Mahathir Mohamad, the world’s oldest prime minister, has been relatively quiet since the start of the New Year 2020 – for a good reason. The Malaysian prime minister, arguably one of the most outspoken leaders, has offended so many world leaders that he probably had lost count – from Myanmar to the U.S., China, India and even fellow Muslim brothers Saudi Arabia in 2019 alone.

Unlike the US-China trade war, which President Donald Trump openly declared on Bejing, a mini trade war could explode between two nations in Asia. India, the world’s second-most populous country in the world with an estimated 1.37 billion people, appears to have started boycotting Malaysia, a country with just 32.6 million populations.

The boycott isn’t official, but Indian palm oil importers have been “privately” urged – even warned – by their government to stop all purchases from top supplier, Malaysia. Last week (Jan 9), the Ministry of Commerce and Industry of India issued a notification declaring that the import of refined palm oil and palmolein from Malaysia has been amended from “Free” to “Restricted”.

Palm Oil

Sources told Reuters that the memo was as good as banning all imports of Malaysian refined palm oil and palmolein (a liquid form of palm oil used in cooking) from entering India. Prior to the official memo, New Delhi had informally asked palm oil refiners and traders to avoid buying Malaysian palm oil. For a while, the Mahathir government thought at least crude oil would be spared.

But now it’s clear that Indian Prime Minister Narendra Modi had had enough of Malaysian Prime Minister Mahathir’s antics. New Delhi has shifted its gear, putting a stop to not only the import of refined palm oil and palmolein, but also crude oil. Long story short, Malaysia is in deep trouble as the latest development means India has started boycotting Malaysian palm oil entirely.

Indian government and industry sources revealed that Modi government was seriously seeking to target Malaysia after relentless criticism of India by Mr. Mahathir. Seen as interference in the internal affairs of India, Mahathir falsely claimed in October last year that India “invaded and occupied” Kashmir, when in reality Jammu and Kashmir are part of India’s territory.

Mahathir Mohamad vs Narendra Modi

Mahathir had even lectured New Delhi to work with Pakistan to resolve the issue, something which triggered Modi’s displeasure leading to the boycott. Last month the 94-year-old Malaysian premier said India was inciting unrest with its citizenship law. He falsely labelled New Delhi’s newly passed Citizenship Amendment Act (CAA) as discrimination against Muslims.

The law actually provides a path to Indian citizenships for Hindu, Sikh, Buddhist, Jain, Parsi, and Christian religious minorities fleeing persecution from three countries – Pakistan, Bangladesh and Afghanistan. On top of the two issues, the defiant Mahathir has chosen to harbour and protect fugitive Zakir Naik, instead of sending the Indian Muslim hate preacher back to India.

The bilateral relationship between both countries has gotten so bad that Shri Ravindra Kishore Sinha, an MP of Bhartiya Janata Party (BJP), mocked PM Mahathir Mohamad of having “brain malfunction” for not only interfering in the internal affairs of India, but also making false statements against the country continuously.

Mahathir Mohamad - A Spoon of Palm Oil

While the Malaysian premier has been provoking Modi administration with racial and religious extremism to both divert attention from his poor leadership as well as to push his status as the champion in the Muslim world, the Indian premier so far has refused to take the bait. Instead, Mr Modi chooses to quietly punish Mr Mahathir, where it hurts the most – Malay Felda vote bank.

Mahathir’s predecessor, Najib Razak, lost in the May 2018 General Election largely because Felda settlers suffered tremendously due to the low price of palm oil, which dropped from above RM3,000 / ton in early 2017 to below RM2,500 / ton in 2018. The privatization of Felda and the public listing of its subsidiary Felda Global Ventures (FGV), not to mention multiple scandals, had turned the settlers against Najib.

A refiner said – “Officially there is no ban on crude palm oil imports from Malaysia, but nobody’s buying due to government’s instructions”. A Mumbai-based trader, on the other hand, explained – “We could import CPO (crude palm oil) from Malaysia, but the government has warned: ‘Don’t come to us if your shipments get stuck“.

India Import Palm Oil From Malaysia

That suggested that the Indian government would not hesitate to use tools in its arsenal to punish Indian traders who ignore the official warning – including prohibiting shipments of Malaysian palm oil from getting cleared at the ports of India. India was Malaysia’s biggest buyer of palm oil in 2019 – bigger than China – with 4.4 million tonnes of purchases.

