Egyptian-Malaysian free trade agreement in progress: Malaysian plantation minister
Ahramonline
8th Oct 2024
By Doaa A.Moneim
Egyptian-Malaysian free trade agreement in progress: Malaysian plantation minister
Egypt’s Minister of Investment and Foreign Trade Hassan Elkhatib and his Malaysian counterpart are currently engaged in designing a free trade agreement (FTA) between the two countries, where palm oil will be a key pillar of this imminent action, the Malaysian Minister of Plantation and Commodities Datuk Seri Johari Abdul Ghani told Ahram Online.
Abdul Ghani said this in his reply to Ahram Online’s question on the extent of the cooperation between Malaysia and Egypt, during a press conference held on the sidelines of the two-day Malaysian Palm Oil Forum (MPOF KL 2024) kicked off in the Malaysian capital Kuala Lumpur on Tuesday.
This forum was launched under the theme “Navigating Trading Challenges with Sustainable Solutions,” with the participation of a group of Egyptian companies.
Egypt is a main importer of Malaysian palm oil; moreover, the Malaysian Palm Oil Council (MPOC) has a trade office in Cairo among other seven global offices, including three in the Middle East region along with ones in Saudi Arabia and Turkey.
Egypt is already engaged in several multilateral trade agreements, including the Greater Arab Free Trade Agreement (GAFTA), the African Continental Free Trade Area (AfCFTA) Agreement, the Agadir Free Trade Agreement, and the Common Market for Eastern and Southern Africa (COMESA), among others.
A platform of connection
The forum is hosted by the MPOC, offering a rich lineup of events including a conference, panel discussions, an exhibition, and a BizMatch session aimed at fostering business connections.
The two-day event also aims at facilitating engagement among stakeholders from the Malaysian palm oil industry and international buyers, serving as a platform for discussing the latest advancements in the oils and fats sector, exploring market trends, and addressing environmental, social, and governance (ESG) issues.
It also offers extensive trade and networking opportunities that connect over 70 key international buyers from various regions, including the Middle East region, particularly from Egypt.
It is worth noting that the MPOF was held in May in Egypt, as Egypt is a key exporter of oils and fats and a key palm oil exporter from Indonesia and Malaysia in particular.
Affordable alternative
Palm oil was initially introduced in Egypt as an affordable alternative to other animal fats.
Over the past two decades, the import and consumption of palm oil have steadily increased, as it is more cost-efficient compared to other vegetable oils, like soybean and sunflower oil.
It is widely used in food production, cosmetics, and industrial applications in the Egyptian market.
“We continue to be key suppliers for the Northern African countries in terms of the palm oil. The African market has lots of potential, such as the growing population and the high level of consumption, which raise the appetite of investors and maintain our focus on it as well. For Egypt, it is a big market for us,” Abdul Ghani said.
During the speech, the minister said that this year’s conference theme is indeed timely and relevant, as the palm oil industry sector faces numerous challenges, from ever-changing market dynamics and evolving trade policies to increasing scrutiny on sustainability practices and environmental impact.
“These are not just domestic challenges. They are global in nature and affect every player in the oils and fats industry,” added the minister.
Malaysia comes second after Indonesia when it comes to palm oil production. In 2023, crude palm oil (CPO) production increased by 0.5 percent to reach 18.55 million tons compared to 18.45 million tons in 2022 attributed to an improved labour supply, particularly in harvesters and fresh fruit bunches (FFB) collectors.
Likewise, FFB yield of oil palm estates and oil extraction rate (OER) in 2023 witnessed a rise of 1.9 percent to reach 15.79 tons/hectare and 0.8 percent to reach 19.86 percent compared to the 15.49 tons/hectare and 19.70 percent in 2022, respectively.
According to official data revealed during the conference, the global challenges have resulted in a decline in palm oil exports due to reduced demand by major importing countries, causing a higher palm oil stock. Accordingly, palm oil exports stood at 15.13 million tons in 2023 compared to 15.71 million tons in 2022.
Egypt’s potential as a business hub
According to MPOC data, Egypt enjoys preferential access to several countries through the multiple free trade agreements, which provide access to 1.5 billion consumers, with 110 million consumers only in Egypt.
Moreover, it connects investors with other developed and emerging markets, with eight percent of global trade passing through the Suez Canal, which qualifies it to be a business hub, especially in the palm oil trade.
The data also highlighted that the shipping time and cost are lower from Egypt, seven days less to the USA than from China and 50 percent cheaper than the UAE.
“The trade agreements have a positive and significant impact on stimulating trade from Malaysia to key markets like Egypt to become the main re-export centre to other countries under the established agreements to satisfy the vast demand for oils and fats and to fill the gap of limited local production. The current existing trade agreements create countless opportunities and facilitate the export growth of Malaysian palm oil to new developing markets,” according to a study by the MPOC.
Palm oil market potential
According to the study, the Egyptian palm oil market is developing at a rapid pace, as this type of oil is an economically essential component for food and non-food industries.
The study showed that there is also a higher intake of palm oil in the food processing industry and the growth of the HoReCa (hotel/restaurant/cafe) sector to cater to tourism industry needs.
Most recently, according to the study, palm oil has principally been approved to be included in the cooking oil blend produced by the Egyptian government for the food subsidy programme, comprising 10 percent.
Furthermore, Egypt’s government disclosed its plans to develop and merge some edible oil subsidiaries to enhance the production capacity, reduce total costs, and maximize profits to improve the competitiveness of Egyptian products in local and international markets.
The government’s plan includes establishing three new edible oil factories at New Borg Al Arab, Sadat City, and Suhag City to replace the six old factories, stressing the government’s willingness to establish cooperation with Malaysian parties to achieve the development plan.
Palm oil is used in several products, including blended cooking oils, vegetable ghee, cheese, sweets, baked goods, margarine, cereals, detergents, and cosmetics. Palm oil imports have jumped over the last five years, amounting to 1.15 million tons in 2022.
Palm oil leads the market share in Egypt’s oils and fats portfolio, scoring 67 percent of the total oils and fats imports, followed by soybean oil at 16 percent, sunflower oil at 14 percent, palm kernel oil at two percent, and others at one percent, according to the MPOC study.