Gov: Rise in CPO export quota is temporary

This is written by my colleague Zaidi Isham Ismail.

PUTRAJAYA: The Plantation Industries and Commodities Ministry has reiterated that the increase in crude palm oil (CPO) export duty free quota is a temporary measure, aimed at stock management and ensuring remunerative prices for farmers. 

In a statement yesterday, the ministry said it will continue to discuss with all the relevant stakeholders to address the issue of the competitiveness of the palm oil industry in the longer term. “This is to ensure a balanced growth and the interest of all players in the industry is taken into account.” 

The government was responding to news reports on Malaysia’s move to allow more exports of duty-free CPO, which has also upset refiners. 

The decision to raise CPO export quota by an additional two million tonnes bumped the total to five million tonnes for 2012. 

The government, stressed this move is to address the falling market share contributed by Indonesian export tax structure on palm oil products and also as a stock management tool. 

Palm Oil Refiners Association of Malaysia (Poram) said the increase in duty-free CPO export quota has worsened the pain on refiners here, which initially was inflicted by the restructure of Indonesian palm oil export tax. 

The ministry said this year, CPO production is forecasted to touch 18.5 million tonnes. Therefore, the CPO duty free quota of five million tonnes accounts for 27 per cent of national output. 

For the January — June 2012 period, monthly average palm oil stock was 1.895 million tonnes, compared with 1.693 million tonnes for the corresponding period in 2011. In addition, production of CPO for the period of July-December 2012 is projected to increase by three per cent to 10.621 million tonnes compared with 10.318 million tonnes for the same period last year. 

The projected increased in CPO production in the second half of 2012 is expected to contribute to the increase in stock level and this could drag CPO prices. 

Since September 2011, the palm oil refiners have had numerous dialogues with the ministry regarding the competitiveness of these products vis-à-vis with those produced in Indonesia. 

This was contributed by the export tax structure in Indonesia which is aimed at promoting downstream operations there. 

In view of this, domestic refining capacity utilisation has decreased to 60.8 per cent for the January – June 2012 period, compared to 72.9 per cent for the same period in 2011. 

“The Ministry is concerned that due to the additional time required to address this issue, the additional window to reduce stocks through the CPO duty free mechanism has to be maintained.” 

It is also of the view that the development of the palm oil industry has to factor in the interest of all parties, including the producers and the processors. 

“We are currently undertaking a comprehensive review to further enhance the downstream sector of the palm oil industry and at the same time, ensuring the interest of the producers,” it said. 

This is taking into account that the palm oil industry is one of the key areas under the Government Economic Transformation Programme towards achieving developed economy status by 2020. 

To further promote production of high value added products and not to compete with basic processed products from Indonesia, the government provides incentives up to 40 per cent of capital cost for new investment in value added products. The products include surfactants, polyurethane, super olein, tocotrienol, phytonutrients, carotenoids. 

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