Playing second fiddle no longer
Posted byMALAYSIA, which is the world's second largest palm oil producer, has always looked up to Indonesia, the world's number one producer of the green commodity.
As the big brother, Indonesia should look after and take care of its younger sibling during both good and bad times. But lately, the signals that Kuala Lumpur has been getting from across the strait have been anything but supportive.
The oil palm industry has been suffering since October 2011 after Indonesia put in place a duty structure to boost its downstream activities by lowering export taxes for processed palm oil products. As a result, crude palm oil prices have softened and could deflate further.
The Palm Oil Refiners Association of Malaysia (Poram) said its members are crying foul as the playing field is no longer fair. The situation is made worse when the government recently announced that it would increase the duty-free quota for crude palm oil (CPO) exports by another two million tonnes, a move that is widely frowned upon by palm oil downstream players.
This not a surprise to me because when it comes to selling palm oil, Indonesia has always undercut Malaysia by selling it at US$10 (RM31.60) a tonne cheaper.
No problem there as everybody should compete in a fair marketplace. But Indonesia's actions could affect the sustainability of oil palm over the next 100 years and beyond.
Weak CPO prices brought about by an ally is no good for all palm oil producers in the world.
Malaysia has toiled in this industry for 40 years by sheer grit, sweat and sometimes the blood of its smallholders.
To quote Poram chief executive officer Mohammad Jaaffar Ahmad: "Because of this export duty structure, which will affect downstream activities in Malaysia, does it mean we should just hand it over to Indonesia after having built up the market for the past 40 years?"
Malaysia has also set up its own research and development agency as well as regulatory body - the Malaysian Palm Oil Board - and the private sector-driven Malaysian Palm Oil Council.
With all due respect to Indonesia, the republic's oil palm sector does not even compile and collate industry data on a regular basis. All Indonesia has done all the while is to follow the trail blazed by Malaysia.
It is time the Plantation Industries and Commodities Ministry stood up and solve our downstream business grievances. There is only so much that we can take. For starters, both countries should work out a common policy on export tariffs of the edible oil.
Malaysia may soon risk losing investments in the palm oil refining industry to Indonesia if it does not come up with a policy to create a level playing field. Enough is enough. We have played second fiddle long enough.
As the big brother, Indonesia should look after and take care of its younger sibling during both good and bad times. But lately, the signals that Kuala Lumpur has been getting from across the strait have been anything but supportive.
The oil palm industry has been suffering since October 2011 after Indonesia put in place a duty structure to boost its downstream activities by lowering export taxes for processed palm oil products. As a result, crude palm oil prices have softened and could deflate further.
The Palm Oil Refiners Association of Malaysia (Poram) said its members are crying foul as the playing field is no longer fair. The situation is made worse when the government recently announced that it would increase the duty-free quota for crude palm oil (CPO) exports by another two million tonnes, a move that is widely frowned upon by palm oil downstream players.
No problem there as everybody should compete in a fair marketplace. But Indonesia's actions could affect the sustainability of oil palm over the next 100 years and beyond.
Weak CPO prices brought about by an ally is no good for all palm oil producers in the world.
Malaysia has toiled in this industry for 40 years by sheer grit, sweat and sometimes the blood of its smallholders.
To quote Poram chief executive officer Mohammad Jaaffar Ahmad: "Because of this export duty structure, which will affect downstream activities in Malaysia, does it mean we should just hand it over to Indonesia after having built up the market for the past 40 years?"
Malaysia has also set up its own research and development agency as well as regulatory body - the Malaysian Palm Oil Board - and the private sector-driven Malaysian Palm Oil Council.
With all due respect to Indonesia, the republic's oil palm sector does not even compile and collate industry data on a regular basis. All Indonesia has done all the while is to follow the trail blazed by Malaysia.
It is time the Plantation Industries and Commodities Ministry stood up and solve our downstream business grievances. There is only so much that we can take. For starters, both countries should work out a common policy on export tariffs of the edible oil.
Malaysia may soon risk losing investments in the palm oil refining industry to Indonesia if it does not come up with a policy to create a level playing field. Enough is enough. We have played second fiddle long enough.
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