Palm oil refiners heave a sigh of relief

This is written by my colleague Rupa Damodaran.

KUALA LUMPUR: PALM oil refiners yesterday heaved a sigh of relief with the government's new export tax structure for 2013, which they say will help restore Malaysia's competitiveness.

The new structure which comes into force January 2013, would detract crude palm oil (CPO) from being shipped out, thus enabling the refiners to use it for their downstream activities.

The move will also raise the competitiveness of Malaysia in processing olein and stearine and exporting products.
Palm Oil Refiners Association of Malaysia (Poram) chief executive officer Mohammad Jaaffar Ahmad is pleased that the government has fulfilled its promise.

Downstream players have been hoping for the government to heed their call to scrap the quota as they said it lowered the industry's competitiveness and reduced national revenue.

"The new tax structure has yet to be implemented, but we are hopeful that the refiners can improve their profit margin next year," he said. At 1.5 per cent to two per cent for palm olein , he said, it would be more manageable and makes it a level playing field compared to Indonesia's eight to 10 per cent.

After more than a year, the Cabinet responded to the plea of the refining community, to lower the tax from the 23 per cent. 

Yesterday, the Plantation Industry and Commodity Ministry announced the new palm oil tax structure for January 2013. The next announcement for February 2013 palm oil tariff structure is scheduled on 15th January. 

The plight of the refiners and others in the local downstream palm oil industry was felt more following neighbouring Indonesia's review of its export tax structure last year to boost its own refining industry.

Now that the government has come up with the much needed tax structure, Mohd Jaffar said, it is up to the refiners and their innovativeness to improve their profit margins.

However news reports said Indonesia may also soon introduce changes to its export tax structure to ward off the stiff competition in January. Its agriculture minister recently said there will also be tax changes to reduce the stockpiles.