INTERNATIONAL JOURNAL OF SCIENTIFIC & TECHNOLOGY RESEARCH VOLUME 9, ISSUE 06, JUNE 2020 ISSN 2277-8616 269 IJSTR©2020 www.ijstr.org Contributions and Challenges of Palm Oil to Smallholders in Malaysia Azhar Ahmad, Lokhman Hakim Osman, Ahmad Raflis Che Omar, Mara Ridhuan Rahman, Suraiya Ishak Abstract—This paper highlights the important contribution of the palm oil industry to the country by providing employment opportunities to more than four million people mostly among the rural community. Smallholders are able to own their land and earn fixed income from palm oil and enjoy the perfect infrastructure facilities. However, there are many obstacles in the global palm oil production such price fluctuations, competition and anti-oil palm campaigns. Therefore, Malaysian smallholders face lack of income from their plantation yields caused by these macroeconomic factors such as rising cost of farming and size of land that is not economical. Therefore, it is a necessity for the smallholders to go into business. An exploratory study among 70 smallholders was done to investigate their interest in doing business. The finding shows that the main reason for their involvement in business activities is to increase their income level. Also, the most widely implemented business type is retailing. Index Terms— Business activities, Income potential, Market fluctuation, Commodity crops, Palm oil, Rural community, Smallholders. ——————————  —————————— 1 INTRODUCTION Palm oil products are Malaysia's largest agricultural commodity sector. As of 2017, the export value of palm oil was RM77.85 billion (USD 5.25 billion), which had contributed for almost 56 percent of Malaysia's commodity export earnings [1]. Rubber commodity products sit at second place with the export value of RM32.3 billion, which was 23 percent to export earnings of the country's commodity sector. From Figure 1, timber products contributed for RM23.2 billion or 16.6% while cocoa product sector contributed RM5.6 billion or 4 per cent to commodity export earnings. The contribution of palm oil is huge on the nation’s soci o- economy. There are 650,000 smallholders in Malaysia and over 2 million people rely on the palm industry as their source of work [1]. Besides providing economic returns to the country as well as employment opportunities, palm oil commodity also faces many challenges. Uncertain market price of exports as well as negative campaigns by foreign countries and NGOs have affected the country's income [2]. Fig. 1: Commodity Products Exports 2017 (Total RM141.1 Billion) This paper discusses the contributions of the palm oil industry to the community and smallholders. Through literature review, commodity crops have provided many benefits to the nation and toward reducing poverty among the rural community. Issues related to the palm oil smallholders are also discussed. With the challenges face by the commodity market various efforts are needed to assist the smallholders and one initiative is get them involve in business activities. The final section elaborates on a survey done on the smallholders to get their feedbacks on business ventures 2 P ALM OIL INDUSTRY IN MALAYSIA Previously, the agriculture sector in Malaysia concentrated on food-based crops such as rice, vegetables and fruits. Agricultural activity at that time was subsistence and based on traditional farming. Then, Malaysia turned to commercial crops like rubber, cocoa and palm oil. Rubber became the main crop of the mid-1890s. Rubber was cultivated and was rapidly developed into a major trading crop after the 1 st World War. However, the size of rubber cultivation has been narrowing as a result of several factors such as decreased in rubber price and the farmers were more interested in planting palm trees. In 1917, the expansion of palm oil plantations in Malaysia had grown from 145,000 hectares to 5,000,000 hectares. The industry also produced various types of products, such as cooking oil, industrial oil and fuel (biodiesel). This development illustrated the growing demand for palm oil. The three major importers of Malaysia’s palm oil are EU nations, China and India [3]. Palm oil industry also has become the major contributor to the agricultural commodity sector. Since then, the agricultural sector has played an important role in contributing to the country's income. This is ————————————————  Azhar Ahmad is an Associate Professor of marketing at the National University of Malaysia (UKM), E-mail: azah@ukm.edu.my  Lokhman Hakim Osman is a senior lecturer of supply chain at the National University of Malaysia. E-mail: lokhman@ukm.edu.my  Ahmad Raflis Omar is a senior lecturer of entrepreneurship at the National of Malaysia, E-mail: raflis@ukm.edu.my  Mara Ridhua is a senior lecturer of accounting at the National University of Malaysia, E-mail: mara@ukm.edu.my  Suraiya Ishak is an Associate Professor in business ethics at the National of Malaysia, Email: suraiya@ukm.edu.my