Due to recent Indonesian tax incentives, the Indonesian palm oil refineries have taken over a sizeable market share of processed palm oil from Malaysian refineries. Malaysian refineries are now under-utilized at 60% capacity, and risks closure in the longer term. Thousands of downstream jobs are at risk.
At RM80 billion a year, the palm oil industry is the second most important export revenue earner after oil and gas. It is a sector that is crucial to the economic health of the nation and as such must be supported and protected.
In this current crisis, the BN government has completely failed to provide the necessary leadership and support to the industry.
BN cho0se to support overseas refineries
The BN government response to this crisis was to increase the duty free CPO export quota by another 2 million MT to 5.6 million MT. 5.6 million MT represents a whopping 30% of total national output.
I shall refer to these duty free CPO (Crude Palm Oil) export quota as “palm oil APs”. By increasing the palm oil APs, BN has effectively chosen to support overseas refineries by allowing more Malaysian CPO to exit the country, thus denying the economic multiplier of downstream activities within Malaysia.
The other scandalous aspect of this so called “solution” is that it will costs Malaysia RM4 billion in loss of duty revenue for 2012. This action to increase palm oil APs even went against the recommendations of the industry associations and the government’s own ETP proposals.
Why? Was it to enrich cronies?
So why did the BN government choose this course of action?
Two days ago, at an international palm oil public forum held in KL, Keadilan has learnt that the official position is not to disclose the names of the AP recipients, as this is considered an official secret.
This astounding public revelation helps to explain why the BN government chose such a costly and detrimental solution to the crisis. It supports the widely held industry belief that a sizeable number of the AP holders are not palm oil producers, but crony traders whose sole business is to profit, duty free from these APs.
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.
Name the oil palm AP Kings
There are three points that we want to stress:
> First, Keadilan challenges the Plantation Industries and Commodities Ministry to publish the list of beneficiaries of the duty free CPO exports quota. If the car AP Kings names can be made public, why should the names of the oil palm AP holders be treated as official secrets?
> The second point we want to make is that this episode illustrates how fiscally irresponsible the government is. By maintaining an opaque oil palm AP system, the government has essentially flushed away RM4 billion in revenue for 2012. Whilst some of the oil palm APs may be justified on the grounds of supporting Malaysian owned refineries overseas; APs for traders are clearly unjustifiable. With proper governance, transparency and by purging cronies, Keadilan estimates that at least RM2 billion of duty revenue can be realized annually. The RM2 billion realized would be sufficient to fund half of Pakatan Rakyat’s free higher education policy to replace PTPTN.
> The third point we wish to stress is that Keadilan is together with the oil palm industry and values the industry as a major economic contributor. We are here to listen and to learn. If we should come to power, we intend to empower the industry and curb undue political interference in the business affairs of the industry.
WONG CHEN IS CHAIRMAN, INVESTMENT & TRADE BUREAU, PARTI KEADILAN RAKYAT