PETALING JAYA: Economists and analysts said Malaysia should not expect too much from Pakistani Prime Minister Imran Khan’s pledge to buy more palm oil.
They voiced doubt about the pledge to buy additional palm oil from Malaysia due to Pakistan’s lack of money and a weak internal demand.
Nazari Ismail, from the Business and Accounts faculty of Universiti Malaya, said the gesture by Khan sounded strange and that it might just be “to please Prime Minister Dr Mahathir Mohamad”.
“Food is not something that you can increase easily. You cannot ask all Pakistanis to increase their consumption of capatis or creamers or other food that use palm oil to help Malaysia boost its export of palm oil,” he told FMT.
Nazari said one way of overcoming the problem of reduced palm oil imports from India since December was to export it to a third party in another country which had dealings with India.
“That country should have a trade deal with India, such as a firm in Singapore, which will then re-export it to India,” he said.
India imposed general restrictions on refined palm oil imports, and had reportedly asked traders informally to stop buying from Malaysia.
Sources had told Reuters the move was in retaliation for Mahathir’s criticism of a new citizenship law and New Delhi’s policy on Kashmir.
On Tuesday, during a call on Mahathir in Putrajaya, Khan said his country would increase imports of palm oil to compensate for Malaysia’s loss in the Indian market.
Analyst Sathia Varqa said even if Pakistan honoured its commitment to increase palm oil imports from Malaysia, it would not be enough to fill the void left by the Indian market.
Sathia, who runs Singapore-based Palm Oil Analytics, said in that 2019, Pakistan bought 1.08 million tonnes of palm oil from Malaysia, while India bought 4.40 million tonnes.
“Pakistan will need to buy an additional 3.309 million tonnes to fully compensate for the loss,” he said.
Such a dramatic increase, he said, was unlikely as Pakistan’s market was much smaller than India’s and as such did not require that much edible oil.
“Also, 80% of Pakistan’s palm oil comes from Indonesia, and the main reason for this is their lower price.”
He said he could only foresee a significant increase in exports of Malaysian palm oil to Pakistan if Malaysia enjoyed tariff advantages over Indonesia.
Independent economist Hoo Ke Peng said Pakistan was the third largest palm oil importer from Malaysia but that it might not have the means to buy additional palm oil.
“They want to buy but they do not have the money,” he told FMT, referring to Pakistan’s total 2019 external debt and liabilities of US$106.9 billion in the first quarter, as the country continues to borrow more, mainly from the International Monetary Fund (IMF), to improve its international payment capacity.
But Ahamed Kameel Mydin Meera, former dean of the Institute of Islamic Banking and Finance at the International Islamic University, said something could be worked out between Malaysia and Pakistan.
“We could buy rice, meat and other food items from them and they could pay the balance after buying palm oil,” he said, referring to netting, an accountancy term to offset the balance.