Eager for a Fair Exchange

Chairman MPOCTan Sri Bernard Dompok was in a good mood as he left Rabat, the capital of Morocco, on Aug 6 to return to his hotel in Casablanca, the north African nation’s largest city. The Plantation Industries and Commodities Minister just had a discussion with Moroccan Foreign Trade Minister Abdellatif Mazouz and it went well. Trade between the two countries is relatively anaemic – RM84mil in 2007 and RM70mil last year – and both sides are eager to boost the exchange of goods and services. The two ministers quickly agreed on a possible avenue. Morocco will consider buying more palm oil from Malaysia, which in turn will look into the idea of increasing its import of phosphates from Morocco. Mazouz proposed that his officers sit down soon with the Malaysian ambassador to Morocco to work out the details.
It was an obvious plan. Indonesia may have overtaken Malaysia in palm oil production but we are still the No.1 exporter of the commodity. On the other hand, Morocco imports 70% of its oils and fats requirements. It is also the world’s largest exporter of phosphates, which are used in making fertilisers, a major input in oil palm cultivation. Each minister came to the meeting with a primary objective. Dompok’s portfolio includes the development of the palm oil industry, while Mazouz seeks to expand the customer base for Morocco’s phosphates. Things often move slowly when governments engage each other to establish new frontiers in international trade. It can be a complicated, protracted dance that combines tentative overtures, cajoling, quid pro quo, meetings after meetings, and sometimes, subtle arm-twisting. However, because of the coincidence of wants in the Malaysia-Morocco situation, the flow of palm oil to Morocco may begin speeding up sooner rather than later. That explains why Dompok and the rest of the Malaysian delegation were upbeat after the meeting. “I’m feeling a little happy hearing that there’s enough interest here (in Morocco) in palm oil,” said the minister. He was on six-day mission in Turkey and Morocco to promote Malaysian palm oil, and the meeting with Mazouz was the final leg. It was a fine ending to a working visit that took over a year to organise. It shows that it takes plenty of effort to maintain Malaysia’s leading role in the global vegetable oil market. Having POTS in Istanbul. It may be easy to believe that because palm oil is a commodity, the emphasis is on the output rather than on its marketing. The argument here is that because it is a homogenous product and it has several substitutes (such as soybean oil, rapeseed oil and sunflower oil), its competitiveness lies purely in the pricing. Therefore, the strategy should be to produce as much palm oil as possible at the lowest costs possible. However, it is not merely a case of if you grow it, they will buy it. There are, of course, differences between the many vegetable oils, as determined by geography, culture, biology and chemistry. And these influence their pricing, applications and marketability. In addition, these are not always static factors. In other words, it is foolish to take for granted palm oil’s place in the world. That is why we have organisations such the Malaysian Palm Oil Board (MPOB) and Malaysian Palm Oil Council (MPOC). The former is a government agency that comes under the purview of Dompok’s ministry. The board’s principal task is to promote and develop the country’s palm oil industry, mainly through research and development. The MPOC brings together representatives from the public and private sectors. Its mission: “To promote the market expansion of Malaysian palm oil and its products by enhancing the image of palm oil and creating better acceptance of palm oil through awareness of various technological and economic advantages and environmental sustainability.”
It is no coincidence that these two organisations are key players in the working visit to Turkey and Morocco, along with the Plantation Industries and Commodities Ministry and the Malaysian embassies in the two nations. Among those who accompanied Dompok on the trip were MPOC chairman Datuk Lee Yeow Chor, MPOB director-general Datuk Dr Mohd Basri Wahid and MPOC chief executive officer Tan Sri Dr Yusof Basiron. A central event during the ministerial mission was the Malaysia-Turkey Palm Oil Trade Fair and Seminar (POTS Turkey) held in Istanbul on Aug 3 and 4. It was a few things rolled into one – presentation of papers, a showcase of palm oil-related products and services, and a platform for business matching. It was the first time that the POTS series, initiated by MPOC, had come to Turkey. To coincide with the event, MPOC also invited Dompok to officially open its regional office in Istanbul, which was set up five months ago.
Why Turkey
The MPOC office in Turkey is essentially a replacement for its office in Dubai in the United Arab Emirates (UAE), which was closed in February after operating for five years. The thinking is that the Dubai office has served its purpose and it is now time to zero in on a new market. In 2001, Malaysia exported 180,113 tonnes of palm oil valued at RM184.2mil to the UAE. Six years later, 360,509 tonnes worth RM894.8mil were shipped to the Middle East country, making it the eighth largest overseas market for Malaysian palm oil. Last year, it held on to that slot with 357,949 tonnes. MPOC’s other regional offices are in the United States, Belgium, South Africa, Pakistan, India, Bangladesh, China and Egypt. The decision to target Turkey is largely about location. Although it considers itself a European country – it has applied to join the European Union (EU) – it straddles both Asia and Europe geographically. The Turkish government positions the country as a gateway to the EU, Central Asia and the Middle East. The fact that MPOB categorises Turkey as a Middle East market indicates how centrally located the country is. In his speech, Dompok said Malaysia viewed the Mediterranean and Middle East markets as very important for palm oil. “There had been a significant upward trend of palm oil exports by Malaysia to this region, which stood as the third largest importer of Malaysian palm oil after the Asia Pacific and the Indian Sub-continent,” he added. “Nevertheless, there is ample potential to further enhance palm oil trade with Turkey. There are many economic activities that this country can undertake using palm oil as a base to further develop downstream activities.” At a press conference after the opening of POTS Turkey, Dompok said, “Basically, our presence here is to ensure that Malaysian palm oil is understood by the rest of the world. The MPOC has set up an office here to allow for greater interaction with users and potential users of palm oil.” He also pointed out that Turkey’s large population (72 million) is potentially a base for palm oil consumption. Although sunflower oil dominates the domestic market, he feels that palm oil has a lot to offer as an alternative. On the MPOC office in Istanbul, council chairman Lee said, “The main thrust is to provide support and services and information to the palm oil users, not only in Turkey, but also in the surrounding areas in the Middle East and parts of Eastern Europe. “Turkey is the second largest vegetable oil market in the Middle East/West Asia region, after Egypt. So it’s a very important market.” A refined idea

