End palm oil 'APs' now - PKR's Wong Chen

Parti Keadilan Rakyat urges the Ministry of Plantation Industry and Commodity to take immediate action to end the Palm Oil APs. The AP system is arbitrary, open to abuse by cronies and this creates price distortions in the market for CPO. The Ministry must review the export duty structure to make our Malaysian producers more competitive against Indonesian exporters.

The refinery crisis started in October last year. Instead of tackling the problem quickly, the Ministry did nothing for 10 months, and then two months ago, did the worst thing possible by increasing the volume of Palm Oil APs. The increase of the Palm Oil APs caused several negative unintended consequences.

At heart the issue is a lot of these APs were given to companies that has no ability to sell CPOs. The policy to push 2 million MT more of CPO to the already sluggish market resulted in little to no new CPO buyers.

In fact last week, the Minister Tan Sri Bernard Dompok explained that 2.5 million MT of the APs have yet to be used. Even in cases where buyers showed interests, delivering CPO to buyers is becoming increasingly difficult as the storage capacity at the refineries and ports are already full of processed palm oil that cannot sell.

Bottleneck

This bottleneck has been reverberating from downstream back to upstream, causing a logistical gridlock and clogging up of the supply chain. There are even reports that the tanks in the mills are now unable to cope, and producers of FFB are forced to sell their fruits to millers at a steep discount. There is wide spread believe that this policy had contributed somewhat to the recent price crash of CPO.

This is by far the most illogical policy we have seen for a very long time. As palm oil prices continue to free fall, the Ministry must buck up and deliver well thought out policies. Since the government will not seek our advice, perhaps they should ask Tun Dr. Lim Keng Yaik to mentor the Ministry on what to do.

Keadilan also continues to urge the Ministry to come out with an official reply on whether the list of recipients of the palm oil export duty quota is an official secret. Clarification on this is important as “The Edge” recently reported that Palm Oil Refiners Association of Malaysia (PORAM) had in fact received a reply from the Ministry stating that the list is an official secret.

If the Ministry has nothing to hide, it must make the list open to public scrutiny. The ministry must also disclose the quota allocated and also the justification for each of these recipients.

Wong Chen is the head of the PKR's investment bureau