According to the Sri Lankan Palm Oil Industry Association, the country's palm oil industry has invested LKR 26 billion ($131 million); Sri Lankan palm plantations cover approximately 11,000 hectares, with about 1% of the total area planted with tea, rubber, and coconut. The country imports around 200K tonnes of palm oil every year, mainly from Indonesia and Malaysia. Following the ban, palm oil producers in Sri Lanka will be expected to remove plantations in a phased manner, uprooting 10% at a time and replacing the farms with rubber or environmentally friendly crops each year.
In recent years, the issue of possible deforestation and the environmentally unfriendly nature of palm oil production has prompted countries to consider placing regulatory bans on the product. In 2020, the US banned palm oil imports from three Malaysian companies following allegations of labor abuse. The EU also voted to ban palm oil for the production of biofuels in 2020 to cease the deforestation of rainforests in mainly Indonesia and Malaysia. The ban placed by Sri Lanka adds to this growing list and adds awareness to the environmental issues that have dominated these industries.
Top Palm Oil Suppliers to Sri Lanka
Source: ITC Trade map
Malaysia is one of Sri Lanka's major palm oil suppliers. Sri Lanka's ban on palm oil imports is not expected to significantly affect Malaysia's palm oil exports, as Malaysia has been gaining influence in other palm oil markets in Africa and the Middle East. According to Malaysia's Ministry of Plantation Industries and Commodities, palm oil demand is also increasing in the Philippines and Vietnam due to Malaysia's palm oil quality. The Malaysian Palm Oil Green Conservation Foundation (MPOGCF) has also been set up for conservation activities to address the anti-palm oil campaign.
According to the Malaysian Ministry of Plantation Industries and Commodities, the ban imposed by Sri Lanka may be considered discriminatory as Malaysian palm oil is of high quality and has achieved 90% Malaysian Sustainable Palm Oil (MSPO) certification. Malaysia also has large forest reserves, and the MPOGCF was established solely to promote greenery and sustainability. Thus, according to the Malaysian Ministry of Plantation Industries and Commodities, Malaysia's palm oil industry activities have not contributed to deforestation, and Sri Lanka may need to review the information regarding the issue.