KUALA LUMPUR (May 11): The incoming Malaysian government is expected to continue shoring up the palm oil sector, in order to remain competitive against Indonesia, said Singapore-based shipbroking & consultancy company, Eastport Maritime Pte Ltd.

This could come in the form of financial incentives, subsidies, waivers or duty changes, Andrew Shipley, a strategist at Eastport, said in a note to clients today.

Yesterday, the Malaysian Palm Oil Board reported that Malaysia's palm oil inventories fell to a seven-month low as at end-April, declining for a fourth straight month as exports and domestic consumption outpaced production.

Referring to the outgoing government Barisan National, Shipley said, quoting Reuters, that the former had offered cash handouts, subsidies and debt waivers worth nearly RM1.5 billion (US$383 million) last year to win over the votes of Federal Land Development Authority settlers.

"In the lead up to the elections, Malaysia scrapped its crude palm oil export tax for four months in January to lower swelling inventories at 2.55 million metric tonne, and in a bid to garner support from the settlers," he said.

He added that a continued currency depreciation could boost the competitiveness of Malaysian palm oil vis-à-vis its Indonesian counterpart and also against competing edible oils.

On Tuesday, a day before the 14th general election, the ringgit touched a four-month low of 3.9507 versus the US dollar.