THE DECLINING PRICES OF PALM OIL
An interview with Faisal Iqbal, Country Chief of MPOPC
From SHAMIM AHMED RIZVI
Jun 26 - Jul 02, 2000
The Palm Oil prices have sharply declined in the international market during the past few weeks because of fall in its demand in the major consumers countries. Pakistani importers whose consignments are under shipment are faced with a serious problem as to how to off set the likely losses. As an immediate reaction to the situation importers have stopped opening fresh letter of credit for import of Malaysian palm oil.
Pakistan Office of Malaysian Palm Oil Promotion Council (MPOPC) located at Lahore is monitoring the situation and is in close touch with palm oil importers of Pakistan. Mr. Faisal Iqbal, country Chief for Pakistan, while talking to this correspondent in his office, said that prices of Malaysian Palm Oil have come down because of slow buying by India, China and to some extent Pakistan. When stocks in Malaysia pile up beyond their storage capacity, prices reduced by panicky stockists to allure more buyers.
Pakistan has its own reasons for decline in imports of palm oil. Main reason is the large scale import of oil seeds by the solvent plants because of the wrong decision of the previous government to allow duty free import of oil seeds. Primarily the decision was taken to provide good quality imported seed to the farmers at reduced rates in order to promote cultivation of Kinola and Sunflower. It was not meant for commercial imports. But because of the ambiguity on this point in the relevent SRO the commercial importers made full use of it and imported over 60,000 tonnes of seed during the current financial year without any duty while importer of palm oil had to pay about 80 per cent additional cost in the form of custom duty and sales tax. Even if imported at the current reduced prices the Malaysian Palm Oil will cost more than oil extracted by the solvent plant from seeds imported without any duty. This problem can be solved only by taxing the commercial imports of seed, Mr. Faisal Iqbal added.
Pakistan is producing about 1.8 million tonnes of Banaspati Ghee and Cooking oil annually. It annually imports 1.4 to 1.5 million tonnes of edible oil out of which over 1 million tonnes is imported from Malaysia in the form of Palm Oil. Malaysia exports over 9 million tonnes of palm oil annually. The biggest importer is India (2.5 to 3 million tonnes) followed by European Union which imports about 1.3 million tonnes annually.
Malaysia currently accounts for 51 per cent of world palm oil production and 35 per cent of world exports, and therefore also for 8% and 22% of the world's total production and exports of oils and fats. As the biggest producer and exporter of palm oil and palm oil products, Malaysia has an important role to play in fulfilling the growing global need for oils and fats in general.
Palm oil and palm oil products are employed in numerous food and non-food applications. They can be used as frying media and for making margarines, shortenings, soap, oleochemicals and other products. In addition to their technical merits, versatility and competitiveness, palm oil and its products are backed up by a strong commitment to R&D and to the maintenance of tight quality control.
The oil palm, Elaeis guineensis, which originated from West Africa, was introduced to Malaysia in 1870 as an ornamental plant. Its use as a crop was not developed until 1917, when it was grown commercially. The modern expansion of the industry can be traced back to the 1960s when the Malaysian government embarked on a massive programme of agricultural diversification. Today oil palm is the leading agricultural crop in Malaysia, covering about two million hectares or a third of the total cultivated area.
The refining of crude palm oil commenced in the early 70s in response to the government's call for increased industrialization. The emergence of refineries marked the introduction of a wide range of processed palm oil products. In 1995, Malaysia remained as the world's largest producer of palm oil with 7.8 million tonnes or 51 per cent of world production. Palm oil is expected to contribute about 20% of the forecasted 105 million tonnes of oils and fats demand by the year 2000.
The Malaysian Palm Oil Promotion Council (MPOPC) was incorporated in January 1990. It is charged with spearheading the promotional and marketing activities of Malaysian palm oil in the effort to make it the leading oil in the global oils and fats market.
Following are the main objective of the (MPOPC)) To promote the positive image of Malaysian palm oil in order to maximise returns to the Malaysian palm oil industry, To package and disseminate plausible technical information to influence the market, To generate comprehensive market information, To collate, analyse and disseminate market information to the local industry, To make MPOPC a recognised centre for information on palm oil and to facilitate new business and off-shore joint ventures in palm oil and To build up an effective resource capacity for MPOPC to deliver. It has its office in all the countries which are importing palm oil from Malaysia including Pakistan.