Malaysia, RI to harmonize palm oil export tax

Malaysia, RI to harmonize palm oil export tax

KUALA LUMPUR (Dow Jones): Malaysia and Indonesia are working together to harmonize export taxes on palm oil products, Primary Industries Minister Lim Keng Yaik said Thursday.

"We are both working on that. We have already sent the taxation (schedules) on different palm (oil) products" to Indonesia, Lim told reporters following a press conference.

Both countries hope to finalize the details within the next month or so, he added.

Lim said the different tax scales for palm oil products between Malaysia and Indonesia at present "gives the impression that both countries are fighting."

"There is a need to harmonize because we have come to the conclusion that palm oil doesn't compete with palm oil. Palm oil competes with 16 other oils" in the international market, he said.

Lim also said Malaysia and Indonesia will jointly seek better market access for palm oil products in China and India.

"We hope China will give extra quotas for palm oil products," he said.

As for India, Lim described its new tariff structure on imported vegetable oils as "very discriminating on palm oil."

He said the import tax on soy oil was only 45 percent, while for palm oil, it was 75 percent, and nearly 92 percent if the various surcharges are included.

"If you want to protect local oil production, by all means do it, but be fair..." he said.

Lim said at a press conference later that the government will collect the amount for the fund from palm oil producers by reverting to the original cess, or tax, of 11 Malaysian ringgit/ton they were required to pay on all CPO produced. This will be effective from May 1. The cess was cut to 7 ringgit/ton in February.

"This (the cess) will be revised as CPO prices move up," Lim said.

Lim also said Malaysia hopes to reduce CPO stocks "to a healthy level of 1.2 million tons at any one time" by burning CPO for fuel in power plants.

"We will keep on burning until stocks reach a healthy level."

He said high palm oil stocks had resulted in CPO prices trading at a big discount to soy oil prices.

Lim said it was even more discouraging to note that CPO prices in Malaysia are about 60 ringgit/ton lower than in Sumatra, Indonesia, "all because our stocks are high."

Malaysia's palm oil futures rebounded from early lows and closed at their highest in nearly six months on Thursday following Lim's statement.

Benchmark third-month June futures rose five ringgit at 880 ringgit ($231.57) a tonne after trading down to 856 on talk yesterday that Tenaga had very limited capacity to burn CPO.

Volume was 2,438 lots.

Cargo surveyors SGS and ITS are expected to release export figures for the whole of March on Friday.

Physical March/April (south and central) was offered at 860 ringgit a tonne against bids of 855. Trade was reported at 855 for south. South was offered at 860 ringgit a tonne against bids of 852.50, and trade was done at 852.50 to 855.

May (south and central) was offered at 880 ringgit and bid at 870, with trade reported at 870 for both regions.