Advertisement
Advertisement
India
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
A palm oil plantation in Johor, Malaysia. Photo: Reuters

Disgruntled India weighs options on ties and palm oil amid #BoycottMalaysia campaign

  • The diplomatic fallout from Malaysia’s criticism over Kashmir is spreading to the economy as Indian businesses shun their palm oil suppliers in favour of Indonesian alternatives
  • With nationalists waging a social media campaign to boycott Malaysian imports, expectations are high that New Delhi will impose curbs or taxes
India
Traders in India are avoiding Malaysian palm oil imports in favour of purchases from Indonesia amid growing fears that New Delhi is weighing retaliation against the Southeast Asian nation for its criticism over Kashmir and sheltering of wanted Islamic preacher Zakir Naik.

At least three importers said the uncertainty in bilateral relations had forced them to consider alternatives, while a government source who handles India’s trade ties with Southeast Asia struck a note of caution despite saying there was no official word on import curbs yet.

“Anything can happen. Maybe some restrictions will be imposed,” said the source, who did not want to be named as he was not authorised to speak on the matter.

B.V. Mehta, executive director of lobbying group the Solvent Extractors’ Association of India, which represents more than 875 businesses with a combined oil processing capacity of 30 million tonnes, said the Indian government was deeply upset with what officials saw as hostile comments from the Malaysians and would take action in response, “but what type of action is still not clear”.

“Just to safeguard business interests, most refiners and importers have moved from [buying from] Malaysia to Indonesia. After all, the price of palm oil from Indonesia is the same,” he said.

Wanted Islamic preacher Zakir Naik. Photo: EPA

Ravindra Rao, vice-president and chief of commodity research at broking firm Kotak Securities, added: “Indian traders are shunning palm oil imports as there is a wide expectation the Indian government might impose more import taxes on Malaysian palm oil.”

Ties between Delhi and Putrajaya have deteriorated since outspoken Prime Minister Mahathir Mohamad criticised India’s move in August to revoke the special status of Kashmir – which is also claimed by neighbouring Pakistan – and impose a communications blockade that was partially lifted only earlier this week.

Mahathir said at a United Nations meeting last month that India had “invaded and occupied” Muslim-majority Kashmir. Turkey has also called on the international community to pay attention to the disputed region, and China has backed its all-weather ally Pakistan. India meanwhile has always maintained that the Kashmir issue is a bilateral one with no need for any third-party involvement.

India’s Economic Times reported on Friday that Delhi was also unhappy about the slow pace of its efforts to extradite Naik, who is wanted in India for alleged money laundering and inciting extremism through hate speech. He is a permanent resident in Malaysia and Mahathir had previously said there was no reason to deport him as long as he caused the country no trouble.

Prime Minister Mahathir Mohamad criticised India’s move in August to revoke the special status of Kashmir. Photo: AP

After Mahathir’s UN speech on September 27, small trade associations and nationalist individuals began waging a #BoycottMalaysia campaign on social media.

Users mostly called for a boycott of tourism and goods from the multiracial, Muslim-majority country, with several suggesting the government raise import taxes.

Meanwhile, Malaysian Twitter users hit back with their own #Boycott India offensive.

India is the world’s top importer of palm oil and buys more than 9 million tonnes annually, mostly from Indonesia – the world’s largest producer and exporter – and Malaysia.

Indonesia removes ‘palm oil free’ products from store shelves

In September, India raised taxes on refined palm oil from Malaysia to 50 per cent from 45 per cent for six months to protect domestic refiners, after a trade agreement between the countries signed earlier this year resulted in a surge in imports from Malaysia.

Rao of Kotak Securities said there were expectations among traders that Delhi might further increase taxes on Malaysian palm oil or decrease tariffs on shipments from other countries such as Indonesia.

“India has an alternative in Indonesia, which can quench our thirst for edible oil by all means. Hence, there seems to be no state of panic in the industry as far as India is concerned. However, the same cannot be said for Malaysia.”

India has been Malaysia’s biggest customer for palm oil products this year, taking in 28 per cent of exports – more than double the amount in the same period last year.

A worker collects palm oil fruits at a plantation in Bahau, Negeri Sembilan, Malaysia. Photo: Reuters

Malaysian trade officials on Thursday said recent fluctuations in refined palm oil sales to India were “within their normal range” given the 5 percentage point increase in import taxes by India.

“[The tax increase] was due to safeguard mechanisms on import spikes – a technical trade mechanism, not tension,” a government source said.

Malaysian officials told This Week in Asia there were no bilateral tensions or frictions with India, even as both countries remain locked in final negotiations for the China-led Regional Comprehensive Economic Partnership agreement, which aims to create a trading bloc of 16 nations by the year’s end.

They said India and Malaysia were sympathetic to each other’s demands during the trade discussions.

This week though, a Malaysian leader said the country was looking at increasing raw sugar and buffalo meat imports from India starting next year.

Malaysia’s Mahathir rebukes UN for letting rich countries do as they please

Asked by local media if this was in response to reports of an Indian boycott on Malaysian goods, deputy primary industries minister Shamsul Iskandar Mohd Akin said: “It is not entirely because of that, but the focus is to get as many [trade] partners as we can ... and India is a very important partner for palm oil.”

Mahathir, who was asked separately about boycott reports, said according to state news agency Bernama: “If the [Indian] government launched a boycott or something like that, then we will have to work diplomatically or reduce the kind of action that they have taken.”

Sandeep Bajoria, the head of a Mumbai-based firm which imports edible oil, said Indian buyers were scoring “fresh bargains” on palm oil from Indonesia, but Delhi should clarify its position on ties with Malaysia to help normalise trade.

Meanwhile, with Indonesian palm oil exports to India increasing, Jakarta on Thursday said it would reduce import taxes on Indian yarn to zero from the current 5 per cent. Last month it said it would consider changing rules on the quality of sugar imports – a move that could potentially benefit India.

Ties between India and Indonesia have become warmer this year with Prime Minister Narendra Modi and President Joko Widodo exchanging visits and both sides committing to double trade to US$50 billion in 2025.

Additional reporting by Bloomberg

This article appeared in the South China Morning Post print edition as: Friction with India spills into Palm oil
Post