The Hindu Business Line : Malaysia hopeful of more trade with India

India and Malaysia may be entering a new phase in their trade relationship, if the remarks made by Dr Peter Chin, Malaysian Minister for Primary Industries and Commodities, are any indication. Until a few months ago, Malaysia had been rather unhappy about India's high rates of customs duty (as much as 80 per cent ad valorem on crude palm oil and 90 per cent on refined palmolein). Currently, duties are down to 60 per cent on CPO and 67 per cent on refined palmolein.

"I am happy the Government of India has reduced customs duty on palm oil. As the Malaysian Minister, I welcome this move. India is an important customer for our palm oil," said Dr Chin. He was responding to a specific question from Business Line about his reaction to the Indian decision to cut duty. Suggesting that Indo-Malaysian trade relations are set to soar, the Minister said: "A government-to-government discussion is going on for strengthening trade ties".

"The trade talks go beyond palm oil," he added, but did not provide details.

Malaysia is world's largest producer and exporter of this important vegetable oil with diverse uses. Malaysian palm oil industry registered an impressive performance in 2006 with record production (15.9 million tonnes), record exports (14.4 mt) and record export earnings (over 32 billion Malaysian ringgit), while prices reached multi-year highs (over MYR 2,000 a tonne) on the back of declining stocks and expanding demand.

Bio-diesel demand

A global rush into bio-diesel production has been a new element influencing palm oil supply and demand in addition to expanding world consumption of vegetable oils, as also competition between grains and oilseeds in the US, Dr Chin pointed out while inaugurating the Palm and Lauric Oils Conference and Exhibition 2007 in Kuala Lumpur on Tuesday. The annual event is organised by Bursa Malaysia.

Looking ahead, there is need for concerted efforts to improve agricultural practices to push yields and productivity to newer heights, the Minister urged, adding that oil palm producers should embark further on replanting unproductive oil palm trees with superior planting materials and the preparation of land with mechanisation in order to reduce dependence on foreign labour. The Minister expressed concern over unfounded allegations by certain Europe-based non-government organisations against oil palm plantation and emphasised that his country was engaged in sustainable cultivation.

Futures trading

Bursa Malaysia Derivatives (BMD), the Malaysian commodity futures exchange trading crude palm oil futures, is readying itself to face competition. Establishment of a new exchange in Singapore — Joint Asian Derivatives Exchange (JADE) in collaboration with Chicago Board of Trade (CBoT) — may create competition. The CEO of BMD told this correspondent that a dollar denominated crude palm oil contract would be launched. Currently, CPO contracts are traded in Malaysian Ringgit. In addition, BMD is working closely with exchanges in India (MCX), China (Dalian) and Thailand to explore new opportunities, he said.

Earlier, in his welcome address, the BMD chairman made a strong pitch for sustaining the current high prices of palm oil. While the trans-fat issue in the US boosted palm oil imports into that market by a third, China's imports are seen up by over 20 per cent and India's vegetable oil imports may rise by a million tonnes in 2007 following strong demand and setback to domestic oilseeds crop.

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