26/10/2012 (The Star) - The implementation of Malaysia's new CPO export duty structure and the discontinuation of duty-free CPO export quota must be accelerated to take effect early next month instead of Jan 1 next year.

Malaysian Estate Owners Association president Boon Weng Siew said the Government must have confidence in its new CPO measures and “should not be overly concerned whether world major CPO producer Indonesia will try to reduce further its CPO export duty to counter Malaysia.”

He opined that the revenue to be generated from the new CPO export duty could be well utilised for the benefit of the local palm oil industry, such as financing the cooking oil subsidy with the concurrent abolition of the flawed windfall profit levy imposed to big plantation companies.

In addition, the potential revenue in a way could compensate local upstream players with palm oil refineries overseas from the loss of benefit of being the recipients of the duty-free CPO export quota.

On the other hand, part of the export duty revenue could be used to finance the proposed RM1bil Industry Adjustment Fund to help local independent refineries without the upstream operations to mitigate the negative impact caused by Indonesia's lower palm oil export duty regime which started in September last year.

Boon pointed out that the CPO duty-free export quota of 5 million tonnes allocated this year so far was not effective in reducing palm oil stocks which hit a historic high at 2.48 million tonnes last month.

“Even the Plantation Industries and Commodities Minister admits that only half of duty-free CPO quota is able to be exported.

“I understand that the so-called approved permits for the duty-free export were now issued to applicants that do not own any refineries overseas and they have problems to export these CPO, as they will need to apply for an export permit which will take time to be approved.

“Also, there is inability to accumulate the adequate quantity for a single shipment of 5,000 to 10,000 tonnes of CPO at one go,” he added.

According to Boon, the domestic price of CPO could not be “directly or indirectly” reduced by the current situation where oil palm smallholders were charged with holding cost between RM20 and RM40 per tonne for their fresh fruit bunches (FFB) supplied to millers and also RM100 per tonne discount or so-called “freight charges” imposed by refineries in Sabah.

He pointed out that the heavy palm oil stocks situation had caused local millers to charge the holding costs to smallholders given the sluggish CPO intake by local refineries from millers and, therefore, causing longer CPO storage costs held by millers.

“I was informed that the holding costs imposed to smallholders in Johor are spearheaded by a local plantation conglomerate with big mills based on the FFB supplied from an outside sources.”

“This move is then emulated by many other millers in the state,” added Boon.

Meanwhile, Palm Oil Refiners Association chief executive officer Mohammad Jaaffar Ahmad said refiners were generally happy with the Government's decision to lower CPO export duty of between 4.5% and 8.5% from the current 23% but “it will be good if the measure can be implemented sooner.”

He suggested that Malaysia should gazette its new CPO export duty on a monthly basis and, if possible, a few days earlier ahead of Indonesia's gazetted CPO export duty on 19th or 20th of each month.

“This will enable local producers, millers and refiners to better plan ahead their purchases and forward buying or selling,” he added.

The Indonesia palm oil export duties are based on the CPO prices in the CIF Rotterdam, Indonesia futures market and Bursa Malaysia Derivatives CPO futures contract.

For Malaysia, under the new export tax regime for CPO, effective Jan 1, 2013, the tax rate will start from 4.5% when the price of CPO is trading between RM2,250 and RM2,400 per tonne.

“The local CPO export duty will subsequently move up in tandem with CPO prices. The 4.5% to 8.5% CPO export duty is believed not to be insurmountable for refiners and producers alike,” according to industry observers.

Jaaffar believes that the latest measure would help to reduce stocks and push up exports by March next year.

“In fact, by middle of next year hopefully the local stocks can reach manageable level below 2 million tonnes and put CPO prices back to RM2,800-RM2,900 per tonne range,” he added.