This article first appeared in The Edge Financial Daily on April 26, 2019
BEIJING: China has agreed to buy more palm oil from Malaysia, as Malaysia inked a framework agreement with the country to reinstate the Bandar Malaysia project.
All these was achieved at the start of Prime Minister Tun Dr Mahathir Mohamad’s five-day official visit to China, where he witnessed both the signing of the framework agreement and two memoranda of understanding (MoUs), one of which is to enhance palm oil trade and China’s investments in the downstream palm oil business.
Under the MoU related to palm oil, signed by Primary Industries Ministry’s secretary-general Datuk Dr Tan Yew Chong on behalf of Malaysia, China agreed to buy an additional supply of at least 1.9 million tonnes of the edible oil from Malaysia over five years starting 2019. The volume is valued at RM4.56 billion, based on an average price of US$600 per tonne.
This is in addition to the four purchase contracts signed in March for the export of 1.62 million tonnes of palm oil from Malaysia to China, with a combined estimated worth of US$891 million (RM3.64 billion).
China was Malaysia’s second biggest importer of palm oil and palm-based products in 2018, during which Malaysia exported 3.07 million tonnes of palm oil and palm products valued at RM8.38 billion to China — up 7.3% from the 2.86 million tonnes (worth up to RM9.39 billion) recorded in 2017.
Malaysia’s annual palm oil export volume to China shrank to below three million tonnes after 2015. The volume was at 3.76 million tonnes in 2011, which was more than Indonesia’s 2.04 million tonnes to China. But since 2015, Indonesia has overtaken Malaysia in terms of export volume of palm oil to China, with the former exceeding three million tonnes, while Malaysia’s dropped to 2.44 million tonnes.
The second MoU, meanwhile, is to increase cooperation between both countries in the development of infrastructure, industrial parks and logistic hubs under the East Coast Rail link (ECRL) project.
On Bandar Malaysia, the signing of the framework agreement, which was not on the original agenda, signifies the two countries’ commitment to commence the massive real estate development at the former air-force base near Sungai Besi.
Economic Affair Minister Datuk Seri Mohamed Azmin Ali represented the Malaysian government in signing the framework agreement with China Railway Group Ltd president, Zhang Zongyan.
Dr Mahathir announced the revival of the megaproject last Friday by agreeing to sell a 60% stake in the development to IWH-CREC Sdn Bhd for RM7.41 billion. IWH-CREC also agreed to pay a RM1.24 billion deposit within 60 days
Dr Mahathir told Chinese leaders yesterday that Malaysia values the diplomatic ties between the two nations, and that it always wants a friendly relationship with China.
Dr Mahathir, who has rubbed shoulders with the most number of China presidents and premiers throughout his political career, stressed that Malaysia hopes to strengthen its diplomatic ties with China in a “tangible way”, adding that Malaysia wishes to sell more palm oil to the country, knowing that the vast mainland is a great market.
“We hope that the [diplomatic] relationship will continue. We know that China is a powerful country and it is the second-largest economy in the world. We hope we could derive benefits from your growth,” Dr Mahathir told China Premier Li Keqiang.
President Xi hails ‘a new chapter’ in Malaysia-China ties
The prime minister met three of China’s top leaders yesterday. Besides Li, Dr Mahathir also met China President Xi Jinping and the chairman of the Standing Committee of the National People’s Congress, Li Zhanshu.
Xi said Sino-Malaysia diplomatic ties are entering a new chapter now. In expressing his appreciation of Malaysia, he described it as an important country along the ancient Maritime Silk Road and in the development of China’s Belt & Road Initiative (BRI). His remarks reflect the great importance China attaches to the BRI and on bilateral relations between the two countries.
Noting that half of the 45 years of diplomatic relations between China and Malaysia was built during Dr Mahathir’s term as prime minister, Xi also commended him for having made “significant contribution towards the development of China-Malaysia relations”.