Malaysia will look to leverage its expansive palm oil resources to support military procurement, a senior government official has stated.
Teresa Kok, Malaysia's minister for primary industries, said the countertrade of palm oil in exchange for materiel would save local jobs, preserve state budget, as well as bolster military capabilities.
"We most welcome such trade offset deals, which will also save us foreign exchange while boosting the sale of our palm oil," Kok said in comments reported by local media on 17 April. Palm oil is one of Malaysia's most important commodities, contributing nearly 5% to the country's GDP with exports in 2018 reportedly worth MYR62.7 billion (USD15 billion).
Kok made the comment in reference to planned defence talks between Malaysia and Russia during Defence Minister Mohamad Sabu's four-day visit to Moscow from 20 April. Russia is one of Malaysia's biggest palm oil export customers and has recently stated a willingness to accept palm oil in return for military equipment.
Kok said that other countries to be similarly open to palm oil-based countertrade deals with Malaysia include China, India, Iran, Pakistan, Turkey, African and Middle East nations.
Malaysian palm oil exports to European countries have been complicated by a decision in 2017 by the European Parliament to ban the use of palm oil in European biofuels by 2020, citing environmental concerns.
In terms of defence trade, the ramifications for Malaysia were highlighted by comments in March by Malaysian Prime Minister Mahathir Mohamad, who indicated that the European ban could influence procurement decisions. "If they keep on taking action against us, we will think of buying airplanes from China or any other country," he was quoted as saying by the official Bernama news agency.
Countertrade is one of several options under Malaysian defence procurement and related industrial collaboration rules. The method of payment is listed as one of several activities through which defence exporters can fulfil industrial co-operation obligations.
Want to read more? For analysis on this article and access to all our insight content, please enquire about our subscription options at ihsmarkit.com/janes