Afghanistan: Potential Market for Malaysian Palm Oil

Afghanistan – officially known as the Islamic Republic of Afghanistan is a landlocked country strategically located in a crossroad between the biggest economies of Asia, China, India and the middle-east countries. The country also shares its borders with Iran, Pakistan, Tajikistan, Turkmenistan and Uzbekistan.

Source: IMF, Statista

Afghanistan is an active member of the United Nations (UN), the Organisation of Islamic Cooperation (OIC), the South Asian Association for Regional Cooperation (SAARC), the Group of 77, the Economic Cooperation Organization (ECA), and the Non-Aligned Movement (NAM). Afghanistan’s economy ranked at 96th largest economy, with a gross domestic product (GDP) of $72.9 billion by purchasing power parity (PPP). (IMF, 2018).

Afghanistan sustained rapid economic growth and improvements for more than a decade with the influx of aid and a strong economic growth after the war in 2001. The real GDP of Afghanistan from the Graph 1 shows a steady growth from the year 2009 to 2018.

Chart 1: Real GDP of Afghanistan from 2009 to 2018

Source: IMF, Statista

Edible Oil Situation in Afghanistan

The edible oil production in Afghanistan is small and does not satisfy the demand of the domestic requirements. The domestic production of edible oil was around 3,200 MT in 2019 which was mainly linseed oil that is traditionally used for both culinary and medicinal purposes. More than 94% of the edible oil consumption is depending on the edible oil import. The preferred cooking oil for household consumption is sunflower oil which is mainly imported from Russian Federation. Palm oil is less popular due to the clouding nature in the temperate climate. However, palm oil is widely used in the food manufacturing sector and some household in favour of the low-cost edible oil.

Source: Oil Worl
Source: Oil World

Palm oil Import in Afghanistan

Palm oil consists of 72% or 160,700 MT of its total edible oil import followed by 21% or 46,900MT of sunflower oil. Up to 80% palm oil shipped to Afghanistan is the standard palm olein packed in jerry cans. 90% of the palm oil traded are sent through Pakistan Karachi Port due to Afghanistan being a landlocked country. Almost all palm oil exported to Afghanistan is in the form of finished products. There are only a few cooking oil processing plants in the country.

Source: Oil World

The Challenges of Palm Oil Traders

One of the challenges that are faced by palm oil traders in Afghanistan is the increase in the container freight over the last 6 months that has added to the cost of palm oil. The freight has increased 3 folds and the availability of containers has also become difficult. Besides these, there are no major issues faced by palm oil in Afghanistan. Malaysia enjoys 80-90% of market share and positive image amongst the buyers in the domestic market.

Other than that, the lack of awareness about palm oil at the level of authorities as well as consumers is one of the issues in Afghanistan. The health authorities and customs have raised the subject of fortifying palm oil at the import stage in the last couple of years but this was not implemented due to the pressure from the local importers. Having said this, the palm oil trade in the country is gradually building up and there is room for market expansion in the palm oil market.

Way Forward for Palm oil Trade in Afghanistan

Since the health concern is getting big in the country, Malaysia must work to ensure the Afghanistan government and its relevant authorities know that the palm oil produced by Malaysia is of the highest quality and as per the global standards set for oils and fats. The government must be aware that Malaysia has been exporting the same high standard of cooking oil to Afghanistan which has also been exported to other parts of the world. It is recommended to hold engagements with the health and standards authorities in Afghanistan to update their import regulations and food standards related to palm oil and other fats.

It is also imperative for Malaysia to increase the awareness regarding health and functional attributes of palm oil among the consumers and health professionals in Afghanistan. Promotional programmes with major importers and distributors of Malaysian palm oil brands can be held to increase demand and exports into the country.

G2G engagements or dialogues between the relevant stakeholders such as the ministries, agencies and organizations are recommended to understand the needs and issues of Afghanistan, hence creating effective and tailored programs to address the issues and needs effectively. At the same time, market studies can be initiated to identify potential areas for palm oil market expansion.

Prepared by: Theventharan Batumalai & Azriyah Azian

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