October 4, 2022

Can’t afford to meddle

6 min read

It seems counterproductive to be irking a major contributor of our economy when the price of one of our main commodities is on the wane.

BOYCOTTING our palm oil may not be the Indian government’s official stand, not even two weeks after the controversy surfaced, but the lobbying by some Indian groups – including the media – to punish Malaysia is still unsettling, especially when the price of the commodity is at its lowest.

At stake is the huge Indian market worth RM6.9 billion, so the call for prejudice isn’t something to be overlooked since the country is the world’s largest vegetable oil importer, with Indonesia and Malaysia its palm oil suppliers.

The palm oil downstream products that India needs include ghee, soap, vegetable oil, biofuel, pharmaceuticals and cosmetic products.

Recently, an Indian trade body representing oilseed crushers, advised its members not to buy palm oil from Malaysia, taking a cue from New Delhi’s protest of Prime Minister Tun Dr Mahathir Mohamad’s remarks on the Kashmir conflict.

“The recent developments pertaining to strained relations between our nation and Malaysia has put a lot of responsibility on our industry in view of huge imports of palm oil from that country, ” said Atul Chaturvedi, president of the Mumbai-based Solvent Extractors’ Association (SEA) of India.

“In your own interest as well as a mark of solidarity with our nation, we should avoid purchases from Malaysia for the time being. We trust you would heed our advice, ” he said in a statement.

Chaturvedi said the Indian government “has not taken kindly” to Malaysia’s position on Kashmir at the UN General Assembly.

“It would be in fitness of things, as responsible Indian vegetable oil industry, we avoid purchasing of palm oil from Malaysia till such time clarity on the way forward emerges from the Indian government, ” he added.

The furore started when Dr Mahathir said in his speech at the 74th session of the General Assembly, “despite UN resolution on Jammu and Kashmir, the country has been invaded and occupied, ” and called on India to “work with Pakistan to resolve this problem”.

In its bid to thwart protests in the region, the Indian government, on Aug 5, revoked Jammu and Kashmir’s legally autonomous status and imposed many unprecedented security measures, including cutting off the Internet and phone services.

The PM’s opinion hit a raw nerve there and led to India’s Ministry of External Affairs rebuking Dr Mahathir’s references to Kashmir on Oct 4.

Added fuel to the fire, the media, particularly Magna Indica-anchored News Z, has been broadcasting a clip nearly every five minutes why India must support Hindus in Malaysia up in arms against Dr Mahathir.

Basically, Malaysia is being accused of taking sides and backing Pakistan – India’s long-time nemesis. It’s hard to ignore controversial preacher Dr Zakir Naik either wittingly or unwittingly playing a part in this diplomatic debacle.

Zakir, unwelcome in any nation, including Muslim majority countries, is a permanent resident in Malaysia. He was thought to be a Saudi Arabian citizen, but apparently, he isn’t, and even the Saudis don’t want him.

Indian groups, including the media, need to take a step back and look at the effects of trade wars and tariffs. It benefits no one except the inflated egos of shallow politicians who think they are statesmen.

The clear example is the escalating US and China trade war, which has led to spill over effects to the rest of the world, as the two superpowers clash. So, trade wars, in any form, is bad for any country.

As Dr Rais Hussin, the Emir Research CEO, put it aptly in his description of trade wars, “they trigger a dyadic trade relationship that is toxic on the rest of the global value chain, with India included.

“If that is an economic fact, why should India emulate the example of Washington DC and Beijing?

“Secondly, and perhaps more importantly, an unsaid yet practical principle in Asean is – any country wishing to be part of a thriving region of 680 million people, cannot be seen supporting the opposition there.”

He wrote that Prime Minister Modi has had a “Southerly Policy” with Asean since 2015, and is a member of the East Asian Summit, Dialogue Partner of Asean.

“India is destroying a key principle of its own diplomatic engagement. Not only will the whole of Asean oppose it, but the rest of the East Asian region will see India’s behaviour as the beginning of the use of ‘hatchet diplomacy’.”

There is another point to consider, much of Indonesia’s palm oil is owned and sold by the likes of Malaysian companies IOI and Genting.

That aside, there are growing concerns among India’s long-time friends that Modi’s hard-nosed approach to nationalism, bordering on religious fervour, is discomforting to many. These actions by Hindu militants, according to many reports, are affecting minorities including Muslims, Christians and Sikhs.

For the time being, the prices of crude palm oil are expected to remain competitive, at least until the first half of next year, pending any official announcements from India.

The Star recently quoted sources saying the offtake of Malaysian palm oil was still stable, and with demand still exceeding supply, CPO prices would hold steady. That’s comforting news.

Without a firm word directly from the Indian government, the market is treating the potential boycott by Indian importers on local palm oil as mere speculation. The MB Investment Bank’s regional head of plantation research, Ivy Ng, said excluding potential impact on demand from speculation of the boycott, CPO prices should recover next year, averaging at around RM2,300 per tonne.

In March, it was reported that China was bumping up its palm oil purchase from Malaysia by around 50% to around 4.7 million tonnes, which will be a huge boost to local planters and the government.

Last year, Malaysia exported 3.07 million tonnes of palm oil and palm products to China worth a total of RM8.38bil, marking, from 2017, an increase of 7.3% from 2.86 million tonnes worth about RM9.39bil.

Primary Industries Minister Teresa Kok said that the agreements were a “good start”, following the delegation meeting between the two countries in August last year, during which it was decided that the Chinese uptake of Malaysian palm oil would be increased by half a million tonnes.

The agreements inked for the purchase of 1.62 million tonnes of palm oil were very significant, said China Ambassador Bai Tian, especially in view of the 45th anniversary of diplomatic ties between Malaysia and China this year.

“This is really a very big number and I believe in the near future, there is possibility that China will increase its uptake of palm oil from Malaysia, ” he said.

“As I have said before, China imposes no glass ceiling on the import of Malaysian palm oil, ” he added.

There was the perception that China was quietly stalling purchasing our oil palm, following the change of the federal government last year and the uncertainties over numerous Chinese projects in Malaysia as its consequence. Concern abounded since China is Malaysia’s third largest importer of our palm oil.

Dr Mahathir was outspoken during his first tenure as PM. He was the champion of Third World countries, and he initiated the Group of 20 comprising developing countries, giving his brutally frank views of western countries in the process.

Although Malaysia is a member of the Commonwealth, and even hosted CHOGM (Commonwealth Heads Of Government Meeting) in 1989, Dr Mahathir once said there has never been a “common wealth” among the member nations, which were all once colonised by the British.

That’s Dr Mahathir for you, and as he reaches 95 years old next year, I don’t think we can expect him to change. He will speak up, without fear or favour, and whether we like it or not, but he must also take cognisance of how Malaysia, which he helmed for 22 years earlier, no longer has a double-digit economic growth. And the prices of crude palm oil and crude oil have dropped drastically over the years.

India and Pakistan will likely continue being at loggerheads, and whatever Malaysia says, will not please anyone. Likewise, there was no need for Dr Mahathir to suggest that Hong Kong chief executive Carrie Lam quit, which did nothing more than irk China.

He was responding to a question from Hong Kong Bar Association chairman Philip Dykes during a question-and-answer session at a forum in Hong Kong, probably not realising that Dykes is an unwelcome man in Beijing.

In fact, the vice-chairman Edwin Choy quit over the association’s failure to condemn protesters’ violent actions in the ongoing anti-government demonstrations.

Malaysia can stay out of harm’s way if he refrains from commenting on issues involving other countries. After all, we have enough problems of our own.

Stay tuned for a new offer coming to you soon.