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  • Writer's pictureBy The Financial District

Malaysia, Indonesia Urge EU Tax Rule That Hinders Palm Oil Exports

Malaysia and Indonesia are sending a "very crucial" mission to Brussels this week to argue against the European Union's new deforestation regulation, which will likely impact the Southeast Asian nations' agriculture sector.

Photo Insert: Indonesia and Malaysia together account for more than 85% of the world's palm oil production, and the EU is the third-largest importer of Malaysian palm oil.

Ministers from the two countries, the world's biggest exporters of palm oil, have criticized the rule as harmful to small farmers, Hakimie Amrie and Norman Goh reported for Nikkei Asia.

The European Union Deforestation Regulation (EUDR) was introduced last year to prevent EU sales of palm oil, soy, coffee, cocoa, rubber, timber, and beef that were raised on land deforested after 2020.

Under the new regulation, all companies involved in the trade of these products and their derivatives must adhere to strict due diligence requirements when exporting to or selling within the EU. The requirements include providing traceability and geolocation information.

EU officials earlier said the regulation would not affect palm oil produced by smallholders under Felda, Malaysia's state-run palm oil producer, given that since 1990, the company had not cleared any forests to open new plantations.

All the news: Business man in suit and tie smiling and reading a newspaper near the financial district.

Indonesia and Malaysia together account for more than 85% of the world's palm oil production, and the EU is the third-largest importer of Malaysian palm oil, the Malaysian Palm Oil Council said. In 2022, EU imported 1.47 million tons of palm oil worth 8 billion ringgit ($1.8 billion).

Malaysian Deputy Prime Minister Fadillah Yusof said last week the country's small farmers and their families depend on exports of palm oil, rubber and other farm commodities.

Business: Business men in suite and tie in a work meeting in the office located in the financial district.

The regulation hinders small farmers from gaining access to the European market, and might slash household incomes, increase poverty and harm rural communities, Fadillah said.

"What is more important is to send a strong message to address poverty issues," he said.

Entrepreneurship: Business woman smiling, working and reading from mobile phone In front of laptop in the financial district.

"Whatever actions taken by the EU without negotiating or without engaging with us will definitely implicate or impact the smallholders," Fadillah stressed on May 17 at a joint news conference after the 11th Ministerial Meeting of the Council of Palm Oil Producing Countries (CPOPC) in Kuala Lumpur.

During the meeting, Airlangga Hartarto, Indonesia's coordinating minister for economic affairs, pointed his finger at the EU, saying "You cannot impose your standard, and you cannot say that your standard is superior to those of others."

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