16/10/2012 (Bernama) - Introduction of the new export duty structure for crude palm oil (CPO) by the Malaysian government does not encourage Indonesia to undercut their tax rate, Malaysia Palm Oil Council chief executive officer Tan Sri Dr Yusof Basiron said today.

In an oligopolistic supplier market, undercutting by Indonesia will force Malaysian exporters to lower prices and to pile up stocks, he said.

"But the new structure does not encourage them to undercut anymore," he told Bernama when met on the sidelines of the International Palm Oil Trade Fair and Seminar 2012 here today.

The Plantation Industries and Commodities Ministry announced on Friday that effective Jan 31, 2013, the CPO export tax rate will be between 4.5 per cent and 8.5 per cent, depending on the prevailing CPO price, and will be fixed on a monthly basis for Malaysia to stay competitive.

Currently, the export tax is 23 per cent.

Yusof said over the last one year, price reduction has taken place despite the world's shortage of oils and fats, and stocks have built up lately leading to a further sharp price decline despite lower annual production in Malaysia.

"Malaysian stocks have increased to record levels despite lower yearly production compared to last year.

"Prices have dwindled by RM1,000 a metric tonne and Malaysia and Indonesia are exporting 20 million metric tonnes of palm oil products, RM20 billion would vanish from the revenue of each country if low prices are to prevail for one year," he said.

He said the governments of both countries will lose RM5 billion in corporate tax and Indonesia will not be able to collect another RM5 billion in export tax.

He said Indonesia could also take similar measures to be adopted by Malaysia and they need to help prevent the RM20 billion potential loss in revenue.

"Unilaterally raising the stake (favourable duty structure) or playing a "win-lose" strategy is a painful mistake; it will backfire in a duopoly market, resulting in a "lose-lose" outcome," he said.

In the near term, duty-free CPO can be exported more efficiently once "tank farms" are organised to allow CPO a clear passage for loading onto ships for exports.

"Some 2.5 million metric tonnes a year are exportable till Jan 1, 2013 when Malaysia's export tax is reduced to 4.5 per cent to eight per cent range.

"CPO will be in demand by local and foreign buyers and price will recover," he added.