KUALA LUMPUR (March 28): France's import tax on palm oil will be a key topic that Prime Minister Datuk Seri Najib Razak and French president Francois Hollande will bring to the table during their discussions later today, said Minister of International Trade and Industry Datuk Seri Mustapa Muhammad.
"This is one of the things that will certainly be discussed. As palm oil exports is huge for us, not just in Europe but worldwide, the proposed tax hike is one of the main topics that will be discussed between Hollande and our prime minister," said Mustapa.
Malaysia is the second largest oil palm producer after Indonesia. One of Malaysia's biggest exports, palm oil was targeted by the French government for a special levy last year.
The special tax — dubbed "Nutella tax" due to its use as main ingredient for the famous Italian spread — would have brought tax on palm oil to 209.7% by 2021.
To the delight of palm oil producers, the tax was rejected in the French parliament in June last year, in place of an alternative proposal that would include other vegetable oils used in food.
As at October 2016, the palm oil tax level in France stood at 21.67% compared to 23.64% for soybean oil, according to a study conducted by Professor Pierre Garello from the University of Aix-Marseilles.
While some of the stigma around palm oil has eased, Mustapa said, it does not mean the issue is resolved.
Other than tax concerns, palm oil has also received certain backlash for, what critics say, plantation methods that cause deforestation, as well as potential health concerns — last year, European Food Safety Authority said palm oil contains carcinogenic chemicals.
Plantation Industries and Commodities Minister Datuk Seri Mah Siew Keong has reportedly brushed off the claim, saying that the chemicals are apparent in all vegetable oils, including olive oil, and are not cancerous.
On that issue, Mustapa said engagement with policymakers is still needed to improve their understanding on how sustainable Malaysian palm oil plantations are.
"We believe relevant ministries will continue to increase their effort to improve the understanding of European policymakers and the community on how we can run the industry in a sustainable manner," he said.
Mustapa spoke to the press during the signing ceremony of six memoranda of understanding between Malaysian and French corporations on energy, infrastructure and information technology in conjunction with Hollande's official visit to Malaysia.
The Malaysian government's initiative to keep palm oil attractive include the Malaysian Sustainable Palm Oil (MSPO) certification — first launched in 2015 — which reflects best practices throughout the supply chain, from oil palm planting to palm oil processing. The scheme will be made mandatory by 2019.
France is Malaysia's fourth biggest trading partner in the European Union, with about RM15.23 billion in terms of bilateral trade in 2016 — a 6.3% increase year-on-year.