Mr Peter Chin, Malaysian Minister for Plantation Industries andCommodities

Kuala Lumpur (Business Line) - WITH crude palm oil prices weakening in thewake of rising indigenous production and sluggish export sales coupledwith loss of market share in India " the world's largest importer of palmoil " to soyabean oil in recent months, Malaysians are a worried lot.

As world's top producer and exporter of palm oil, there is a lot at stakefor Malaysia in the global marketplace. Inroads being made by rivalsoyabean oil in key consuming markets such as India, benefiting fromdifferential in customs duty between palm (80 per cent) and soya (45 percent) oils are being viewed with consternation here.

As if to add insult to injury, there now are reports of the Malaysian oilpalm plantation programmes of area expansion affecting the environment andbiodiversity. The natural habitat of some forest animals is said to belost because of oil palm cultivation in newer areas.

Over the last one week, a thick envelope of haze covering many parts ofthe country including the key city of Kuala Lumpur has added a newdimension to the existing challenges because the oil palm plantations(albeit, from outside Malaysia) are in someway implicated in thedeterioration of air quality.

Crude palm oil production during 2004-05 (October/September) is projectedto rise to a record 15.5 million tonnes even as inventories are bulging.No wonder, crude palm oil prices have pared their value considerably (overRinggit Malaysia (RM) 100 per tonne) over the last several weeks and arenow threatening to breach the psychological RM 1,300 a tonne mark.

It is in this background that Business Line had an exclusive meeting withMr Peter Chin, Malaysian Minister for Plantation Industries andCommodities. The free-wheeling discussion touched several aspectsincluding Indo-Malaysian trade relations, rivalry between palm and soyaoils, relationship between Malaysia and Indonesia (world's second largestproducer and exporter of palm oil), role of technology and so on.Excerpts:

In March this year at the Palmoil Price Outlook conference here, you toldBusiness Line that you would be visiting India soon to talk to ourpolicymakers regarding high tariffs on palm group of oil. When is yourvisit going to materialise and what's the agenda?

India is at the top of my list for bilateral discussions. Work pressurehere has delayed my India visit. Hopefully, it should happen in November.We want to look at some of the critical issues such as tariffs on palmoil, which to us is "punitive". Our government is going on the basis of aFree Trade Agreement with India. We would like to see India as a hub forMalaysian palm oil. I am convinced that collaboration between Indianentrepreneurs and Malaysian producers is the way forward and would resultin a "win-win" situation for both.

India has an adverse trade balance with Malaysia primarily because oflarge palm oil imports even though there are several products andservices, apart from agricultural goods, that India can offer to Malaysia.Even the railway project did not come off in a big way. Why shouldMalaysia not buy more from India, if not for domestic consumption, forthird-country exports?

Malaysia has a good trade network in Asia and outside. Trade is a two-waystreet and there is need to strengthen the bilateral trade relations. Iwill encourage Malaysian businesses to look at India more closely forinvestment and trade. Also, I would like to initiate a dialogue with Indiafor collaboration in agricultural research, as your country has a stronginstitutional framework for farm research, extension and so on.

How are your relations with Indonesia, which is slowly gnawing into yourpalm oil market share?

I don't see Indonesia as a rival. In fact, palm oil production in Malaysiaand Indonesia are complementary to each other. Indeed, we want to ensurebetter collaboration between the world's two largest palm oil producers sothat we can manage our supply chain better. A number of Malaysiancorporates have invested in oil palm plantations in Indonesia; and to thatextent, there can hardly be any conflict of interest. We want Malaysiancompanies in Indonesia to follow best agricultural practices.

How do you propose to tackle the problem of haze, which seems to beoriginating in Indonesia?

Before anyone accuses Malaysian companies in Indonesia of causingpollution by open burning of palm trees, I want to rush to that countryand tell them not to indulge in open burning. I want our industry tofollow best practices whereever they are located. I am soon going to meetIndonesian authorities to discuss this issue of haze as my government isextremely concerned about poor quality of air. I am also going to take uptrans-boundary pollution issue under ASEAN.

How do you propose to manage the much talked about competition betweensoya oil and palm oil in the global marketplace? Also, what do you make ofthe reports suggesting damage to environment and biodiversity as a resultoil palm area expansion?

First of all, I think, there is no conflict between palm and soya oils.Both the oils can co-exist in the world as the market is rather big andthere is scope for every type of oil to enjoy a decent market share. Inthe final analysis, the best product will survive and flourish. As for thequestion of environment impact of oil palm area expansion, we have seensome mischievous reports in the recent past originating from the westernworld. The findings in these are largely baseless and divorced fromreality. I want to place it on record that areas going into oil palmcultivation are not forestland; they are arable land already identified,earmarked and designated for oil palm plantation. So, we are notdestroying forestland. We are keen to preserve our biodiversity.

What is being done about yield enhancement and improved recovery of oil?

We are encouraging the application of biotechnology in these areas. We areexperimenting with transgenics. We are conscious of the fact that we haveto be careful given the concerns relating to human health, environment,bio-safety and related issues. We want to make use of cutting-edge scienceand technology, but would tread with utmost caution