The Malaysian Insight

ANY move by Putrajaya to retaliate over the European Union’s plan to phase out palm oil from its biofuels mix by 2020 should not involve a blanket ban on EU imports.

Economics professor Dr Yeah Kim Leng said this would have a negative impact on the economy.

The academic with Sunway University said such “tit-for-tat actions” would be damaging to both sides.

“It’s best to avoid going down that route as it will eventually escalate to a trade war. That would be catastrophic for both sides.

“Some of the imports are essential items so if you stop importing them, it will be hard to find substitutes. Any retaliatory action will likely be product-specific,” he said.

According to Malaysian Palm Oil Board, Europe is the second largest export market for Malaysia’s palm oil, overtaking China in 2017. 

Europe imported 2.06 million tonnes, just behind India which remained Malaysia’s top palm oil importer at 2.83 million tonnes. 

Yeah was asked to comment on Deputy Prime Minister Ahmad Zahid Hamidi’s recent statement that Putrajaya was reviewing the purchase of products from European Union countries following the EU parliament’s proposal to ban biofuels made from vegetable oil, including palm oil by 2020.

He said the proposed ban would affect the incomes of some 500,000 smallholders.

The move was considered discriminatory as it would affect the demand for palm oil, which is one of Malaysia’s biggest commodity-based export contributors with a value of RM71.5 billion last year. 

In November 2017, Malaysia’s Trade with the EU amounted to RM15.22 billion, or 9.7% of Malaysia’s total trade. The trade with EU saw an increase of 15.7% from November 2016.

Plantation Industries and Commodities Minister Mah Siew Keong said China is expected to be Malaysia’s largest primary products importer by 2020.

Economist at the Asian Development Bank, Dr. Jayant Menon, said the EU is an important trading partner for Malaysia and it would hurt Malaysia more if the country were to stop trading with the EU.

“We should try and break away from the widely discredited mercantilism-based view of the world and embrace the reality that trade is mutually beneficial.  

“Exports are not necessarily better or worse than imports and both contribute to a country’s welfare when conducted on a free and fair basis,” the lead economist in the Economic Research and Regional Cooperation Department said. 

He said there are better ways to resolve disputes involving trade than imposing bans.

“Taking it up using the processes provided for by WTO (World Trade Organisation) should be the first consideration if there is a legitimate complaint to be addressed,” he said. 

Felda settlers, meanwhile, are more concerned about issues affecting them directly than the recent EU proposal, said settlers’ pressure group, Persatuan Anak Peneroka Felda Kebangsaan (Anak).

Its president Mazlan Aliman said their debts, plantation maintenance and management were more immediate concerns as settlers had managed to survive through other episodes when discriminatory policies on palm oil imports affected Malaysia’s export of the commodity.

“Settlers don’t really feel like they are affected by the proposal, most probably because they have experienced something similar. They are more affected by issues like their debts, maintenance and low income,” he told The Malaysian Insight.

He added the government should still be prepared with proactive measures and not react only when anti-palm oil policies are announced.

Felda Jengka settler Andak Ahmad said: “From my observation, some settlers don’t really know or talk about such matters. Usually they will leave it to the Felda management to handle such issues.

“But I’m quite worried, because even now, Felda’s management is problematic,” he said, adding he was concerned about the trickle-down effects of the EU proposal.

“Surely we will feel the impact, we’ll have to wait and see, and I’m not sure if the Felda management can handle the matter.

“Because even now they are plagued with internal issues, the mismanagement that they themselves created,” he said. – February 8, 2018.