Malaysia and India set for showdown over palm oil and religion

Kuala Lumpur — Malaysia is talking to the Indian government and trade officials in a bid to resolve concerns over New Delhi’s new palm oil import restrictions, a minister in Kuala Lumpur said on Thursday amid a trade spat between the two countries.

India’s Hindu nationalist government has repeatedly objected to Malaysian Prime Minister Mahathir Mohamad speaking out against recent policies, which critics say discriminate against Muslims. Malaysia is a Muslim-majority nation.

Last week, India, the world’s biggest buyer of edible oils, placed curbs on imports of refined palm oil and has informally asked traders to stop importing all kinds of palm oil from Malaysia, the world’s second biggest producer and exporter of the oil.

Reuters reported on Wednesday, citing sources, that New Delhi could also restrict imports of petroleum, aluminium ingots, liquefied natural gas (LNG), computer parts and micro-processors from Malaysia. No action has been taken so far.

“This year, we foresee more challenges in some of our major markets,” Teresa Kok, Malaysia’s primary industries minister, who is in charge of palm oil, told an industry conference, referring to India’s new palm import rules.

Kok said the Indian high commissioner, the ambassador in Malaysia, was one of the people she was in touch with over the issue. It is “important for us to engage with them further through diplomatic channels and stakeholders”, she said. “We will continue to engage.”

In some good news for Malaysian palm sellers, Bangladesh’s farm minister said his country is open to buying more from Malaysia if it offers competitive rates. The South Asian country buys mainly from Indonesia, which is expected to be the biggest beneficiary of the Malaysia-India dispute.

Mahathir, who is vocal on issues concerning the Muslim world, ignored a question from Reuters on the spat with India on the sidelines of a separate event on Thursday.

On Tuesday, he said Malaysia is concerned about the palm oil curbs but indicated he would continue to speak out against “wrong things” even if it costs his country financially.

Last month, he criticised India’s new religion-based citizenship laws, which critics say discriminate against Muslims, and its policies in the Muslim-majority region of Kashmir, which is also claimed by Pakistan.

India was Malaysia’s biggest buyer of palm oil in 2019, buying 4.4-million tonnes. In 2020, purchases could fall below 1-million tonnes if relations do not improve, Indian traders say.

To make up for the potential loss, Malaysian officials say they are trying to sell more to countries such as Pakistan, the Philippines, Myanmar, Vietnam, Ethiopia, Saudi Arabia, Egypt, Algeria, Jordan, Kazakhstan and Uzbekistan.

However, replacing a huge buyer such as India will not be easy, and there have been calls for both countries to talk it out putting aside any “personal or diplomatic ego”.

The other concern for Malaysia is that after the signing of an initial trade deal between the US and China on Wednesday, China could buy more soy oil from the US and less Malaysian palm oil.

Reuters