(adds more details)
By Niluksi Koswanage
KUALA LUMPUR Feb 5 Malaysia has issued
this year's tax-free crude palm oil export quotas of 3 million
tonnes after weeks of delay, sources said on Sunday, ending
speculation it would scrap the quota to help its refiners
compete with Indonesian rivals.
Sources with direct knowledge of government plans said some
palm oil firms like IOI Corp and state run plantation
agency FELDA received their quotas last week. The total quotas
account for 15.5 percent of projected output this year in
Malaysia, the No.2 producer.
The move ends weeks of talk that Malaysia would scrap the
quota, which has tightened regional supply for its refiners
after Indonesia raised its export tax for the crude grade to
jump-start its own processing industry.
Malaysian refiners now struggle to compete against
Indonesian rivals who enjoy better margins, with growing
national output and refined palm oil export taxes that were
slashed last year to half that of the crude grade.
"The refiners have not been forgotten. The government is
looking at providing incentives to refiners to encourage them to
go further downstream and produce higher value products compared
to Indonesia," a government source said.
"The incentives will be done via special funding from the
government. There will be an announcement at the end of this
month," added the source.
Local media said last week that the government would scrap
the duty-free export quota for crude palm oil while maintaining
23 percent export tax for the grade to safeguard the refining
industry. Malaysia does not tax refined palm oil exports.
SPOTLIGHT ON EXPORT QUOTAS
The 2012 tax-free export quota for crude palm oil is less
than the 3.6 million tonnes shipped out without any tariffs to
Malaysian-owned refiners in Europe and Asia.
As in the past, the government has an option to increase the
quota to meet the demands of the licence holders, though that
might not happen this year due to slower imports from Indonesia,
the sources said.
Plantations holding export licences say the delay by the
government to issue quotas slowed shipments in January, putting
their businesses and long existing contracts at risk.
Cargo surveyor Societe Generale de Surveillance reported a
13 percent drop in Malaysia's January exports from a month ago.
Crude palm oil shipments alone slumped 56 percent.
Shipments of refined, bleached and deodorised palm olein --
used in cooking oil -- fell just 6.4 percent as there was enough
crude palm oil supply in Malaysia for refiners to process even
though some demand had shifted to Indonesia.
Refiners say the delay in issuing export quota helped to
curb rises in domestic price in January. They also say the quota
system is not transparent and is subject to abuse, with licence
holders offering tax-free crude palm oil to domestic refineries
-- accusations planters deny.
"It is election year and government wants to keep firms like
FELDA happy as it handles a lot of local farmers who need to
offload their crude palm oil," said a Malaysian refiner in Kuala
"The incentives the government promises may not even amount
to much; we will have to wait and see. Or maybe we should just
look at shifting some of our operations to Indonesia or having
more joint ventures with Indonesian firms," he added.
(Reporting by Niluksi Koswanage; Editing by Will Waterman)