Malaysia to Lessen Palm Oil Export Tax to 4- 6% to Boost Market Share

June 2022

Malaysia’s Plantation Industries and Commodities Ministry announced a measure to reduce the palm oil export tax from 8% to between 4-6% to alleviate the global shortage of edible oil. As the world’s second-largest palm oil producer, Malaysia aspires to increase its share of the edible oil market following the Russia-Ukraine war that disrupted the supply chain and Indonesia’s temporary embargo on palm oil exports in April.

Its Minister Zuraida Kamaruddin stated that the minister had proposed the tax policy to the Ministry of Finance, and the discussions were still underway, with a decision expected in June 2022. In the short term, Malaysian exporters are the clear winners as global buyers primarily look for Malaysian palm oil. Another proposal includes the tax cut for Malaysia’s large palm oil producer, FGV Holdings, and companies with overseas oleochemical production. Furthermore, the ministry aims to slow the implementation of B30 biodiesel requirement, which requires Malaysia’s biodiesel to be blended with 30% palm oil, to ensure supply for global and domestic food industries.

In particular, Malaysia has been asked to lower its export levies by several importing countries. India, Iran and Bangladesh are seeking to trade agricultural products like rice, wheat, fruits and potatoes for Malaysian palm oil. Production-wise, Malaysia’s palm oil output has been strained for more than two years due to a severe labor crunch caused by border restrictions that prohibited entry of migrant work. However, the ban has been lifted and the country’s exports of palm oil are forecasted to rise by 30% in the second half of 2022.

(Sources: Reuters; The Edge Markets)

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