Ahead of EU ban, Putrajaya sets eye on China as largest palm oil importer

Minister of Plantation Industries and Commodities Datuk Seri Mah Siew Keong (left) and China Ambassador to Malaysia Bai Tian chats before a joint press conference in Putrajaya  February 2, 2018. — Picture Yusof Mat Isa
Minister of Plantation Industries and Commodities Datuk Seri Mah Siew Keong (left) and China Ambassador to Malaysia Bai Tian chats before a joint press conference in Putrajaya February 2, 2018. — Picture Yusof Mat Isa

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PUTRAJAYA, Feb 2 — China is set to overtake the European Union (EU) to become Malaysia’s largest palm oil importer in the next two years, Plantation Industries Minister Datuk Seri Mah Siew Keong said today amid a trade rift with Brussels over a potential ban of the commodity for biofuel use there.

China is currently the second largest buyer of Malaysian palm oil after the bloc, but that position could soon change as the republic looks towards increasing the import to meet its biofuel need.

“We expect in two years’ time China to be the biggest importer of our commodity,” Mah told a joint press conference held with the new Chinese ambassador to Malaysia, Bai Tian.

“And we are also looking at more joint ventures especially for biomass technology in Malaysia we have got a lot of biomass and this is an area we can work on,” he said.

Total Chinese palm oil exports were valued at RM8.52 billion from January to November last year, an increase of 9.8 per cent from the same period the previous year.

China has been Malaysia’s biggest trade partner for the last eight years.

Total trade value between the two countries reached RM237.96 billion from January to October last year, up 24.1 per cent from RM191.65 billion in 2016.

“Last year saw a big increase in China’s import of Malaysia’s primary products and we are happy to see the numbers coming out very beautifully,” Bai said at the press conference.

“I think we are very satisfied with the current China-Malaysia relations in all sector be it political, economic, cultural and communication exchanges. As our leaders have agreed, China-Malaysian relation are at all-time high”.

Bai also said China will not impose a limit on Malaysian palm oil and palm-based products, but would instead encourage more investments in Malaysia’s biomass industry.

“This means, we need to import eight million tonnes of biodiesel. I think this is good news for palm diesel producers. We hope Malaysia will take up this golden opportunity,” he said.

Pundits would likely view today’s announcement and courtesy visit by the Chinese ambassador as political posturing by Beijing, which has splashed trillions of dollars to win loyalty and expand its influence in the region.

But Mah said Malaysia will not be beholden to China even as Putrajaya look towards the communist republic to offset the potential loss of revenue if the EU proceeds with its planned ban on Malaysian palm oil.

“The main thing is that we want to export our palm oil so we are trying to actively pursue many markets.

“We do not want to be beholden to any single market..it’s part of our diversification programme,” he said.

Malaysia is currently looking to expand its palm oil exports to Iran, Vietnam, Philippines and the Middle East, Mah said.

Two weeks ago, European lawmakers approved draft measures to reform the power market there and reduce energy consumption to meet more ambitious climate goals.

The plan includes a ban on the use of palm oil in motor fuels from 2021.

Palm oil can be used as a substitute for crude oil to make biofuel. A large portion of European palm oil imports are used to make biofuels, giving the palm industry cause for concern as they fear overall demand will fall.

Putrajaya is still hoping to reach a compromise with Brussels even as the European Parliament has voted to pass the ban, Mah said.

The bloc is expected to finalise its decision after the European parliament meets with the Council of Ministers, which is scheduled to take place soon.

“We need to convince them it is discrimination and unfair to farmers,” Mah said.

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