Govt needs more than tax revamp to pare down palm oil inventory

By SHAHEERA AZNAM SHAH / Pic By TMR

Malaysia must act beyond the changes of the palm oil export duty structure as the glut continues to weigh on the country’s main agriculture export.

CIMB Investment Bank Bhd regional head of agribusiness research Ivy Ng said the palm oil export tax has been reduced to zero since September 2018.

“At this moment, if we want to cut the inventory, there is nothing much we can do for the tax because it is already at zero percent.

“Changing the duty structure is not going to do anything, as at a zero rate, our palm oil is already competitive from the tax point of view,” she told The Malaysian Reserve.

Presently, Malaysia does not impose any export tax for the crude and refined palm oil as prices are still below the RM2,250 level.

She said any new tax structure to be imposed on the commodity must match the competitiveness of Indonesia’s tax structure and what the world’s largest exporter of palm oil is offering, to stay ahead in the current market.

“The components that people will be looking out for is whether the new tax structure will be aligned to Indonesia’s structure, and if it could offer much more benefits.

“But in Indonesia, they have recently revised their export levy for palm oil which is more progressive for different taxes at a different level of prices,” she said.

Ng said efforts to trim the country’s palm oil inventory would require collaborative and balanced mechanisms, including to encourage the use of palm oil and curb supplies.

“If we are able to increase the biodiesel usage through the new mandate and encouraging the replanting of oil palm trees, we can promote our product aggressively to the new market,” she said.

Moving forward, Ng said the palm oil price is projected to recover at an average RM2,400 in 2019 after the commodity sank to a three-year low 2018.

“We just have to go through the cycle of commodity price and the market will eventually find its own prices.

“I don’t think the government can do anything on the price on a daily basis because it is a globally traded commodity,” she said.

Primary Industries Minister Teresa Kok was reported as saying that the government is reviewing the duty structure of the palm oil exports in order to boost demand and reduce burgeoning stockpiles.

“We are currently reviewing our present export duty structure to ensure a level playing field in the market,” Kok said, according to Reuters.

As a measure to remain competitive, Malaysia has reduced its crude palm oil’s export tax to zero since September 2018.

According to the Malaysian Palm Oil Board, the government will continue keeping the export rate of the commodity at zero percent for the January export activities.