The Malaysia Reserve (08/01/2018) - The government expects up to 10% reduction of earnings for the country’s palm oil exporters, as the ringgit continues to strengthen against the greenback, said Ministry of Plantation Industries and Commodities (MPIC) Minister Datuk Seri Mah Siew Keong.

He explained that the projection is based on the local currency’s performance against the US dollar, which is in an ongoing upward trend.

“The ringgit used to be at the RM4.40 to RM4.50 level, but today it is RM4 which is actually a 10% difference. There will be a corresponding reduction in earnings as their exports are in US dollars,” Mah said at a press conference held in Kuala Lumpur last Friday.

Thus, Mah said, 2018 will be a challenging year for the commodities exports.

The government, he said, is also ready to absorb a big drop in revenue following the ministry’s move to suspend crude palm oil (CPO) export duty temporarily.

Mah said the moratorium will be effective for three months from Jan 8, 2018, to April 7, 2018, to reduce the stock level and strengthen price.

“We must bring down this stock level and that is why we decided to implement this scheme.

“The Cabinet has given the approval to waive this export duty. We just got the letter signed by the minister of finance, who is also the prime minister (PM), to authorise the Customs to make it duty-free for the Malaysian palm oil exports.

“The will be a big revenue loss, but for the sake of the stakeholders and the 650,000 smallholders, the Finance Minister and PM has agreed to this duty scheme,” Mah explained.

Among the objectives of the temporary scheme are to protect the smallholders from being impacted due to the falling CPO price and to improve the competitiveness of the palm oil industry as a whole.

However, the suspension may be lifted earlier than the three-month period should the stock level comes down to 1.6 million tonnes.

“I am confident, with this scheme, we should be able to reduce the stock level and hope it can increase the demand for palm oil,” Mah said.

MPIC will monitor the CPO price and its stock level, followed by suitable measures to strengthen the price in the market.

The scheme is open to all companies that have a valid licence to export CPO. As it is, the commodity sector remains the largest net exporter for the period of January to November 2017, with a trade balance of RM92.9 billion compared to other sectors such as electrical and electronics with RM28.8 billion and petroleum and gas at RM32 billion.

Total exports earnings of commodity products have increased 16.5% year-on-year (YoY) to RM129.1 billion compared to the RM122 billion recorded in 2016.

Meanwhile, imports of commodity products climbed 26.4% YoY for the 11-month period to RM36.2 billion from RM28.6 billion a year ago.

Embracing a challenging year ahead, coupled by the possibility of an import ban on palm oil by the European Union, the government will continue to promote local commodities products to new markets.

“We have made several marketing trips to Iran, India, the Philippines, Japan and Pakistan, which has seen rising demand, especially in Iran and Pakistan. We are going to work harder on these new markets,” Mah said.

MPIC opened a new regional office in West Africa last year to become an African centre for Malaysian palm oil activities.

In November 2017, the stock level increased 16% to 2.56 million tonnes due to higher production and declining exports.

Subsequently, the average CPO price has dropped to RM2,372.50 per tonne in the third week of December last year.