Asia palm oil plays waiting game over tax

Asia palm oil plays waiting game over tax

KUALA LUMPUR (Reuters): Malaysia is likely to include the four
firms allowed last year to export crude palm oil duty-free in
this year's concession, while Indonesia may cut the CPO tax to
five percent from 10 percent soon, traders said Monday.

Last year, the government authorized plantation house Felda,
Kuala Lumpur Kepong Bhd, Golden Hope Plantations Bhd and Kuok
Oils and Grains to export CPO without duty in order to help
reduce stocks.

Trade sources said the four firms would once again receive the
concession plus another four companies from the eastern states of
Sabah and Sarawak on Borneo island. Government officials could
not be reached for comment on Monday.

"As far as I know four companies have been confirmed. The
government plans to allow eight companies to export CPO duty-free
this year, but we don't know yet about the other four," said one
trader in Kuala Lumpur.

Officials at the four companies declined comment.

Market sources said that Malaysia and Indonesia appeared to be
waiting for the other to make a decision before making their own
announcement.

An official at Indonesia's Trade and Industry Ministry said on
Monday the country would decide its new export taxes on CPO and
its by-products on Thursday. The taxes would be announced early
in September, said the official.

The official options included cutting CPO export tax to five
percent and eliminate export tax on by-product. Another option
was to axe all export taxes on CPO and by-products.

Traders said they expected Indonesia to adopt the first option
to take a more cautious approach and see what Malaysia does.

Malaysia's Primary Industries Minister Lim Keng Yaik said
earlier in August that priority in awarding the tax breaks would
be given to exporters in Sabah and Sarawak and that the number of
firms could be higher than four.

Traders earlier expected the government to release the list
after a cabinet meeting last Wednesday, but Lim said the
government could make a decision this week.

The next cabinet meeting will be on Wednesday. Traders,
however, were skeptical there would be an announcement because
the government would be too busy preparing for the Independence
Day celebration on Thursday.

Traders said the duty-free concession could help reduce
stocks, which are piling up due to slack demand from traditional
costumers, such as India.

Buyers are aware the stocks were high in Malaysia, so they
don't have to rush to buy.

Malaysia has for many years taxed CPO exports heavily,
currently the levy is about 140 ringgit a ton, to ensure supply
to the local refining industry. Exports have been falling.

The benchmark third-month November futures contract was
unchanged at 1,000 ringgit ($263.15) a ton at 0820 GMT.