Malaysia said it may impose a ban on EU countries winning its public contracts in retaliation for the bloc’s “unfair exclusion” of palm oil biofuels.
Speaking at the launch of the Sime Darby Plantation Operational and Productivity Excellence Summit, Seri Mustapa Mohamed, international trade and industry minister, said on top of refusing defence projects to EU countries, the government could also collaborate with government-linked companies to determine where they should buy and sell goods.
He said however, the government could not impose a blanket ban on all trade with the bloc.
“That [total ban] will result in a lot of disruption to the world, including Malaysia, because there are many EU companies with businesses in Malaysia, including German, Dutch, French, British and Swedish – hundreds of them,” he said.
“But when it comes to government purchases, we have 100% leverage on where we want to buy, such as purchase of defence equipment. The same goes to the government-linked companies.”
He added that since Malaysia is an “enterprise nation” and not a control economy or communist nation, the government does not have the power to regulate the private sector’s import-export dealings.
The proposal for a trade ban on the EU was put forward following the European Parliament’s (EP) decision last month to exclude the use of palm oil in biofuels and bioliquid products by 2021.
The EU said the decision was made after studies showed palm oil was among the worst drivers of deforestation, which also causes climate change. The EP voted overwhelmingly in favour of imposing the ban and the EU Council of Ministers is set to give its approval to the ban.
At the time, Malaysian minister Mah Siew Keong branded the decision a “hate campaign” against the country and threatened a boycott of EU exports.
“If these hate campaigns and discriminatory policy against palm oil were to go on, we can also retaliate – don’t expect us to continue buying European products,” he said.
Mustapa said the Malaysian government views the proposed EU ban as a discrimination against palm oil and would affect the incomes of some 500,000 palm oil smallholders across the country.
The palm oil industry is the fourth-largest contributor of the country’s gross national income, accounting for about 8% or RM50bn ($15.6bn).
Malaysia is the second-largest producer of palm oil, generating 39% of the world’s supply.
Meanwhile, Malaysia’s threat has led to concerns that the UK could lose out on highly lucrative defence contracts.
The UK is looking to sell jets and other defence equipment to Malaysia, a business worth as much as £5bn that guarantees around 20,000 jobs in Britain.
Defence giant BAE, which produces Typhoon jets and its weapons, has a potential sale of around £4bn at risk. Airbus UK is bidding for a communications satellite contract worth up to £700m. Helicopter firm Leonardo is looking to sell its AW150 helicopters to Malaysia in a £300m deal.
France, which is competing with the UK to sell its own Rafale fighters to Malaysia, has announced it will oppose the ban.
So far, Sweden, Spain and a majority of UK MEPs have opposed the EU palm oil resolution.
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