KUALA LUMPUR: Malaysia needs to navigate with tact and diplomacy and work together with Asean countries in its efforts to counter the European Union (EU) threat against palm oil, says the Malaysian Palm Oil Council.

Its science and environment director Dr Ruslan Abdullah said such efforts by Malaysia could backfire if it does not work with other countries as Malaysia is only a small country.

“The impact will be less significant. But if we work together with other countries, for example India or Pakistan, we may have a strong wall to compete against the EU,” he told Bernama.

He was responding to Prime Minister Tun Dr Mahathir Mohamed’s statement that Malaysia would consider retaliating if the EU discriminates against palm oil.

On Dec 19 last year, French lawmakers voted to remove palm oil from the country’s biofuel scheme, starting in January 2020.

Malaysian Palm Oil Board (MPOB) director-general Datuk Dr A. Kushairi Din said Malaysia could retaliate by buying products from other countries if the EU continues its discriminatory stance against Malaysian palm oil.

The EU’s plan to restrict the usage of palm oil in the biofuel sector could have an impact on the local smallholders who depend on this industry for their source of income.

“Malaysia is an important trading partner for the EU. According to the European External Action Service, Malaysia is the EU’s second largest trading partner in the South East Asia region, whilst the EU is Malaysia’s third largest trading partner.

“In terms of trade in oil palm products, based on MPOB data, the EU was the second largest Malaysian palm oil export market in 2018 after India and accounted for 11.6 per cent of total exports of Malaysian palm oil,” he said.

In 2018, the total value of palm oil and palm-based products exported to the EU was RM9.31 billion, down 16.9 per cent from RM11.20 billion in 2017, due to low prices of palm oil products.

He said trade between the EU and Malaysia is dominated by industrial products, with the EU mainly importing machinery and appliances and exporting electrical equipment and machinery.

“Other sectors of relevance in terms of EU imports from Malaysia are plastics and rubber as well as vegetable fats and oils and in terms of exports, mechanical products,” he said.

Meanwhile, Malaysian Palm Oil Association (MPOA) chief executive officer M.R. Chandran said Malaysia should make a coordinated effort to address the EU threat.

“We should set up a “desk” to tackle this issue. We have to make sure that we have better solutions to increase our market share in two big markets such as India and China,” he said.

Malaysia needs to further enhance the development of higher value added products to compete against competing products.

For the long term, the country’s palm oil industry is encouraged to explore and expand their business into markets which are characterised as niche markets to gain higher market value. — Bernama