Political chill at centre of India's curbs on Malaysian palm oil

Unhappiness over Mahathir's criticism of India's affairs has plunged ties to all-time low

A worker unloading oil palm fruits from a lorry in Sepang, outside Kuala Lumpur, Malaysia. Last week, India put restrictions on the import of different categories of palm oil, directly hitting Malaysia, its largest supplier of the oil. PHOTO: AGENCE
A worker unloading oil palm fruits from a lorry in Sepang, outside Kuala Lumpur, Malaysia. Last week, India put restrictions on the import of different categories of palm oil, directly hitting Malaysia, its largest supplier of the oil. PHOTO: AGENCE FRANCE-PRESSE

In May 2018, Indian Prime Minister Narendra Modi, while on a visit to Singapore, squeezed in a trip to Malaysia to specially congratulate Prime Minister Mahathir Mohamad on his stunning win in the Malaysian general election.

It was a visit that signalled his intention to deepen ties with Malaysia, a country with which India has diasporic and traditional links.

The two leaders met again last September in a meeting described by diplomats as "very cordial".

Yet, four months later, ties between India and Malaysia are anything but friendly, possibly plunging to their lowest since diplomatic ties were established in 1957, after Malaysia gained independence.

Last week, India put restrictions on the import of different categories of palm oil, directly hitting Malaysia, its largest supplier of the oil, which is used as a cooking medium. Indian importers now need import licences, which will be issued by the government.

The Times of India reported that restrictions on palm oil imports would be followed by restrictions on the import of microprocessors and Malaysian telecommunications equipment.

While Indian officials have not overtly said Malaysia was a target, a political chill has clearly translated into a trade tiff, a result of remarks by Tun Dr Mahathir criticising New Delhi for stripping Kashmir of its special status. He has accused India of illegally occupying Kashmir, which is at the heart of a dispute between India and Pakistan.

He has also been critical of the Citizenship Amendment Act which provides citizenship to non-Muslim illegal immigrants, and over which protests - some violent - have broken out across India.

Dr Mahathir was quoted as saying: "People are dying because of this law. Why is there a necessity to do this?"

His remarks annoyed New Delhi, with insiders saying retaliatory measures had to follow for his interference in India's internal affairs.

India's Ministry of External Affairs (MEA) accused Malaysia of insensitivity.

"Our relationship goes back a very long way and we have had very good relations. We have told them that they should keep in mind the sensitivities which we have on some of these topics. Unfortunately, despite our statements, we keep on getting similar statements coming out from their side," said MEA spokesman Raveesh Kumar, who acknowledged that the state of relations is a factor for businesses in commercial decisions.

Malaysia is India's 13th-largest trade partner, with bilateral trade from 2018 to 2019 at US$17.24 billion (S$23.19 billion).

Palm oil is at the heart of those trade relations, with India being the biggest importer of palm oil from Malaysia, buying 4.4 million tonnes last year.

Indian businesses say it is tough to carry on as usual amid such high tensions.

Mr B.V. Mehta, executive director of the Solvent Extractors Association of India, said: "We issued an advisory asking importers to keep away from Malaysia. Mahathir made a big statement. The government of India was upset. We have to protect our interests.

"Most of them (importers) have moved from Malaysia to Indonesia. They will continue to source from Indonesia till there is clarity on what is happening at the highest level (of government)."

In recent years, there has also been tension over Indian Islamic preacher Zakir Naik, who moved to Malaysia in 2016. India formally sought his extradition in 2018 on charges of money laundering and hate speech, but Malaysia has not responded.

Dr Mustafa Izzuddin, a research fellow at the National University of Singapore's Institute of South Asian Studies, said: "I think India-Malaysia relations have tapered off because of the rebalancing act that Mahathir has sought to do with Malaysia's relations with India and Pakistan, tilting in favour of the latter.

"In other words, Mahathir's remarks are meant for the domestic audience and for him personally to burnish his Islamic credentials."

Some analysts also see the action against Malaysia as a sign of India's new muscular foreign policy.

Former Indian foreign secretary Lalit Mansingh said: "It's not as if in the past, governments didn't notice when a friendly country did something hostile. There was no overt action.

"Now, we have reached a stage where we make our displeasure open. It is not business as usual."

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A version of this article appeared in the print edition of The Straits Times on January 17, 2020, with the headline Political chill at centre of India's curbs on Malaysian palm oil. Subscribe