The decision by India, the world’s biggest buyer of palm oil, to restrict the import of refined palm oil and palm olein on Jan 8 has put Malaysian refiners and the Minister of Primary Industries in a difficult position.
Although the restriction is not specific to Malaysia, the country’s palm oil exports are predominantly refined products, following the move since the 1970s to develop the downstream sector. Indeed, the refiners will be the worst hit as processed palm oil has accounted for more than 70% of the country’s total exports in recent years, according to Maybank Investment Bank Research. India’s move will benefit Indonesia, where the downstream sector is still in nascent development.
The move is said to be aimed at helping India’s refiners. Coincidentally, the introduction of the restriction follows Prime Minister Tun Mahathir Mohamad’s criticisms against India’s actions in Kashmir and its new citizenship law.
Minister Teresa Kok’s initial response to the import restriction was to say that there was no boycott of Malaysian palm oil by Indian buyers. While her statement is not wrong as there is no official directive to stop buying Malaysian refined palm oil, it is an effective ban as the restriction could be in the form of a requirement for a permit or licence to import.
In fact, Reuters reported that Indian buyers were not buying any crude or refined palm oil from Malaysia.
Days after her initial comments, when asked about the trade spat, Kok said her ministry would be engaging the Indian government.
Was the minister too focused on semantics when she brushed off the effective ban or was she ill-advised on the issue at hand?