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Palm Oil Brewing between India and Malaysia Diplomatic War

Indonesia is the world’s largest producer of palm oil, followed by Malaysia. India had been the biggest importer of palm oil from Malaysia for the last five years. But the trading halted after the January curbs when then Prime Minister Mahathir Mohammed criticized Indian Government decision on Kashmir and Indian Citizenship Law.

India imported palm oil of $1.3 billion in the year 2018 and accounted 28% of Malaysia’s total palm oil exports. Furthermore, as per the Malaysian Palm Oil Board (MPOB), India purchased 4.4 million tons of palm oil from Malaysia in the year 2019. Palm oil is an important trading thing for the Malaysian economy, as it accounts for 4.5% of total exports and 2.8% of country’s total gross domestic product.

After ban on Malaysia, Indonesia remains the only single source of palm oil products, however, India exported ~$3.8 billion of palm oil from Indonesia in the year 2018 with 60% of the market share accounted by Indonesia as a largest palm oil exporter.

Snapshot of the Domino Effect

Top sugar refiner of Malaysia announced to boost the purchases of commodity from India which is considered as an effort to placate spat between India and Malaysia over palm oil.

As per some sources, MSM Malaysia Holdings Berhad will purchase 130,000 tons of raw sugar from India which worth around $49.20 million (200 million ringgit) in Q1 2020. Although, company did not mention any reason related to palm oil dispute for increased sugar trading. In the year 2019, Malaysia purchased ~88,000 tons of raw sugar from India. The increase in sugar purchasing will help India to cut stockpiles of sugar in the country. As per sources, India accounted as the world’s largest sugar producing nation and struggling with surplus production. The country’s exports are anticipated to increase to 5 million tons for the 2019-2020 period.

As per the statement from Praful Vithalani, the president of the All India Sugar Trade Association (AISTA), Malaysia is aggressively purchasing Indian raw sugar in current year. Also, as per the statement from a Mumbai-based dealer of a global trading house, in the year 2020, Kuala Lumpur is anticipated to purchase more than 400,000 tons of sugar from India. Malaysia purchased more sugar from Brazil and Thailand than from India in past years. But the changing facts and increasing diplomatic issues are signifying the dramatic shift in countries’ relations and trading values.

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