Modi’s strategy of using silent boycott obviously is more lethal, not to mention smarter, than Mahathir’s barking and bitching for attention. Because the boycott on crude palm oil imports from Malaysia isn’t official, the Government of Malaysia could not officially lodge any complaints about it. To do so would look incredibly foolish.

Malaysia’s pain, however, is Indonesia’s gain. Not only Indian refiners and traders have reportedly shifted almost all their purchases to Indonesia, they even willingly pay an extra US$10 per tonne over Malaysian prices. For February shipment, Malaysian crude palm oil was sold cheaper at US$800 per tonne, compared to US$810 from Indonesia.

Kite Diplomacy – Indonesian Jokowi and Indian Modi

Yes, New Delhi was determined to teach Mahathir administration a lesson so much so they were more than happy to pay a premium for Indonesian supplies. The fact that palm oil constitutes a whopping 4.5% of Malaysian total exports and 2.8% of Malaysian GDP (gross domestic product) speaks volumes about how critical the commodity is to the country’s economy.

As the world’s biggest consumer of palm oil, India imports more than 9-milliontonnes from Indonesia and Malaysia annually. It was estimated that if the ongoing dispute and bad blood are not solved, India’s purchase of Malaysian palm oil could plunge to below 1-million tonnes this year (2020). That means Indonesia will capture an additional business of 3.4-million tonnes of palm oil.

Already, India had taken away the 5% less import duty on refined palm oil previously enjoyed by Malaysia over neighbouring Indonesia after Mahathir arrogantly told India that he won’t send hate preacher Zakir Naik back to India, even if requested by New Delhi. India made a formal request to the Malaysia to extradite its citizen – Zakir Naik – in June 13, 2019 for money laundering.

Zakir Naik with Mahathir Mohamad

Yes, Indonesia will be laughing all the way to the bank, exporting more than 8-million tonnes of palm oil to India, while Malaysia struggles to sell 1-million tonnes to the country which Mahathir had mocked and insulted. Malaysian palm oil inventories will skyrocket and the prices will tumble like a rock. Perhaps Mahathir could convince the 32.6 million Malaysians to drink the 3.4-million tonnes of palm oil.

Thanks to Mahathir’s toxic mouth, Malaysia has not only lost its price advantage to rival Indonesia, but also faces boycott from its biggest client – India. No wonder his 12-year-old bakery “The Loaf” had to be closed in 2018 after failed to stop its losses for years, before being bailed out and revived by construction firm Ekovest in April 2019. Mahathir knows nuts about business.

Still, the defiant Malaysian premier refuses to acknowledge that it was him who has created the trouble for the country. As expected, the egoistic old man cannot lose face, hence he insisted he cannot be blamed for speaking out against India, despite what he said about Kashmir and citizenship issues in India were factually inaccurate.

Felda Malay Settler - Palm Oil

Heck, he even argued that money is not everything. Of course, he could talk big about money because all his sons were billionaires, thanks to government projects, contracts, bailouts and whatnot whenever the juniors failed in their business. It’s the 110,000 Malay Felda settlers who will eventually suffer as a result of one man’s arrogance and ego.

Laughably, Mahathir said that a solution to the issue needs to be found, as worries over the impact of the ban on the local palm oil industry increases. He should tell India to fly kite, because his buddies – Pakistan Prime Minister Imran Khan, Turkish President Recep Tayyip Erdogan and Iranian President Hassan Rouhani – could easily absorb the entire 4.4-million tonnes of Malaysian palm oil.

Amusingly, Mahathir’s media adviser – Kadir Jasin – has suggested retaliationin the form of kicking out 150,000 Indian expatriates and workers in Malaysia. Seriously? What type of grass has he been smoking lately? Mr. Kadir should stop hallucinating that Malaysia is the economic superpower United States. Did he know that Malaysia currently enjoys a trade surplus of US$4.4 billion with India?

Top-5 Export Market For Malaysian Palm Oil - 2019

Malaysian Palm Oil Exports by Top-5 Markets

According to India’s trade ministry data, Malaysia’s exports to India stood at US$10.8 billion in the 2018/19 fiscal, while imports from New Delhi totalled US$6.4 billion – hence the US$4.4 billion surplus in favour of Malaysia.  What this means is Malaysia needs India more than India needs Malaysia. Malaysia’s total import of Indian products only constituted 0.2% of India’s GDP. India won’t feel a pinch.