India introduces restrictions on Malaysian refined palm oil and palmolein imports in January 2020.
Context
In September 2019, Malaysian Prime Minister Mahathir Mohamad claimed that India had “invaded and occupied” the disputed territory of Kashmir (following an August 2019 move by India to revoke the autonomy previously granted to the part of Kashmir that India administers). In October 2019 India’s Solvent Extractors Association responded by calling for a boycott, with a statement addressed to its 875 members that said “[i]n your own interest as well as a mark of solidarity with our nation, we should avoid purchases from Malaysia for the time being.” The Indian government initially denied responsibility for the boycott, with its High Commissioner to Malaysia stating in December 2019 that “[i]t’s the palm oil association (acting), not the government of India.”
In December 2019 Prime Minister Mahathir also critiqued changes to India’s citizenship law as being discriminatory against Muslims. Subsequently, in January 2020 the Indian government did move to officially restrict imports on refined palm oil and palmolein from Malaysia. Indian government sources unofficially tied this move to Prime Minister Mahathir’s comments. Other background context contributing to deteriorating bilateral relations included increasing ties between Malaysia and Pakistan, and Malaysia’s rejection of an Indian extradition request for an Islamist preacher, Zakir Naik.
Responses
(i) Malaysian Industry
Malaysia’s Trades Union Congress issued a statement calling for “both governments to use all possible diplomatic channels to resolve this issue putting aside any personal or diplomatic ego.” The managing director of one Malaysian firm, Edward Lee Ming Foo, told press that he believed the measure would be rescinded “eventually” because India “cannot be buying more expensive oil” from other suppliers.
(ii) Malaysian Government Response
Malaysian Prime Minister Mahathir Mohamad refused to back down from his comments. In October 2020 Mahathir told reporters that “We speak out our minds and we do not retract and change” and said that Malaysia needed to balance a need “to be friendly with people. Malaysia is a trading nation, we need markets and so, we are nice to people also” with a need “to speak up for people. So, sometimes what we say is liked by some and disliked by others.”
In January 2020 A. Kadir Jasin, an advisor to the Malaysian Prime Minister, floated the idea of Malaysia responding with its own boycott of Indian goods and new visa restrictions on Indian migrants to Malaysia. However, this idea was dismissed by Prime Minister Mahathir Mohamad, who noted Malaysia’s relative weakness compared to India, saying that“[w]e are too small to take retaliatory action”. Instead, there were suggestions that Malaysia may look for market diversification into Africa.
(iii) Indian Industry
One Indian industry source was quoted by reporters as saying in early January, 2020, that “[t]he (Indian) government has been struggling to find ways to restrict imports from Malaysia due to World Trade Organization rules. For the time being it asked for industry co-operation.”
(iv) Others
Reuters reported that this incident was “likely to help Indonesia, the biggest exporter of crude palm oil.” The graph belowsupports the contention that Indonesia benefitted from this measure, as the main competing alternative source of palm oil. Notably, Indonesian crude palm oil is $10 more expensive per barrel than its Malaysian equivalent.
Status
After a four month pause, India restarted palm oil imports from Malaysia in May 2020, following a change in government in Malaysia.
Reference list
Al Jazeera. 2019. “‘People dying’: Malaysia’s Mahathir slams India’s citizenship law.” Al Jazeera. December 21. Available at: https://www.aljazeera.com/news/2019/12/ 21/people-dying-malaysias-mahathir-slams-indias-citizenship-law/
Azmi, H. 2018. “Malaysia Rejects India’s Request to Deport Muslim Preacher Zakir Naik.” Benar News. July 6. Available at: https://www.benarnews.org/english/ news/malaysian/malaysia-militants-07062018155228.html#:~:text=Malaysia’s%20new%20prime%20minister%20said,giving%20sermons%20that%20inspired%20terrorism
Chain Reaction Research. 2020. “The Chain: India’s Boycott of Malaysian Palm Oil May Lead to Higher Imports from non-NDPE Sellers in Indonesia.” Chain Reaction Research. January 24. Available at: https://chainreactionresearch.com/the-chain-indias-boycott-of-malaysian-palm-oil-may-lead-to-higher-imports-from-non-ndpe-sellers-in-indonesia/
Drishti. 2020. “India Resumes Purchase of Malaysian Palm Oil.” Drishti blog. May 21. Available at: https://www.drishtiias.com/daily-news-analysis/india-resumes-purchase-of-malaysian-palm-oil/print_manually
Jadhav, R. 2020. “India restricts refined palm oil imports after Malaysia’s criticism of Modi.” Reuters. January 9. Available at: https://www.reuters.com/article/india-palmoil-imports/update-1-india-restricts-refined-palm-oil-imports-after-malaysias-criticism-of-modi-idUSL4N29D300/
Jadhav, R. and Thukral, N. “Exclusive: India resumes purchases of Malaysian palm oil – traders.” Reuters. May 19. Available at: https://www.reuters.com/article/business/ exclusive-india-resumes-purchases-of-malaysian-palm-oil-traders-idUSKBN22V0QL/
Khaliq, R.U. 2019. “Malaysia dismisses Indian threat to limit oil imports.” Anadolu Agency. October 22. Available at: https://www.aa.com.tr/en/asia-pacific/malaysia-dismisses-indian-threat-to-limit-oil-imports/1622005#
Liz, L. and Ananthalakshmi, A. 2020. “’Too small to fight India’: Malaysia rules out action over palm oil ban.” Business Standard. January 21. Available at: https://www.business-standard.com/article/economy-policy/too-small-to-fight-india-malaysia-rules-out-action-over-palm-oil-ban-120012000321_1.html
Palansamy, Y. 2019. “What boycott? We still buy Malaysian palm oil, says Indian envoy.” MalayMail. December 11. Available at: https://www.malaymail.com/news/malaysia/ 2019/12/11/what-boycott-we-still-buy-malaysian-palm-oil-says-indian-envoy/1818313
Parameswaran, P. 2020. “Malaysia-India Relations: What Does a Palm Oil Ban Mean Amid the Kashmir Dispute Fallout?” The Diplomat. January 9. Available at: https:// thediplomat.com/2020/01/malaysia-india-relations-what-does-a-palm-oil-ban-mean-amid-the-kashmir-dispute-fallout/
Peter, Z. 2020. “Malaysia’s Palm Oil Sector Pays for Prime Minister’s Tough Talk on India.” VOA. January 31. Available at: https://www.voanews.com/a/east-asia-pacific_malaysias-palm-oil-sector-pays-prime-ministers-tough-talk-india/6183483.html
Reuters. 2020. “India asks refiners to stop buying Malaysian palm oil.” The Asahi Shimbun. January 8. Available at: https://www.asahi.com/ajw/articles/13056225
Reuters. 2020. “Malaysia’s PM defends criticism of India despite palm oil curbs.” Al Jazeera. January 14. Available at: https://www.aljazeera.com/economy/2020/1/ 14/malaysias-pm-defends-criticism-of-india-despite-palm-oil-curbs