On Aug 4, the Malaysian delegation led by Dompok travelled to capital city Ankara for courtesy calls to Industry and Trade Minister Nihat Ergun and Agriculture and Rural Affairs Minister Mehmet Mehdi Eker. The principal message from these meetings was that Turkey is looking to address the si zeable big trade imbalance in Malaysia’s favour. Dompok suggested that Malaysian and Turkish businesses could team up to set up refineries in Turkey that process palm oil shipped in from Malaysia. “If we have a refinery in Istanbul, for instance, when it re-exports the palm oil, it becomes a product of Turkey. This can help correct Turkey’s trade imbalances with other countries,” he explained. “The other part, of course, is that Afta (Asean Free Trade Area) is coming into effect, and countries from Europe or this part of the world can use Malaysia as a point of entry into Asean to enjoy the status that is accorded to member countries of Afta.” When asked about what he would say to the players in the Malaysian palm oil industry about prospects in Turkey, he said, “The message would be that the doors for palm oil are opening. In fact, one of the reasons we are here is to hold the POTS in order to address the Turkish consumers’ questions about the commodity. “Palm oil is getting better and better understood. There’s increasing usage of the products. The market is there but you have to do more marketing. The producers need to work with the relevant organisations such as MPOB and MPOC.” In Casablanca, Morocco, Dompok hosted a dinner for players in the country’s oils and fats industry on Aug 5. His speech was meant to counter the negative publicity about palm oil, such as allegations that palm oil was unhealthy and that oil palm cultivation was environmentally damaging. “It is indeed sad when some people would resort to smear tactics of others just to ensure that their own interest is taken care of, when there are many other options and ways that we can do to enable everyone to live in harmony, thus complementing each other for the greater good,” he lamented. Morocco imports less palm oil than does Turkey. Thus, the challenge of penetrating the Moroccan market is greater.
The delegation knows this. Said Dompok, “We had come to Morocco knowing that it’s not yet the market for big importation of palm oil; the commodity has not been established here yet. Therefore, the main focus was to see how we can develop the market.” On why the Government had chosen to focus on Morocco, he said, “Morocco has a high profile in this part of Africa. In many ways, it is quite organised. The economy is doing well. You can see a lot of property development coming up. Tourism is big here. “And there’s its proximity to Europe. Its economy is an example for others in this part of Africa to emulate. If we can get a foothold here, it might mean an easier entry to the others for palm oil.”

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