The Hindu Business Line : `Malaysia would like to see India as its hub for palm oil'

WITH crude palm oil prices weakening in the wake of rising indigenous production and sluggish export sales coupled with loss of market share in India — the world's largest importer of palm oil — to soyabean oil in recent months, Malaysians are a worried lot.

As world's top producer and exporter of palm oil, there is a lot at stake for Malaysia in the global marketplace. Inroads being made by rival soyabean oil in key consuming markets such as India, benefiting from differential in customs duty between palm (80 per cent) and soya (45 per cent) oils are being viewed with consternation here.

As if to add insult to injury, there now are reports of the Malaysian oil palm plantation programmes of area expansion affecting the environment and biodiversity. The natural habitat of some forest animals is said to be lost because of oil palm cultivation in newer areas.

Over the last one week, a thick envelope of haze covering many parts of the country including the key city of Kuala Lumpur has added a new dimension to the existing challenges because the oil palm plantations (albeit, from outside Malaysia) are in someway implicated in the deterioration of air quality.

Crude palm oil production during 2004-05 (October/September) is projected to rise to a record 15.5 million tonnes even as inventories are bulging. No wonder, crude palm oil prices have pared their value considerably (over Ringgit Malaysia (RM) 100 per tonne) over the last several weeks and are now threatening to breach the psychological RM 1,300 a tonne mark.

It is in this background that Business Line had an exclusive meeting with Mr Peter Chin, Malaysian Minister for Plantation Industries and Commodities. The free-wheeling discussion touched several aspects including Indo-Malaysian trade relations, rivalry between palm and soya oils, relationship between Malaysia and Indonesia (world's second largest producer and exporter of palm oil), role of technology and so on. Excerpts:

In March this year at the Palmoil Price Outlook conference here, you told Business Line that you would be visiting India soon to talk to our policymakers regarding high tariffs on palm group of oil. When is your visit going to materialise and what's the agenda?

India is at the top of my list for bilateral discussions. Work pressure here has delayed my India visit. Hopefully, it should happen in November. We want to look at some of the critical issues such as tariffs on palm oil, which to us is "punitive". Our government is going on the basis of a Free Trade Agreement with India. We would like to see India as a hub for Malaysian palm oil. I am convinced that collaboration between Indian entrepreneurs and Malaysian producers is the way forward and would result in a "win-win" situation for both.

India has an adverse trade balance with Malaysia primarily because of large palm oil imports even though there are several products and services, apart from agricultural goods, that India can offer to Malaysia. Even the railway project did not come off in a big way. Why should Malaysia not buy more from India, if not for domestic consumption, for third-country exports?

Malaysia has a good trade network in Asia and outside. Trade is a two-way street and there is need to strengthen the bilateral trade relations. I will encourage Malaysian businesses to look at India more closely for investment and trade. Also, I would like to initiate a dialogue with India for collaboration in agricultural research, as your country has a strong institutional framework for farm research, extension and so on.

How are your relations with Indonesia, which is slowly gnawing into your palm oil market share?

I don't see Indonesia as a rival. In fact, palm oil production in Malaysia and Indonesia are complementary to each other. Indeed, we want to ensure better collaboration between the world's two largest palm oil producers so that we can manage our supply chain better. A number of Malaysian corporates have invested in oil palm plantations in Indonesia; and to that extent, there can hardly be any conflict of interest. We want Malaysian companies in Indonesia to follow best agricultural practices.

How do you propose to tackle the problem of haze, which seems to be originating in Indonesia?

Before anyone accuses Malaysian companies in Indonesia of causing pollution by open burning of palm trees, I want to rush to that country and tell them not to indulge in open burning. I want our industry to follow best practices whereever they are located. I am soon going to meet Indonesian authorities to discuss this issue of haze as my government is extremely concerned about poor quality of air. I am also going to take up trans-boundary pollution issue under ASEAN.

How do you propose to manage the much talked about competition between soya oil and palm oil in the global marketplace? Also, what do you make of the reports suggesting damage to environment and biodiversity as a result oil palm area expansion?

First of all, I think, there is no conflict between palm and soya oils. Both the oils can co-exist in the world as the market is rather big and there is scope for every type of oil to enjoy a decent market share. In the final analysis, the best product will survive and flourish. As for the question of environment impact of oil palm area expansion, we have seen some mischievous reports in the recent past originating from the western world. The findings in these are largely baseless and divorced from reality. I want to place it on record that areas going into oil palm cultivation are not forestland; they are arable land already identified, earmarked and designated for oil palm plantation. So, we are not destroying forestland. We are keen to preserve our biodiversity.

What is being done about yield enhancement and improved recovery of oil?

We are encouraging the application of biotechnology in these areas. We are experimenting with transgenics. We are conscious of the fact that we have to be careful given the concerns relating to human health, environment, bio-safety and related issues. We want to make use of cutting-edge science and technology, but would tread with utmost caution.

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