In an interview to New Europe Dr. Yusof Basiron, Chief Executive Officer of the Malaysian Palm Oil Council reacts to the negative labelling of palm oil in the EU and explaines what its production realy means for the Malaysian economy.
Palm Oil seams to be a new product in the eyes of the European consumers. But, Malaysia is in business since 1918 when the first plantation was started. Indeed, today palm oil production is an important factor for the economies of Malaysia and Indonesia as well. EU imports 15% of the Malaysian production. But new regulations concerning the product have to be implemented by the EU in December. A fact that is considered a threat to the production of palm oil.
New Europe: We are at a critical moment for palm oil production. First of all I would like to understand and explain to our readers why this crisis on the price of palm oil happened. The government of Malaysia reduced the taxation on the export of crude palm oil to 0. This is a bit strange after a general euphoria this past year concerning the future of palm oil business.
Yusof Basiron: Palm oil business is a very traditional business. As you know, this industry has been operating for more than 50 years and still growing. Of course, palm oil is now the most consumed oil in the world – bigger than soybean. And in the export market is more dominant, occupying over 60% of the world exports of edible seed oils.
So, when the supply is happening to increase here and there, there will be some price fluctuation occurring as well. So, over the last year the supplies of soybean from South America and this year supply from USA have been bullish, meaning very good production yields. And so, with the so-called over-supply of some of these the oil seeds in North America, the market tends to be bearish and the prices have kind of weakened, and that includes palm oils because we are all participating in the market. All these oils can be substituted for one another. So if there is a big supply coming from North America the price will be weakened. Palm oil price has also run fairly low compared to traditional normal average level. Now it is about 2,100 ringgits.
That means there is a concern for the future of the product?
The palm oil market will continue to fluctuate from year to year. It is still very profitable for palm oil to be produced because it is a very high yielding crop. The farmers, although they are not so happy, they are still able to make good profits from their operations. So it is not an issue for us, but we do not want to allow the market to totally collapse in price. So we took steps to make sure that we continue to stimulate exports because we are mainly exporting our palm oil. We don’t want stocks in Malaysia to build to a level that would make the price weaker. So to stimulate the reduction of stocks and to increase more exports, we stimulate the demand and we extend the exemption for 0 duties to December as announced by the budget.
This has to do with crude palm oil.
Yes. The refined palm oil is already zero duty, according to our duty structure. Only the crude palm oil attracts a duty initially to provide some protection to the local refineries to have enough raw materials to refine. But during times of big supply and high stock they have plenty of palm oil anyway. We removed the duty temporarily to encourage other refineries in other countries. That’s why we removed the duty temporarily. And therefore, that’s how we feel that we have to take steps in order to prevent the deterioration in the market, knowing that America has also a big crop this year and they keep reporting they have a very good yield. So obviously we need to pre-empt and take necessary actions not to be unduly affected by this.
Do you think that, on an international level, reactions against palm oil have to do more with palm oil directed to the food and cosmetic market or palm oil proposed as a biofuel?
The palm oil is used very diversely – in food 80%, in oil chemicals 10% and biofuel another 10%. So, all these applications can invite reaction from different groups. Those in the food industry, if they find palm oil to be too competitive they will try to defend themselves by restricting palm oil market excess to give them a better advantage in their market shares. There are competitors competing with palm oil in the food market and they also devised campaigns or strategies to make them more competitive locally. This is typically done in France where they even campaigned to put No Palm Oil labels on their food products. So all these products, we monitor them and we think that they are not legally correct to put this type of negative labelling providing unfair competition to sincere people who follow the law.
This has been seen in France and in southern Belgium – the French-speaking Belgium – where the trend seems to be spreading. This for us is very unfair because it could affect our palm oil exports to France or Belgium or EU later on. And as you know palm oil constitutes 10% of our national export revenue. Ten percent is a big number and we can’t afford to be damaged by this kind of illegal labelling allowed to be adopted by French retailers and manufactures.
Will this affect relations between EU and Malaysia for instance?
We are concerned that this is not a fair practice. It is discriminatory. Palm oil is as good as olive oil nutritionally, but why is palm oil being singled out like this? Palm oil is not damaging to the environment because we are exporting sustainably certified palm oil to Europe. Our country has adopted the RSPO certification scheme. RSPO means Round Table on Sustainable Palm Oil. It’s a scheme developed by WWF and which we comply to and certify our palm oil that we export to Europe. In fact, we produce double the amount that Europe can import in terms of certified sustainable palm oil. So, there are absolutely no scientific, nutritional or environmental reasons why this negative labelling should appear.
But new regulations concerning Palm Oil will be implemented by the EU in December.
Yes. New regulations will be implemented by the EU in December when new labelling laws of food products will come into effect [under which] all the oils and fats and ingredients will be clearly labelled and shown if they are present in the food. And with this kind of food labelling, there is absolutely no reason why this negative labelling should continue. Because on the labelling panel, if there is no Palm Oil it is not there. If there is palm oil it will be shown. So there is absolutely no reason to allow the negative labelling to continue unless it is with the intention to exploit the market and deceive consumers with an implied claim that it is something undesirable. But what is undesirable? They have not provided any explanation. They cannot provide a direct explanation because they could be sued. There is no justification scientifically.
But the use for food and cosmetics apart, palm oil it is also proposed as a biofuel.
Palm oil is a very efficient oil producing crop. It is able to be produce by poor countries like Malaysia and Indonesia because it is competitive and uses very little land area to produce the necessary quantity. If you are to produce biofuel by allocating your land to plant soy seeds you will require 10 times more land. With palm oil we use one-tenth of the land to provide the same quantity. It is very efficient and cost-effective. So it is good for the consumer because it’s not expensive and it is viable. It is so viable that the EU slammed an anti-dumping tax on Indonesian biofuel simply because they construed that this must be dumping because it is so cheap, but this is not dumping. If it produces 10 times more yields it is obviously going to be less expensive than local oils. So this is the reality, but in a competitive world there are people who will construe some scheme to limit the importation of palm oil.
Source : NewEurope