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China-ASEAN FTA to boost Malaysian palm oil export

Xinhua | January 13, 2010

China-ASEAN FTA to boost Malaysian palm oil export

The full implementation of the China-ASEAN Free Trade Area (FTA) is expected to boost the export of Malaysia’s palm oil industry, especially to China, a local official said.

Mohd Basri Wahid, director-general of the Malaysian Palm Oil Board (MPOB) told Xinhua in a recent interview at the MPOB head office that the China-ASEAN FTA delivered more positive impact to the industry.

Malaysia exported 3.79 million and 4.03 million tons of palm oil to China in 2008 and 2009, and it was expected to hit 4.5 million tons this year and five million tons in future, Basri said.

Basri said that palm oil was categorized as the sensitive product and that its tariff was reduced to nine percent after the full implementation of the China-ASEAN FTA on Jan. 1, 2010.

Although there was no total tariff elimination for Malaysian palm oil, the prevailing tariff rate was much lower than the previous 30 percent, added Basri.

Basri highlighted that lower tariff meant that Malaysian palm oil could be imported by importers from China at a lower price, increasing the competitiveness of the commodity in the huge market there.

Tariff for items categorized in the sensitive list will be reduced to 20 percent by 2012 and zero to five percent by 2018 in the China-ASEAN FTA, Bakri said.

He also said that China produced an abundance of soy oil, also a type of vegetable oil.

If palm oil could be purchased at a lower price, it would be appealing to the customers in China, said Basri.

He also believed that Malaysian palm oil industry players would strive to increase their exports to China.

Malaysia became the main palm oil supplier of China in 2002, Basri said, adding that it took up 60 percent of the palm oil market in China.

While Indonesia also exported a large amount of palm oil to China, Basri said that China’s market was so big that Malaysia would cooperate with Indonesia to meet China’s demand, instead of competing with each other.

Since the health awareness in China was growing, Basri said the vegetable oil consumption would also rise, adding that the fast-growing economy had also raised purchasing power of China’s consumers.

When asked about the trend of the palm oil price, Basri said the price was very much market driven.

If the demand was high, the price would rise, said Basri, adding that the increase in international oil price would also drive the commodity price up.

Besides crude palm oil and refined palm oil, Malaysia also exported other palm-related products to China, with the medium density fiber board being one of the examples.

Basri said that the fiber board could be used to conserve underground water while preventing soil erosion.

Basri also noted that Malaysia also had collaborated with several universities and companies in China to carry out research and development activities on palm oil.

In 2005, Malaysia established the Palm Oil Research and Technical Service Institute in China, aiming to establish closer ties with the oils and fats industry in China.

It was also aimed to ensure that China continued to import Malaysian palm oil and allow information on Malaysian palm oil to be effectively disseminated across China.

Basri said that while researches were done on the area of food, the non-edible field was also being explored.

Malaysia is among the leading palm oil producers in the world. In 2008, Malaysia produced 17.73 million tons of crude palm oil and 17.56 tons in 2009.

For years, Malaysia has been receiving harsh criticism from the West where the later rapped Malaysia for destroying the tropical rain forests and threatening the lives of endangered species.

Basri refuted the claims, stressing that the palm oil industry had been developed in a sustainable manner throughout the years with no damages made to the environment.

Basri said palm trees were planted on agriculture land and strict rules and regulations were in place, prohibiting open air burning to clear the land for planting.

The industry players were also subject to strict licensing procedures, allowing the authorities to monitor the development of the industry, added Basri.

On the other hand, Basri said palm oil could be used for the production of biofuel.

In Malaysia, 3,936 vehicles started to use the first generation biofuel consisting of palm oil in February 2009, said Basri.

However, to protect middle- and down-stream industries and to ensure ample supply of food, Basri said the amount of palm oil allocated for fuel production was limited to six million tons in Malaysia each year.