Why Asia is fighting for Kenya's edible oils market

A customer at a supermaket in Nyeri compares prices of various brands of cooking oil after the passage of the Finance Act 2023. [Kibata Kihu, Standard] A new law that prevents businesses from exporting products linked to deforestation into the European Union (EU) could be the reason behind the aggressive interest by Indonesia and Malaysia in Kenya's edible oil market. In the last two months, both countries - which are global leaders in palm oil - have sent delegations to Kenya and have expressed interest for some sort of partnership in the edible oils space. In July, there was a delegation from Malaysia led by Deputy Prime Minister Fadillah Yusof during the Malaysian Pam Oil Forum while just last month, Indonesia President Joko Widodo was in the country for a state visit with similar interests. It is during Mr Widodo's visit that Trade Cabinet Secretary Moses Kuria launched 'Mama Pima', a vending booth where Kenyans can buy cooking oil for as low as Sh20. The vending machine is meant to cushion Kenyans from the skyrocketing prices of cooking oil that have for long averaged Sh370 per a litre. Self sufficient Mr Kuria expressed the country's determination to be self-sufficient when it comes to edible oils. He listed Homabay, Lamu and Tharaka Nithi as some of the counties that can grow palm trees. "Now we have Sh20 cooking oil, next year we want to start growing some palm oil trees here in Kenya. We are working with counties like Homabay, Lamu and Tharaka Nithi," said the CS. "We do not want to continue importing edible oil. We spend $1 billion (Sh150 billion) importing. Next year we want to be self-sufficient." The Mama Pima vending machine is a borrowed idea from Indonesia. But away from the state visits and delegation meetings, the major reason why these two countries are fighting for the Kenyan market lies behind a recent law adopted by the EU to combat climate change. The law passed in December 2022 dubbed 'Green Deal' demands that anyone supplying products to the market must prove that they are not linked to deforestation or forest degradation. "Once adopted and applied, the new law will ensure that a set of key goods placed on the EU market will no longer contribute to deforestation and forest degradation in the EU and elsewhere in the world," reads the announcement in part by the European Commission. Reduce emissions Since the EU is a major economy and consumer of these commodities, the commission adds, this step will help stop a significant share of global deforestation and forest degradation, in turn reducing greenhouse gas emissions and biodiversity loss. This provision has caused sleepless nights in palm oil producing countries who largely export the commodity to EU. So jittery it has been that in August, the same month Widodo was in the country, Indonesia issued threats that it would be diverting its palm oil exports to Africa. A statement by the Indonesian Palm Oil Association dated August 9 quotes Maritime and Investment Coordinating Minister Luhut Binsar saying the country will divert the export of crude palm oil from Europe to South Africa and other African countries. "If the European Union decides to reject the Indonesian palm oil," the statement reads in part. The statement notes that the rejection is possible after the decision of the EU to apply the EU deforestation regulation(EUDR) which requires exporters and importers of agricultural and planation products, including palm oil, to prove that the products are not the cause of deforestation. This should be done with documents of due diligence and verifiable. "I said to the EU parliament that we will gradually reorient our palm oil export of three million tonnes from Europe to other countries. We will gradually divert it to African countries," Mr Binsar is quoted in the statement, which is attributed to CNBC Indonesia. "We will make a visit to a number of countries in Africa such as South Africa, Congo and Kenya to establish trade relations. President has instructed to develop the global south, so south -south collaborations," Prior to this fightback by Indonesia, the European Commission had in June updated that they had an agreement in place with Indonesia and Malaysia to form a task force on how to implement the EU Deforestation Regulation. "The task force will examine the situation for relevant commodities in Indonesia and Malaysia within the scope of EUDR for the EU market," reads the European Commission update. Kenya is a lucrative market to both countries as it imports sh150 billion worth of edible oils annually. According to Council for Palm Oil Producing Countries, Kenya is among the top importers of palm oil from Malaysia. Other countries that import from Malaysia are: India, China, Turkey, Netherlands, the Philippines, Pakistan, Saudi Arabia, Japan and Iran. Netherlands is a member of EU. Indonesia exports largely to China, India, Italy, Bangladesh, Pakistan, and Spain. Between January to July 2023 Malaysia exported 524,461 metric tonnes of palm oil to Kenya. In the same period last year, this amount was 441,402 an increase of 83,059 metric tonnes according to Malaysian Palm Oil Council. The data from the Council also shows that in 2022, Kenya imported a total of 763,060 metric tonnes from Malaysia. From the data by MPOC, between January and July, Kenya is Malaysia's third largest market the first being India between January and July 2023, followed by China. There are 13 major palm oil producing countries in the world who form Council for Palm Oil Producing Countries. These are Thailand, Nigeria, Papua New Guniea, Malaysia, Guatemala, Honduras, Indonesia, Cote d'Ivoire, Ecuador, Ghana, Brazil, Columbia, and Costa Rica.

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