Malaysia aims to parry Indonesia palm tax change
NEW DELHI, June 4 – Malaysia will soon take steps to make its palm oil exports competitive, the country’s commodities minister said today, as it moves to counter efforts by top producer Indonesia to promote its downstream industries.
Indonesia last year changed its export tax in favour of its refining industry, which narrowed margins for palm oil processors in Malaysia, the No. 2 producer of the vegetable oil.
Indonesia’s export tax changes have put a spotlight on Malaysia’s own tax-free quota on crude palm oil exports, which refiners say is further squeezing supply in a country where production growth has slowed because of limited expansion of acreage.
Malaysia has struggled to frame an immediate response to the new tax regime, allowing Indonesian refiners to export at a sizeable discount and grab market share.
“We have received a lot of complaints from farmers and industry,” Malaysian Commodities Minister Tan Sri Bernard Dompok told reporters in the Indian capital after a meeting with Indian food minister K.V. Thomas.
“These are the things that the government has to consider. We are looking at the competitiveness of the entire palm oil industry.”
Malaysia is studying the impact of Indonesia’s tax changes on its palm oil industry, he added.
“I am preparing a submission to the Cabinet to see how the tax structure promulgated by Indonesia can affect the industry in Malaysia,” Dompok said. “We have not taken any decision, but this has to be considered soon.”
Malaysia’s palm oil output will rise in the next 2 to 3 months, helping the Southeast Asian nation hit its 2012 target, Dompok said, adding that production is expected to jump 2.3 per cent to 19.3 million tonnes for a second consecutive rise.
Malaysia usually charges a high duty on crude palm oil shipments to protect its domestic refining industry. It does not impose any export taxes on processed palm oil.
Indonesia’s tax changes have also hit processors in India, the world’s top vegetable oil buyer, prompting them to demand import curbs. Industry body the Solvent Extractors’ Association of India called Indonesia’s move a “death blow” to its business.
Last week, sources said India could end a freeze on the base import price for refined palm oil to protect its refineries from cheaper imports from Indonesia.
Separately, India offered to sell wheat to Malaysia, Thomas said, but gave no details. India, sitting on huge stockpiles of wheat, is grappling with storage problems due to bumper harvests since 2007. – Reuters