Malaysia considers palm oil export tax waiver as stocks reach record

Malaysia is weighing whether to suspend its crude palm oil (CPO) export tax to reduce record inventories of 3.5 million tonnes and improve export competitiveness, according to a wire report. Discussions between the Plantation and Commodities Ministry and industry representatives are expected.

ESG Malaysia executive director Dr Harald Sippel said a temporary exemption could increase shipments, particularly to price-sensitive buyers such as India. But he cautioned that it would not eliminate Indonesia's pricing advantage or provide a lasting improvement in competitiveness.

At current prices, Malaysia's 10 per cent tax represents about RM450 a tonne, Sippel said. Indonesian supplies are RM700 to RM900 a tonne cheaper, meaning that passing the entire tax saving to buyers would cover only half to two-thirds of the difference. Indonesia could also respond by cutting its levy, he added.

Sippel estimated that the Treasury would forgo about RM450 million for each million tonnes exported without the tax. Increased corporate tax and windfall levy receipts could offset part, but not all, of that loss. He called for a fixed expiry date and explicit conditions for ending any exemption.

The effects would differ across the industry, Sippel said. Plantation businesses could benefit from firmer domestic CPO prices, while refiners could face more expensive feedstock and lose part of their cost advantage.

Public Investment Bank analyst Chong Hoe Leong said the proposed waiver could help Malaysia recover market share from Indonesia. He suggested keeping it until domestic stocks drop below two million tonnes. Malaysia previously suspended the tax for six months in 2020.