4/1/2007  KUALA LUMPUR, (AFP): Malaysia will ride a commodities boom in the year ahead, with soaring prices for palm oil, rubber, tin and timber providing a boost to the economy, analysts say.
Palm oil has been a star performer in 2006, buoyed by the bright future for biofuels which Malaysia is aggressively pursuing. Palm oil futures contracts recently surged to their highest levels since 1999.
In a move to cement Malaysia's status as a top producer amid growing regional competition, three of the nation's leading plantation firms have begun moves to combine into the world's largest listed palm oil company.
A deal on the 8.86 billion dollar merger is expected to be signed in January.
Rubber prices, which reached 20-year highs earlier this year, are also expected to rise thanks to growing demand from the booming automotive sectors in China and India.
The price of tin reached an all-time high of 11,600 dollars per tonne on the Kuala Lumpur market in the closing days of 2006, reportedly on concerns of tight supply as Indonesia cracks down on illegal mining operations.
"As long as the mining sector does well, and the resources sector -- rubber, palm oil and timber -- continues to do well, that should be quite supportive of spending and income in the rural sector," said GK Goh economist Song Seng Wan.
"There's still some question mark over recent floods and low consumption, but at this point I think it still looks like Malaysia can achieve GDP growth of 5-6 per cent on the basis that the export-oriented sector stays on an even keel."
The government has given a robust picture on Malaysia's economic prospects recently, saying it expects growth to exceed its projection of 5.8 per cent for 2006, and reach 6.0 per cent in 2007.
A leading Malaysian forecaster in December raised its 2006 economic growth projection to 5.9 per cent from 5.6 per cent and its 2007 forecast to 5.2 per cent from 4.8 per cent on the back of improved business and consumer confidence.
The influential Malaysian Institute of Economic Research said that "goodies and incentives" under a national development plan to boost the economy -- and the agriculture sector in particular -- had contributed to a better business environment.
Malaysia's palm oil products contributed some 27 billion ringgit (7.7 billion dollars) in exports in 2005.
It is currently the world's biggest palm oil producer, but Indonesia -- which has a much larger area for plantations -- has said it aims to snatch the title by 2008. The two countries account for 85 per cent of world production.