During Jan. – June period of 2020, the market share of MPO has increased significantly and has put Malaysia at a respectable position in the palm oil market share in the Bangladesh’s palm oil market once more. Price competitiveness of MPO compared to Indonesian suppliers contributed mainly in the said growth. This trend of increasing imports can lead to the possibility of direct Malaysian investment in Bangladesh as well.
MPOB data shows that export of MPO during Jan. – June period of 2020 to Bangladesh witnessed a staggering growth to the tune of about 8 folds as compared to the corresponding of period of 2019. Detail on the same may be seen in the Table – 1 furnished hereunder.
|Table–1: Export of MPO To Bangladesh (MT)|
|Origin||Jan – June 2020||Jan – June 2019||Changes||Changes|
|Source: MPOB Data|
THE SCENARIO NOW:
Bangladesh is a country of 160 million people and consumes about 3 million tonnes of oils and fats annually, which is increasing by 8% to 10% annually. Economic development, population increase, change of food habits in pace with rapid urbanization are some of the factors which are contributing toward this increase. Average per capita consumption of oils and fats in Bangladesh is approaching 19 kgs.
Bangladesh is import dependent country, on average, about 85% to 88% of annual requirements of oils and fats are met through import. Possibility of higher local production of oil seeds is very low due to limited agricultural land availability, thus the dependence on import is therefore almost certain.
To meet this increasing demand, the major three edible oils; palm oil, soyabean oil and rapeseeds/canola oil, would continue to be the main imported oils and fats in Bangladesh in the coming years. Of the lot, palm oil would be the major beneficiary of this increasing trend because it already holds the lion’s share in the total imports. Currently approximately 55% of the total imports of oils and fats consist of palm oil.
In view of this certain growth, investment in edible oil refining sector of Bangladesh is potentially lucrative. Malaysian investors can take advantage of the different trade related bilateral agreements between the two countries. Besides, the Govt. of Bangladesh has also offered attractive facilities for FDI.
Such investments would have far-reaching impact in increasing and sustaining MPO’s market share in Bangladesh. Some Of the areas which can add value to the supply chain of palm oil in midstream and downstream sectors include tank storage facilities, refining, packing and distribution. According to Bangladesh Investment and Development Authority (BIDA), Bangladesh has received proposals worth US$ 1,717 million under Malaysian FDI/Joint venture during 2018-19 fiscal in the field of telecommunications, power generation, textile and financial sectors. Malaysia’s total trade with Bangladesh was US$ 2.37 billion in 2018-19 fiscal. Until now there is no agreement on FDI between the two countries, but the following agreements could be major facilitators for attracting Malaysian investments in Bangladesh:
- Avoidance of Double Taxation Agreement concluded on April 1983
- Trade Agreement concluded in December 1977
- Agreement on Investment, Promotion and Protection between two countries concluded on October 1994.
FTA/PTI MAY BE SIGNED:
Apart from the aforesaid trade deals, signing of an FTA/PTA between the two countries is also in progress. Bangladesh’s Minister for Commerce, during his last visit to Malaysia in July 2019, stated that “Bangladesh is actively thinking about signing of FTA with Malaysia”. This will not only pave the way for easier investment opportunity by Malaysian investors in Bangladesh but would also contributes in further increase of exports of Malaysian goods, specially palm oil to Bangladesh.
Malaysian investment in edible oil refining sector will not only consolidate MPO’s share in Bangladesh market, but would also assist in entering the Indian market using South Asian Free Trade Agreement (SAFTA) guidelines. Under this agreement, SAARC member countries are able to export commodities to any of the member countries at 50% reduced tariff than that of the prevailing tariff on the commodity in question.
MPOC OFFICE IN BANGLADESH:
It may be mentioned here that Malaysia alone played a great role in popularizing palm oil in Bangladesh. MPOC Bangladesh Office, which is active in Bangladesh since 1995, played the lead here on behalf of the Malaysia Palm Oil Industries. Since 1993 to 2005, Malaysia was the major supplier of palm oil to Bangladesh with an exception between 2000 to 2003. Malaysia lost its position as the lead supplier of palm oil to IPO since 2006 mainly due to price competitiveness.
Prepared by Fakhrul Alam
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