12 June 1998
Palm oil holds good for Malaysia

THE troubled Malaysian economy is being propped up by sales of palm oil.

Malaysia is the worlds largest producer and exporter of crude palm oil. It is cheap to produce, world prices have been going up, and exports are paid in US dollars.

The dollars have brought significant returns, considering that the approximate 30% depreciation of the Malaysian Ringgit (M$) against the US dollar since the Asian financial crisis began last year results in a foreign-exchange gain on each sale.

Golden Hope, the countrys largest plantation company, reported a 30% rise in net profit to M$140.6m (US$35.4m) for the half-year to end-December.

The export prices of palm oil increased 2.4% to US$542.30 a tonne during the first quarter. The Government said prices rose because of projections of a poor harvest, reflecting the start of a cyclical decline in its biological yield. It also cited the drought.

But there are a few potential problems on the horizon. The regional financial crisis has reduced demand in the Asian nations. Analysts also note that competition from other vegetable oils may intensify.

  • Financial Times 12/06/98 page 28