Malaysia looks to Pakistan after India palm oil controls

Business Desk | Published: 23:58, Jan 13,2020


A file photo shows a worker picking palm oil fruits in Malaysia. Malaysia may expand its palm oil trade with Pakistan following controls imposed by the Indian government on refined palm oil imports. — AFP photo

Malaysia may expand its palm oil trade with Pakistan following controls imposed by the Indian government on refined palm oil imports, reports Arab News.

‘Pakistan is one of Malaysia’s most regular and dependable buyers of local palm oil and products,’ Malaysian Primary Industries Minister Teresa Kok said on Sunday.

Kok met Pakistan’s adviser for commerce, textiles, industry and production and investment Abdul Razak Dawood on an official visit to Pakistan.

‘In 2018, Pakistan imported 1.16 million metric tonnes of palm oil from Malaysia valued at RM2.97 billion ($730 million). Avenues were discussed to further expand Malaysian palm oil share in this growing market,’ said a statement by the Ministry of Primary Industries in Malaysia on Sunday following the minister’s visit.

India’s Directorate General of Foreign Trade (DGFT) last week announced restrictions on the import of refined palm oil and palm olein, a liquid form of palm oil. Importers will now be required to apply for licences.

Indian media reported that while the announcement was ‘not country-specific, but product-specific,’ Indian prime minister Narendra Modi’s government had ‘informally’ requested palm oil refiners and traders forgo Malaysian palm oil.

Currently, Indian buyers are not making any crude or refined palm oil purchases from top supplier Malaysia, at least five industry sources familiar with the matter said, reports Reuters.

‘Officially there is no ban on crude palm oil imports from Malaysia, but nobody’s buying due to government’s instructions,’ said a leading refiner, adding that buyers now import from Indonesia despite paying a premium to prices in Malaysia.

India is the world’s largest buyer of palm oil and the move to effectively block imports from Malaysia could put pressure on palm oil prices in Malaysia and push up palm oil inventories in the country.

Malaysian prices set the global benchmark for palm oil prices. The move could also benefit Indonesia — the world’s largest exporter of crude palm oil (CPO).

‘We could import CPO from Malaysia, but the government has warned: ‘Don’t come to us if your shipments get stuck,’’ said a Mumbai-based trader, adding ‘no one wants to see their shipments get stuck at ports.’

India in 2018 imported $3.8 billion worth of palm oil from Indonesia, and $1.3 billion from Malaysia. The two Southeast Asian countries are the world’s main producers in the palm oil industry.

The Indian import controls came after remarks by Malaysian prime minister regarding India’s actions on Kashmir and the new citizenship law last year.

Responding to queries on Monday, Kok dismissed reports that India has called for a boycott of Malaysian palm oil, reports Malaysia’s Sun Daily.

She said that it was learned from several discussions that Indian palm oil buyers want Malaysia to increase its export of crude palm oil and reduce the export of refined palm oil.

‘What boycott? They just want us (Malaysia) to export more crude palm oil and reduce the export of refined palm oil,’ she told reporters after a briefing on the Malaysian Sustainable Palm Oil (MSPO) Certification Scheme and a dialogue with local Selangor oil palm growers.

Malaysian Palm Oil Board (MPOB) director general Ahmad Parveez Ghulam Kadir and Malaysian Palm Oil Certification Council (MPOCC) CEO Chew Jit Seng were also present at the event.

The minister urged more oil palm smallholders in Selangor to secure the MSPO certification for their crop, saying that only 4.5 per cent of the 45,000 hectares of oil palm smallholdings in Selangor had the certification and the number was very low.

Ahmad Parveez said that the MPOB is in the process of issuing warning letters to palm oil mills as well as oil palm plantations that have yet to begin the process of MSPO certification.

‘If they continue to disregard the matter, we will begin to impose compound fines from July. And from early next year, the MPOB will not hesitate to suspend or withdraw their licence,’ he said.

As of last Friday, 76.3 per cent or 345 palm oil mills in the country had secured the MSPO certification while plantations comprising 3.67 million ha of the 5.85 million ha under oil palm had the certification.

A Malaysian political analyst from the Singapore Institute of International Affairs, Oh Ei Sun, told Arab News that the restriction ‘doesn’t help to improve bilateral relations’ and is seen as New Delhi’s retaliation to a series of remarks made by Malaysian prime minister Mahathir Mohamad regarding India’s widely criticised citizenship laws and Kashmir lockdown.

‘We speak out our minds and we don’t retract and change,’ said the 94-year old leader at a press event in October regarding his UN speech last year calling for a UN resolution on the Jammu and Kashmir conflicts.

He also spoke out against the new citizenship legislation last year during the KL Summit in December, claiming that the new law would ‘deprive some Muslims of their citizenship’.

Mahathir’s decision to allow controversial Indian preacher Zakir Naik to remain in Malaysia also upset Modi.

‘As India is a major buyer of Malaysian refined palm oil, palm oil refining industry will, of course, be significantly affected,’ Oh said, adding that it remains to be seen if the broader crude palm oil-producing industry will be affected.

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