Ever since the radical Islamist Mahathir Mohammad brought down and sent to the dustbin of Malaysian politics, bilateral relations between India and Malaysia have been improving as the Muhyiddin government is determined to undo the damage done by Mahathir in his quest to promote Wahabism. Immediately after assuming the reigns of Malaysia, Muhyiddin started to placate India as Malaysia increased its sugar imports from India by manifold.
While India has severely restricted its Malaysian Palm Oil imports, it didn’t act vindictively in the times of crisis and lifted the ban on the much-heralded HCQ and sent the game-changer drug to Malaysia to help the nation fight the Wuhan coronavirus pandemic.
In a significant move, Malaysia has now signed a record rice deal with India as the former is all set to import a whopping 100,000 tonnes of rice from India in the span of the next two months.
Malaysia’s move to export 100,000 tonnes of rice from India will likely signal a thaw in the bilateral relations between the two countries which nosedived thanks to Mahathir’s constant meddling in India’s internal affairs and regular anti-India rants. This purchase by Malaysia is already double the average yearly volume of rice the country has imported from India in the past five years. This is a significant move as Malaysia on average imported around 53,000 tonnes per year for the last five years.
India is the world’s biggest exporter of rice and this move will help in reducing the country’s rice stockpiles. BV Krishna Rao, president of India’s Rice Exporters Association said, “After a long time, Malaysia is making substantial purchases from India.” Rao believes that India’s rice exports to Malaysia can rise as much as 200,000 tonnes this year.
India has sensed an opportunity as the likes of Vietnam, Cambodia, and Myanmar have restricted rice exports to meet their domestic needs and hence, India has moved quickly and is now selling white rice for between $390 and $400 per tonne compared with more than $450 for other countries.
An Indian official said, “Both economics and diplomacy have played out here, and when this palm oil thing came in, things sort of fell in place for India.”
India has severely punished Malaysia for Mahathir’s sins as the former has imported just 10,806 tons of palm oil in March which is the lowest monthly total since 2000. It is expected that the number is likely to fall below 10,000 tons in the coming months which won’t bode well for the world’s second-largest producer of palm oil.
Interestingly, Bangladesh and especially Nepal are also bearing the brunt of India’s decision to restrict palm oil imports as Nepal doesn’t produce a drop of palm oil and still exports it to India by sourcing the palm oil from Malaysia which is subsequently refined in the country sold in India. This move will affect not Nepal but palm oil imports by Nepal from Malaysia as well.
Recently, India cancelled the permission to import over three lakh tonnes of refined palm oil from Nepal and Bangladesh as it found that the two countries were misusing the South Asian Free Trade Agreement. According to the agreement, free trade is allowed only in the case where there is the production of the commodity in the economy of origin. However, Bangladesh and Nepal don’t produce a single drop of palm oil and import entirely from Malaysia.
Nepal has taken a huge hit as about 2.93 lakh tonnes of palm oil was slated to be imported from the country while the rest 12,000 tonnes from Bangladesh which is now cancelled. This has resulted in Malaysia’s palm oil exports dwindling not just in India but also in Bangladesh and Nepal.
In a last-ditch attempt to encourage India to import palm oil from Malaysia, the latter has slashed its export duty on the commodity to zero for the month of June. It is important to note that the export duty on the commodity was 4.5 % in May. This may make India rethink about its decision to restrict palm oil imports from Malaysia.
Earlier in March, India’s exports of sugar to Malaysia nearly tripled over the 2019 figure despite it being less than 3 months into 2020. This is a significant development as India is a sugar surplus country and is the world’s biggest producer of sugar and this move will help India in reducing its stockpiles. “This year Malaysia was aggressively buying Indian raw sugar which was a pleasant surprise,” said the president of the All India Sugar Trade Association.
In the first three months of 2020, Malaysia has imported 324,405 tonnes of sugar from India compared to around 110,000 tonnes in 2019. It is estimated that Malaysia’s raw sugar purchases this year will surpass 400,000 tonnes.
According to Malaysia’s Commodities Minister Mohd Khairuddin Aman Razali, Malaysia has set itself a month’s deadline to resolve the dispute over palm oil. Earlier this month, Malaysia’s Transport Minister Dr Wee Ka Liong said, “Can we just renegotiate? It’s for my country as well as for my people,” Wee told Reuters. “Since we are a new government, let the PM, the new government deal with it. We treasure the friendship with India.”
The Malaysian government by asking its refiners to give preference to India when it comes to the purchase of raw sugar — it is reaching out to India as it strives to hit the reset button. The move by the Malaysian government to give preference to India in its raw sugar imports sets a new dawn in the bilateral ties between the two countries. India’s no-nonsense approach seems to have made a significant impact on the political discourse and economic agenda of Malaysia.
With a new leadership, Malaysia is attempting to heal ties by increasing imports from India as the latter’s move to skewer palm oil imports seriously threatens Malaysia’s palm oil industry and economy.