EXCLUSIVE Malaysia could halve export tax on palm oil amid global supply crisis

A worker unloads bunches of palm oil fruits from a truck inside a palm oil mill in Bahau, Negeri Sembilan, Malaysia January 30, 2019. REUTERS/Lai Seng Sin

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KUALA LUMPUR, May 10 (Reuters) – Malaysia’s commodity ministry has proposed to halve the export tax on palm oil to help fill a global shortage of edible oil and boost market share of the world’s second largest producer of palm oil.

Plantation Industries and Raw Materials Minister Zuraida Kamaruddin said in an interview with Reuters on Tuesday that her ministry had proposed the cut to the Finance Ministry, which has set up a committee to review the details.

Malaysia could reduce the tax, likely a temporary measure, to 4%-6% from the current 8%, Zuraida said.

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A decision could be made as early as June, she said.

Malaysia is seeking to increase its share of the edible oil market after Russia’s invasion of Ukraine disrupted shipments of sunflower oil and Indonesia’s decision to ban sunflower oil exports palm further tightened global supply.

“In these times of crisis, we can probably relax a bit so that more palm oil can be exported,” Zuraida said.

The proposal also called on the finance ministry to speed up tax cuts for state-linked palm oil producer FGV Holdings (FGVH.KL) – Malaysia’s largest – and companies with oleochemical production. overseas, she said.

Malaysia will also slow implementation of its B30 biodiesel mandate, which requires that some of the country’s biodiesel be blended with 30% palm oil, to prioritize supply to global and domestic food industries. , she said.

“We have to prioritize to get food to the world first,” Zuraida said.

Palm oil – used in everything from cakes to detergents – accounts for almost 60% of global vegetable oil shipments and the absence of Indonesia’s top producer has rattled the market.

The benchmark palm oil contract fell 2.3% in Tuesday morning session, paring some losses after Reuters reported on a possible export tax cut.

Zuraida told Reuters that importing countries had asked Malaysia to reduce its export taxes.

“They think it’s too high because of the high costs along the supply chain, because of the price of edible oil,” she said.

Crude palm oil futures have jumped around 35% so far this year to historic highs, further aggravating global food inflation.

The Food and Agriculture Organization of the United Nations has warned that food prices, which hit a record high in March, could rise by up to 20% due to the Russian-Ukrainian war, increasing the risk of increased malnutrition. learn more L5N2VE39W

Zuraida said Indian, Iranian and Bangladeshi buyers were offering to trade agricultural products like rice, wheat, fruits and potatoes for Malaysian palm oil.

Malaysia’s production has been under severe strain for more than two years due to a severe labor shortage following coronavirus border curbs that halted the entry of migrant workers.

With travel restrictions now eased, foreign workers will start arriving in mid-May, Zuraida told Reuters ahead of his visit to the United States later this week.

U.S. Customs and Border Protection has imposed import bans on two Malaysian palm oil producers – FGV and Sime Darby Plantation (SIPL.KL) – over allegations that they use forced labor in the production process.

Both companies have commissioned independent audits to examine the allegations and said they would work with US authorities.

Zuraida said during her visit she will ask US Customs to detail their findings on the alleged labor abuse and give Malaysian companies time to resolve the issue before imposing sanctions.

“We’re not ruling out the possibility of this happening, but you should give us time to rectify,” she said.

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Reporting by Mei Mei Chu and A. Ananthalakshmi; Editing by Tom Hogue and Susan Fenton

Our standards: The Thomson Reuters Trust Principles.

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