventional strategies of boosting primary production but also bolder moves in driving structural changes.

One way to move forward is to develop and upgrade the bio-based downstream activities.

The idea is to create and keep added value in the territories. It is hoped that the reallocation of economic activities and the diversification of income sources will allow Borneo to pull out of the vicious cycle of unsustainable land exploitation. The term ‘bio-economy’ has been widely used to describe such a transformation.

The concept evolves around the substitution of fossil-based materials with biological resources using cutting-edge biological knowledge and technological innovation. The spectrum of bio-economy strategies is wide, covering the different components from upstream, e.g., intensifying primary production to downstream, e.g., creating new bio-based products and markets.

A natural step for Borneo to boost its economic resilience would be growing a local palm-based oleochemical industry. Globally, almost one-half of the global vegetable oil was used for technical purposes, with about a quarter coming from palm oil and palm kernel oil.

Particularly, the nonfood use in Indonesia has increased substantially. Most were consumed in the chemical industry, with a relatively small amount devoted to biofuel production. Some of the major oleochemicals produced are fatty acids, fatty alcohols, methyl esters, glycerine, and soap noodles.

Other potential markets include highly-priced specialty oleochemicals that can be used in pharmaceutical, cosmetic, and food industries, such as amino acid esters and β-carotene.

Both Sabah and Sarawak have achieved a refining capacity of 11.2 million tonne by 2019.

However, neither has advanced oleochemical plant, despite Peninsula reaching a capacity of 2.7 million tonne according to MPOB. The situation in Kalimantan is not clearly known, but at the country level, the development has been reported to be substantial in the past ten years.

About 74% of palm oil exported by the country in 2019, or about 20 million tonne, was refined palm oil.

Indonesia also sees a fast-growing oleochemical industry with an annual capacity of 11.3 million tonnes, though the majority is outside of Kalimantan. This may be attributed to its incentive policies like palm oil levy, tax allowance, tax holidays, and lower energy costs.

Another line of development is probably the valorisation of low-value bio-resources generated from the land-based sectors. These include palm kernel shells, empty fruit bunches, forestry residues, etc., that are collectively called ‘biomass’.

Roughly, the island generates about 75 million dry tonne of biomass per year, with close to half coming from Sabah and Sarawak. These have not yet included several millions tonne of oil palm trunks generated from replanting.

Interests in biomass and a broader concept of biorefinery emerged in Borneo in the 2010s, with growing demand in Japan and Korea. Both countries have implemented policies to partly substitute coal with biomass in their power plants. Further explorations have also been made to convert biomass into second-generation biofuels, packaging materials, bioplastics, drop-in chemicals, and novel chemicals.

In Sabah and Sarawak, state-specific strategies were rolled out in 2016 under Malaysia’s National Biomass Strategy (NBS) 2020 to develop domestic high value-added biomass-based industries by valorising the agricultural and forestry residues. Initially, plans were made for energy pellet production, driven by the Feed-in-Tariff schemes for bioenergy in both Malaysia and overseas markets.

Interestingly, Indonesia has recently started to explore co-firing biomass for power generation to reduce its coal consumption. However, it is unclear if incentives will be made by the government in the near future, especially given the fact that East Kalimantan is a key coal producer.

Apart from the solid residues, the valorisation of palm oil mill effluents (POME) is also something worth exploring. POME must be treated carefully to avoid serious pollution of Borneo’s water resources as well as reduce the release of methane, a major greenhouse gas, into the atmosphere.

Two interesting options are being explored. One is capturing the methane for biogas production.

Another one is to extract and convert the oil content from POME to liquid biofuels, potentially including aviation fuels.

To date, large-scale mobilisation of oil palm residues has not been realised. Logistics cost is often cited as the key problem. Meanwhile, the deployment of advanced POME and MSW treatment systems was also slow due to financial constraints.

However, the potential role of advanced biorefineries may stretch beyond just profits, especially in tackling the issues of waste management and building a foundation for innovation in the biotechnology industries. Considering its long term strategic importance, the idea of developing advanced biorefineries in Borneo should not be simply discarded.

It is a no-brainer for Borneo to pursue a structural shift in growth to achieve its aspirations for sustainable development. A sustainable bio-economy does not only reduce considerable pressure on the island’s nature but also protect the economies from the wax and wane of primary commodities. Hopefully, it may also provide remunerative employment for local people and cultivate and reserve local talents.

Indeed, time is needed for Borneo to develop its own version of ‘bio-economy’. The pre-requisite would be a more vibrant ecosystem of industrial development with cross-sectorial and synergistic collaboration between agriculture, forestry, energy, chemical, and food sectors.

The vision of creating a digital economy in Sarawak may lay the foundation to materialize such collaboration and potentially integration. While Sarawak and Sabah also enjoy more advantages than their Indonesian counterparts due to more developed infrastructure, the construction of Nusantara in East Kalimantan is likely to direct much investment to the province in the near future.

In this context, forging collaboration among the Bornean territories will be an important aspect to look at. This may be built upon existing programmes, i.e., ‘Sabah-North Kalimantan Border Economic Area Programme’ and ‘Malindo Socio-Economic Cooperation’ between West Kalimantan and Sarawak.

It is worth further exploring how the Bornean territories can form a larger ‘bio-economy’ ecosystem and regional value chains to support each other’s aspirations in transforming their economies.

Dr. Goh Chun Sheng is currently the Programme Leader for Master in Sustainable Development Management at Jeffrey Sachs Center, Sunway University. He is also an Associate of the Harvard University Asia Center. Chun Sheng’s research interests lie within the intersection of bio-economy development and environmental restoration, with a special focus on both Malaysian and Indonesian Borneo.