Review palm oil strategy

AGAINST opponents who are focused, implacable and persistent, is Malaysia's reactive start-stop strategy towards palm oil appropriate?

On April 4 this year, the European Parliament passed by an overwhelming margin – 640 votes for, 18 votes against with 28 abstentions – a non-binding resolution calling for the establishment of a single Certified Sustainable Palm Oil (CSPO) scheme to ensure only oil from palms grown in an environmentally sustainable manner will be allowed entry into the European Union (EU) after 2020.

Also by 2020, the resolution suggests phasing out palm oil from the EU's biodiesel programme.

If implemented, this resolution could reduce Malaysia's exports of palm oil to the EU, the second-largest export market for the commodity.

Data from the Malaysian Palm Oil Board (MPOB) show the EU imported 2.06 million tonnes of palm oil products from Malaysia last year – less than India's purchase of 2.8 million tonnes but slightly ahead of China's intake of 1.9 million tonnes.

Palm oil contributed 3.3 million tonnes or 27% of the EU's biodiesel feedstock – a figure equivalent to 5.6% of total palm oil output last year, a report by CIMB Research says.

Criticising the resolution as unfair, top oil palm growers, Indonesia and Malaysia, plan to send a joint mission to meet EU officials next month.

Two questions need to be asked: What are the chances of persuading European governments to overturn a resolution overwhelmingly endorsed by EU parliamentarians? Are government representatives from Indonesia and Malaysia best placed to persuade European governments to change their stance towards palm oil?

Convincing consumers that oil palm plantations don't cause deforestation or endanger the orang utan and the vegetable oil is healthy is a credibility issue. If European corporations and academics are positive about palm oil, their views are likely to be given greater weight than those from Malaysia and Indonesia.

Malaysia should employ American and European academics to challenge the belief that palm oil is an unhealthy vegetable oil and greater media coverage should be given to highlight palm oil is a major source of Vitamin E. While Malaysians have already undertaken such research, the likelihood of bias suggests their findings will lack credibility.

Support from corporations that are also major users of palm oil can be helpful, as the "Nutella tax" case suggests.

In 2012, France proposed an initial tax of €300 (RM1,415) per tonne on palm oil, rising to €500 in 2018, €700 in 2019 and €900 in 2020. Ferrero, the Italian manufacturer of Nutella, launched an advertising campaign defending its use of palm oil, claiming the vegetable oil contributed to the confectionery's smooth texture and enhanced its shelf life.

In March last year, the "Nutella tax" was drastically reduced to €60 a tonne and in June, it was scrapped.

Malaysian policymakers must adopt a multi-track and sustained strategy. Undoubtedly, priority should be given to persuading the EU to withdraw – or at least defer – the recent resolution.

While the decision to send the first consignment of Malaysian Sustainable Palm Oil (MSPO)-certified palm oil consignment to Europe by year-end is commendable, equally essential is maximum media coverage to convince sceptical European consumers that MSPO (Malaysian Sustainable Palm Oil) – although certified in this country – is credible and on par with the proposed CSPA.

Additionally, producers of National Geographic, Discovery and other similar programmes should be invited to Malaysia to film documentaries showing palm oil is produced in a sustainable and environmentally-friendly manner and that the orang utan and elephants aren't endangered.

Moreover, environmentalists, consumer groups and European policymakers should also be given the opportunity to visit oil palm plantations in this country.

All this countermeasures should be implemented every year – and not only when palm oil is threatened either by a higher tax or restricted access to export markets or hit by fresh claims that the vegetable oil is unhealthy.

In the long term, Malaysia should step up efforts to boost palm oil exports to other Asian and Middle Eastern countries, particularly populous countries like India, Pakistan and China.

At a recent seminar on the impact of US President Trump's policies on Asia and in response to a question, Khazanah director Tan Sri Andrew Sheng made an interesting suggestion – instead of US dollars, Malaysian exports of palm oil to China should be denominated in renminbi.

Some may argue that continuing to accept payment in US dollars will benefit Malaysian exporters. Factors supporting a stronger greenback include Trump's plans for massive spending on infrastructure, a move that could exacerbate the US budget deficit, and the US Federal Reserve's stated plan to increase interest rates at least two more times this year.

While a strong US dollar will undoubtedly benefit Malaysian exporters, this should be weighed against the possibility of lower volume of exports to Beijing.

Malaysian policymakers and exporters must consider this trade off: short-term pain for long-term gain.

Opinions expressed in this article are the personal views of the writer and should not be attributed to any organisation she is connected with. She can be contacted at siokchoo@thesundaily.com