Duty-free CPO export quota used to enrich cronies, says PKR

Indonesian tax cuts have siphoned away market share from Malaysian refineries. — Reuters pic

KUALA LUMPUR, Sept 14 ― Putrajaya’s move to raise duty-free crude palm oil (CPO) export quota to fight Indonesia’s incentives for the commodity is enriching the government’s cronies and could cost Malaysia RM4 billion in lost duties, PKR has said.

The party’s investment and trade bureau chief Wong Chen said Indonesian tax incentives for the palm oil industry have robbed Malaysian refineries of market share, causing them to run at just 40 per cent of capacity and at risk of folding.

“The Barisan Nasional government’s response to this crisis was by choosing to support overseas refineries by allowing more Malaysian CPO to exit the country, thus denying the economic multiplier of downstream activities within Malaysia,” Wong said, questioning the government’s course of action.

Wong added that the projected loss from what he called the “palm oil approved permit (AP)” scheme was calculated by taking 23 per cent of the export duty, the quota figure and Maybank’s projected CPO price of RM3,150 per metric tonne.

“I was told that the official position is not to disclose the names of the AP recipients as this is considered an official secret,” Wong said.

He added that this revelation, made at a recently concluded international conference for the industry, was evidence that a sizeable number of the palm oil AP holders were crony traders whose sole goal is duty free profits.

“In other words, there is now a strong case to infer that the BN government not only failed to tackle the crisis, but used the crisis as an opportunity to enrich some cronies with more APs,” Wong said.

He added PKR will push the Plantation Industries and Commodities Ministry headed by Tan Sri Bernard Dompok to publish the list of beneficiaries of the duty-free CPO exports quota by raising the matter in the next parliamentary session’s question-and-answer segment.

“If the car ‘AP kings’ names can be made public, why should the names of oil palm AP holders be treated as official secrets?” Wong said.

He was referring to the 2005 controversy regarding vehicle APs issued by the Ministry of International Trade and Industry, then headed by Tan Sri Rafidah Aziz.

The slowdown for Malaysian refineries was predicted by Dompok’s ministry, who told Reuters in February that the change in palm oil export tax in Indonesia may hurt plans for 25 new refineries in Malaysia where processors are already suffering from weak margins.

Indonesia last year cut export taxes on refined grades that helped its domestic processors restart their factories and offer discounts to overseas buyers.

Dompok reportedly said that this had turned margins negative for refiners in Malaysia, the second-largest palm oil producer, and the government was looking at ways to keep investments flowing into its RM60 billion sector.

The minister added that the tax-free export quota for crude palm oil helped Malaysian firms expand overseas to places like Amsterdam and China and was continued, but had yet to fully examine the impacts.

On Wednesday, the Malaysian Palm Oil Board (MPOB) reported August stocks at a 10-month high of 2.1 million tonnes, erasing some gains in palm oil futures that are trading 9 per cent lower so far this year.

Malaysia-based TA Securities in a note to clients said while the latest data showed optimism on the export side on the back of higher tax-free crude palm oil quota, a growing concern is on the stockholding level, which has now spiralled to more than 2 million tonnes.