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Pakistan Seen Doubling Palm Oil Imports From Indonesia in Deal

08 Jan 2013

Pakistan may double palm oil imports from Indonesia this year as Asia’s third-largest buyer lowers taxes under a free-trade agreement, an industry executive said.

Indonesian imports may account for 50 percent of the purchases as Pakistan cuts tariffs by 15 percent, said Arif Qasim, chairman of the Pakistan Vanaspati Manufacturers’Association, representing 94 companies which make hydrogenated vegetable oils. The country imports about 2 million metric tons of palm oil annually.

Pakistan consumes about 3.2 million tons of edible oils annually and meets more than 50 percent of the demand through imports from Malaysia after taxes were cut by 15 percent under a trade pact in 2007. The country has offered the same concessions to Indonesia, the largest palm oil producer from Jan. 18, Sanaullah, Pakistan’s ambassador, said by phone from Jakarta.

“We are buying 75 percent of our needs from Malaysia and about 25 percent from Indonesia now,” Qasim said in a phone interview from Lahore yesterday, referring to annual palm oil imports. “The equation is going to be 50-50 after the agreement with Indonesia.”

Under a preferential trade agreement with Indonesia, buyers will get a 15 percent rebate on import duties of 8,000 rupees ($82) a ton on crude palm oil, 10,800 rupees on RBD palm oil, 9,050 rupees on palm stearin and 9,050 rupees on palm olein.

Prices Slump

Crude palm oil futures fell 23 percent last year in Kuala Lumpur, the worst slump since the financial crisis in 2008, as reserves built up for five months to a record in November. The contract for delivery in March dropped for a fourth day, losing as much as 1.1 percent to 2,391 ringgit ($786) a ton on the Malaysia Derivatives Exchange today.

Indonesia’s sales to Pakistan rose last year after it changed the export-tax structure. Indonesia cut the export tax to 7.5 percent this month from 9 percent in December, according to Bachrul Chairi, acting director general for foreign trade at the trade ministry. Malaysia changed its export-tax structure to help cut the reserves, resulting in the tariff for January falling to zero.

The free trade pact with Indonesia will make crude and refined palm oil from Indonesia more “competitive and attractive,” Qasim said. Pakistan’s palm oil imports fell 4.8 percent to 844,178 tons in the five months through November, according to the Pakistan Bureau of Statistics.

Indonesia needs to cut its export tax to avoid losing market share to Malaysia in countries such as India and Pakistan that typically buy more of the crude variety, Joko Supriyono, secretary-general of the Indonesian Palm Oil Association, said today.