PETALING JAYA: The Trans-Pacific Partnership Agreement (TPPA) is neutral-to-marginally positive on the Malaysia plantation sector on a trade perspective, with downstream players to benefit most, according to MaybankIB Research.
It said under the TPPA, the removal of import duties on oleochemicals and finished palm products will largely be gradual, over 10-15 years for the USA and Mexico.
“While the TPP will provide Malaysian plantation companies with greater market access to the US, Canada, Mexico and Peru over time, the benefits, over the immediate 10 years, will not be significant in our view,” the research house said in a report.
It said for the longer term of over 10 years, the downstream players will potentially benefit the most given that the import duties removal are mainly on downstream products. Malaysian producers will enjoy a competitive advantage in the absence of Indonesia, Thailand and Philippines from the TPPA.
“Potential beneficiaries under our coverage are IOI Corp Bhd, Kuala Lumpur Kepong Bhd, Sime Darby Bhd, Felda Global Ventures Holdings Bhd and Genting Plantations Bhd,” MaybankIB said.
Still, it said there are two key challenges that may mitigate the positive impact of import duties removal, which are the distance between Malaysia and the US where logistic cost is a key consideration, and the bad press on palm oil, which may discourage palm oil consumption in the US and Canada.