KUALA LUMPUR: Indonesia’s decision to delay the implementation of the B50 biodiesel mandate presents Malaysia with a short-term opportunity to increase palm oil exports as the commodity’s price is kept stable by the move, according to an academic.
Dr Chong Siew Huay, a senior lecturer at the Faculty of Business and Management, Universiti Teknologi MARA (UiTM), said the postponement means Indonesia will absorb less crude palm oil (CPO) domestically for biodiesel than originally planned, as the country retains the B40 mandate for now.
"In the short term, global demand for palm oil is slightly lower than expected because Indonesia’s domestic biodiesel demand is not increasing as quickly as anticipated with the B50,” she told Bernama.
She noted that with Indonesia absorbing less CPO domestically, more palm oil would be channelled into international markets, creating opportunities for Malaysia to increase exports, particularly in markets where Indonesia is a direct competitor.
"This could ease pressure on palm oil supply in the global market and help to maintain stable domestic and export conditions,” she said, adding that prices are likely to stabilise or rise more slowly than previously anticipated as reduced domestic demand lessens upward pressure on CPO prices.
Chong said Malaysia’s longer-term competitiveness in the global palm oil market would depend on factors such as productivity, the development of value-added products including refined palm oil and oleochemicals, as well as sustainability practices, rather than relying solely on Indonesia’s policy decisions.
She explained that Indonesia’s decision to delay the B50 rollout was driven mainly by fiscal sustainability concerns, as higher biodiesel blending ratios would substantially increase subsidy requirements, particularly during periods of high CPO prices and uncertain global energy markets. "Moving from B40 to B50 would amplify the government’s exposure to price volatility and budgetary pressure, raising concerns over fiscal capacity and economic stability,” she said.
From a technical perspective, she said higher biodiesel blends pose greater challenges in fuel stability and compatibility, especially for older vehicles and heavy machinery, while also requiring adjustments across fuel systems, engines, logistics networks, and regulatory frameworks.
Higher blending mandates would significantly increase Indonesia’s domestic demand for palm oil, which could push up prices for food-related palm oil products and create inflationary pressure, particularly on cooking oil, she added.
"In developing countries, governments must balance energy and industrial policy goals with inflation control, fiscal sustainability, and social welfare considerations. The delay does not rule out a future move to B50, but reflects a cautious, step-by-step approach to avoid technical, economic, or social disruptions that could arise from moving too quickly,” she concluded. - Bernama
