KUALA LUMPUR • Malaysia is in talks with at least six countries on the possibility of using palm oil to pay for arms, as South-east Asia's third-biggest economy seeks to replace old equipment to boost its defence capabilities.
Malaysia has struggled to update its military equipment, and a cut in its defence budget this year derailed efforts to replace navy ships, some of which have been in service for 35 years or more.
Costs have been a big hurdle but using palm oil to help pay for equipment could open new avenues of funding, Defence Minister Mohamad Sabu said yesterday.
He said discussions on paying with palm oil had started with China, Russia, India, Pakistan, Turkey and Iran. "If they are prepared to accept a palm oil barter trade, we are very willing to go in that direction," he said in an interview. "We have a lot of palm oil."
Malaysia and Indonesia, the world's two largest palm oil producers, are embroiled in a dispute with the European Union over a plan to phase out the commodity from renewable fuels used by the bloc by 2030 over deforestation concerns.
The two countries supply about 85 per cent of global palm oil, much of which is used in food but also in items such as lipstick and soap.
Mr Mohamad said he could not put a figure on how much palm oil Malaysia was looking to trade for defence equipment.
Besides new ships, Malaysia is also keen to acquire long-range surveillance aircraft, unmanned aerial vehicles and fast intercept boats, the minister said.
Besides new ships, Malaysia is also keen to acquire long-range surveillance aircraft, unmanned aerial vehicles and fast intercept boats, the minister said. The planned barter is part of a 10-year defence policy to be tabled in Parliament this year.
The planned barter is part of a 10-year defence policy to be tabled in Parliament this year, which Mr Mohamad said would focus on boosting naval capabilities, including in the disputed South China Sea.
China claims almost the entire South China Sea, a strategic waterway which is also claimed in parts by Asean countries, namely, Vietnam, the Philippines, Malaysia and Brunei; as well as Taiwan.
Recent Chinese naval deployments in the disputed sea, through which over US$3.4 trillion (S$4.7 trillion) in goods are transported annually, have reignited tension with Vietnam and the Philippines.
Kuala Lumpur had been critical of Beijing's South China Sea position, but has not been excessively outspoken recently, especially after China pumped billions of dollars into infrastructure projects under its Belt and Road Initiative.
Malaysia regularly tracked Chinese naval and coastguard vessels entering its territorial waters, Mr Mohamad said, but added that China respects Malaysia and had "not done anything that caused us trouble, so far".
However, South-east Asian counties would need to work together to make sure their interests are not drowned out by big powers such as the United States and China jostling for control, Mr Mohamad said.
"We want this region to remain peaceful and neutral," he added.