At the request of the buyer countries, Malaysia is going to reduce the export duty on palm oil by almost half. The decision could take effect in June. If that happens, as palm oil imports from Malaysia increase, prices are expected to fall.
Malaysia, the world’s second-largest palm producer, is trying to consolidate its position in the world’s edible oil market in the absence of Indonesia, according to a special report by Reuters on Tuesday (May 10th). To this end, the country is planning to halve the export duty on palm oil.
Malaysia’s Minister of Arboriculture and Consumer Affairs Juraida Kamruddin told Reuters in an interview that his ministry had made a proposal to the Malaysian Ministry of Finance to reduce the export duty. The finance ministry has already formed a committee to review the matter.
He said palm oil exports to Malaysia are currently subject to a duty of eight per cent. It has been proposed to reduce it to four to six percent. Juraida said a final decision could be made by June.
According to the report, Malaysia wants to increase its share in the world market by taking advantage of the crisis in the global supply system caused by the war in Ukraine disrupting the supply of sunflower oil and Indonesia’s ban on palm oil exports .
“In times of crisis, we can ease restrictions so that more palm oil can be exported,” Juraida said. The proposal calls for more tax exemptions for foreign oleochemical manufacturers, including FGV Holdings, Malaysia’s largest palm oil producer, the minister said.
In addition, Malaysia may show some leeway in implementing the B30 biodiesel policy to increase the supply of palm oil to the global and local food industry. Under the policy, the country is required to add 30 percent palm oil to biodiesel. According to Juraidar, we must first prioritize the world’s food supply.
Palm oil is used in almost everything from cooking to soaps, shampoos, detergents. Palm oil accounts for 70% of the global edible oil market. Its largest supplier is Indonesia. The Indonesian government has banned the export of palm oil since April 26, citing price controls in the local market . Immediately after this, the price of edible oil in the world market increased a lot. The biggest problem is countries like Bangladesh, India, Pakistan, which are more dependent on Indonesian palm oil.
But hopefully, the Indonesian ban could be lifted soon . Moreover, the price of palm oil has already started falling in the world market.
Juraidah said the importing countries had requested Malaysia to reduce the export duty on palm oil. They think this is too much because of the extra cost of the supply system.
The Malaysian minister said Bangladesh, India and Iran had offered to exchange agricultural commodities such as rice, wheat, fruits and potatoes from Malaysia in exchange for palm oil.
Bangladesh imports about 60 percent of its palm oil from Indonesia and buys the remaining 20 percent from Malaysia. However, India, the world’s largest importer of vegetable oil, imports most palm oil from Malaysia.
A large number of foreign workers work in the Malaysian palm industry. But the country’s palm production has come under severe pressure as coronavirus restrictions have barred foreigners from entering for a long time. However, it is hoped that foreign workers will return to the country in mid-May as the ban is lifted. As a result, Malaysian palm production is expected to increase further, Juraida Kamruddin said.