Malaysia Palm Oil: Worries About the EUDR


Mar 24, 2023 | Agricultural Markets News

Reading time: 2 minutes

The latest move by the European Union (EU) to introduce the EU Deforestation-Free Product Regulation (EUDR) on the import of selected commodities, including Palm Oil is linked to deforestation and forest degradation, prompts Malaysia to consider the possibility of stopping the export, stated by the Deputy Prime Minister, Datuk Seri Fadillah Yusof who is also the Minister Plantations and Commodities. Statistically, the Palm Oil plantation sector contributes almost 35 percent to agriculture’s Gross Domestic Product (GDP), making the industry the most significant contributor to the country’s agricultural sector.

Malaysia, which is the world’s second-largest producer and exporter of Palm Oil after Indonesia, has seven main export destinations, namely India, China, the EU, Turkey, Kenya, Pakistan, and the Philippines, accounting for nearly 62.2 percent (9.7 million tons) of the total Palm Oil exports. India remains the leading destination of the country’s Palm Oil exports for the 9th year from 2014 to last year, as has China as the second largest market since 2019, although exports may slightly decline in 2022.

At the same time, the EU, as the third largest Palm Oil export destination, accounted for 9.4 percent of Palm Oil exports from Malaysia, which was 1.47 million tons last year, which showed a slight decrease compared to the percentage in the previous year (10.5 percent). According to the AgFlow data, Malaysia shipped 90,400 tons of Palm Oil to India in February, followed by Kenya (37,650 tons), Saudi Arabia (36,100 tons), and Turkey (23,845 tons).

Malaysia Palm Oil: Worries About the EUDR

Malaysian Palm Oil Strategy

Therefore, before taking any such decisive decision, Malaysia needs to formulate a more effective strategy and find a way to convince the EU that the country practices agricultural policies and practices, especially Oil Palm, which are not against the EUDR.

First, Malaysia needs to be proactive and launch its campaign to correct misperceptions among EU countries, thus not allowing the Oil Palm industry to continue to be attacked with baseless allegations. Negotiations and engagements must continue with the EU and the US to deliver a message to stop such allegations against Malaysian Palm industry products.

Secondly, Malaysia should strengthen cooperation with Indonesia to deal with the negative understanding. The recent visit of the Prime Minister, Datuk Seri Anwar Ibrahim, to Indonesia was a good initiative, with Malaysia and Indonesia agreeing to strengthen cooperation in the Palm industry in dealing with attacks and restrictions on Palm-based products from the region.

Third, Malaysia can request the cooperation of the International Trade Organization (WTO) to help explain the situation to the EU so that restrictions on Palm products can be lifted. Active involvement in conferences and forums organized by the WTO should also be made because the platform is appropriate for providing awareness to participating countries.

Fourth, Malaysia needs to work with the Council of Palm Oil Producing Countries (CPOPC) to highlight the results of studies, publications, and consultations carried out, primarily related to the sustainability of Malaysian Palm Oil. Sharing information and the results of this research at the global level is very important to counter negative perceptions related to deforestation. Malaysia invited Thailand to become a member of the CPOPC.

In addition, a sensitivity study or known as a ‘what if’ analysis, needs to be done to assess the impact of the policy of stopping Palm Oil exports to the EU and its effect on the volume and value of Malaysian Palm exports. It can give a clear empirical picture of the impact of implementing the restrictions. Finally, a holistic study should also be carried out on Malaysia’s trade with the EU. This study is not only for Oil and Palm-based products but also for other goods and services involving trade with the EU.

Other sources: BHARIAN

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