28/04/2022 (The Sun Daily), Petaling Jaya - The subsidy provided by the government for palm oil-based cooking oil will have to be increased due to the decision by Indonesia to ban the export of palm oil.

Sunway University economist Dr Yeah Kim Leng said the government will have to spend millions of ringgit to ensure cooking oil remains affordable for the lower income group, although the amount is much lower than the billions spent on fuel subsidies.

University Tun Abdul Razak economist Dr Barjoyai Bardai concurred and added that the subsidy for palm oil-based cooking oil was just over RM500 million, but it is only for the 1kg bag.

Yeah said although the world price will be higher due to the Indonesian ban, it will not impact the cost of living drastically.

“Cooking oil is only a small component in the basket of goods purchased by a household every month.

“The cost of living will be higher but the increase will be negligible. Most households would be able to absorb it,” he told theSun.

Yeah said Indonesia is the largest producer of palm oil. Malaysia is second but is also the largest exporter of the finished product.

He added that many Malaysian companies own sizeable plantations in Indonesia and this will impact them.

Yeah said the slight relaxation on the export of crude palm oil from Indonesia recently would help local refiners meet their obligations to customers.

“The high prices will have a cascading effect, with smallholders being the biggest beneficiaries. This will put more money into their pockets and in turn would help the economy grow.

“The higher spending power would benefit the overall economy.”

He said even with the high prices, the low-income group would not be hit hard because Malaysia is a nett exporter of palm oil.

Yeah said the government will only need to pay refiners a higher subsidy to keep the price of cooking oil under control.

Last Friday, the Indonesian government banned the export of palm oil because the high prices were causing shortages in the country. The ban was announced to ease the shortage and keep the price of cooking oil under control.

Barjoyai said any action would have two possible outcomes, especially with the palm oil ban.

He said on the positive side, higher prices in the world market would benefit Malaysia. It will bring higher foreign exchange earnings and at the same time benefit local companies.

“On the downside, the government will have to provide a higher subsidy to keep the price of cooking oil down.”

Barjoyai added that there is a possibility of lower palm oil prices due to the good harvest of soya. He said soya oil can be a replacement for cooking oil but not for industrial use.

He said as palm oil-based cooking oil is a price-controlled item, the higher market price would not have a major impact on the low-income group.