Malaysia deserves to get low-risk status in new EU regulation
12/05/2025 (New Straits Time) - The European Union will by June 30 unveil the much anticipated "country benchmarking system" under the EU Deforestation Regulation (EUDR).
It will divide countries into one of three tiers: "low", "standard" or "high" risk, with escalating due diligence and compliance obligations aimed at minimising EU's contributions to global deforestation and forest degradation.
It requires seven commodities and their derivatives — cattle, cocoa, coffee, palm oil, rubber, soyabean and wood — entering the EU market to be deforestation-free, legally produced and covered by a due diligence statement.
This regulation may restrict Malaysia's trade with the EU as palm oil, rubber, timber and cocoa are produced by the former.
Where Malaysia lands in the EUDR rankings will have a profound impact on thousands of local producers in industries such as palm oil.
Is "low-risk" status for Malaysia warranted? What has our sector done to deserve low-risk status, and is it enough?
The truth is there is still a lot of uncertainty, not least over the methodology the EU Commission will use to decide the rankings.
The EU has stated that assessments will be based on an analysis of national deforestation rates, measured in "absolute" terms (i.e. the number of hectares of forest lost) and in "relative" terms (i.e. the percentage of hectares lost annually).
Countries below the thresholds will be classified as "low-risk" while countries that exceed them will be classified as "standard-risk".
While the Commission has been transparent about the criteria to determine a country's ranking, it has not yet specified what the thresholds will be.
Nor has it defined the time spans that will apply to assessments — whether they are based on data over 30 years, 15 years or only the last five years.
It is particularly frustrating for Malaysia, which has taken significant steps to improve the sustainability of its palm oil industry in recent years.
Between 2014 and 2023, Malaysia reduced primary forest loss by 65 per cent and overall tree cover loss by 52 per cent (Global Forest Watch/World Resources Institute 2024).
The latest data from Satelligence (which provides data for EUDR compliance purposes) also shows that Malaysian deforestation rates are stable compared with its competitors, and the risk of further deforestation is appreciably lower (Satelligence 2025).
Malaysia has also been steadily reducing the overall acreage of land taken up by palm oil production.
It has also been leading the way on sustainability practices via the Malaysian Sustainable Palm Oil certification, a mandatory national scheme that ensures strong protections for biodiversity and natural ecosystems, and robust traceability and supply chain integrity for every palm oil stakeholder in the country.
The upshot is Malaysia is now one of the cleanest and most sustainable suppliers of palm oil in the world.
Where the Commission chooses to draw the line between the risk categories is likely to be influenced by the EU's wider trade relationships with third countries and the record of its own member states on deforestation.
These factors could also play well for Malaysia. Negotiations on an EU-Malaysia free trade agreement are poised to restart (now a priority for the EU in an era of soaring global tariffs); and recent Food and Agriculture Organization data points to potentially higher levels of primary forest lost in certain EU member states than in Malaysia.
Is it feasible that Malaysia could be given a worse classification if all EU member states are deemed to be "low-risk"?
The competitive advantage of "low-risk" status is considerable and could prove make-or-break for smallholders and medium-sized producers, who depend on the European market for their livelihoods.
Our European partners would also do well to consider the implications for their own consumers as palm oil is used in over 50 per cent of products on Europe's supermarket shelves.
The higher priority should be focusing attention on regions and countries that pose the greatest risk.
If the EU's scheme inadvertently punishes countries that have succeeded in addressing the risk of deforestation, it will disincentivise other palm oil producing nations from following in Malaysia's footsteps.
It will punish a domestic industry that has some of the highest national sustainability standards worldwide.
The effect will be higher prices for importers. These costs will get passed on to European consumers, with no benefit at all to the environment.