The bilateral relations between India and Malaysia have been in a state of free-fall since Malaysian PM Mahathir’s rant against India at the United Nations General Assembly where he claimed Kashmir has been “invaded and occupied”. Mahathir has been completely oblivious to the fact that the Malaysian economy will be dealt a devastating blow if India decides to restrict palm oil imports from it. Mahathir, who was recently snubbed by Imran Khan, decided to yet again wade into India’s internal matters as he gave his two cents on the Citizenship Amendment Act. This was the final straw for the Indian government as it has informally asked palm oil refiners to stop buying palm oil from Malaysia.
India is the world’s biggest buyer of the oil and palm oil inventories could spike in Malaysia, putting prices under pressure if Indian refiners reduce purchases from the country. Malaysian prices are the global benchmark for palm oil prices. A senior official in India’s vegetable oil industry, who did not wish to be named, said the government had asked refiners at a meeting attended by two dozen vegetable oil industry officials in New Delhi on Monday to boycott Malaysia.“In Monday’s meeting we have been verbally told to avoid buying Malaysian palm oil,” the official said. “We’ve had various rounds of meetings within the government and industry to see how we could reduce imports from Malaysia,” a government official said, adding India has yet to firm up a plan of action and is exploring various options. The Indian government has made it clear it wants to punish Malaysia for the remarks and traders should support it, said another industry official.
Malaysia’s economy heavily depends on its palm oil exports to India. Palm oil accounts for nearly two-thirds of India’s total edible oil imports. India buys more than 9 million tonnes of palm oil annually, mainly from Indonesia and Malaysia. Indonesia is the world’s biggest producer of palm oil, followed by Malaysia. Palm oil is crucial for the Malaysian economy as it accounts for 2.8% of Malaysia’s gross domestic product and 4.5% of total exports. Since the shipments have already been contracted for the moths of January and February, Malaysia will feel the heat from March onwards as Indonesia’s exports will rise.
Mahathir it seems has skipped his classes on the economy as he has decided to alienate India at a time when Malaysia exported palm oil worth $1.65 billion to India in 2018. Globally, the European Union is also planning to phase out palm oil by 2030 as there are growing concerns over its impact on the environment as Malaysia finds itself caught in the crossfire between the US-China trade war as two of its biggest trade partners engage in a tariff war. At such a delicate time, Mahathir’s statement which will alienate India exposes his inept and is an extremely poor judgement of economics.
Only a leader with absolute disregard for trade and economy would decide to anger his country’s third-largest export destination for palm oil exports as in 2018, palm oil exports to India amounted to $1.63 billion. The palm oil industry is one of the biggest employers in the Southeast Asian country of 32 million people and India’s move to restrict its exports will have widespread ramifications for the country.
It seems that the Indian government has had enough of Mahathir’s antics and are in a mood to make him pay for his anti-India tirades.