EU nod to MSPO tightens Malaysia’s grip on palm oil market

The European Union’s (EU) nod to the Malaysian Sustainable Palm Oil (MSPO) certification has given Malaysia a shot in the arm in its trade talks with the bloc.

Economists say the green light tightens Malaysia’s grip on the European market, putting a valuable market more firmly in play.

Doris Liew, who specialises in Southeast Asian development, said EU policies had long clouded prospects for Malaysia’s palm oil industry.

“This has forced us to diversify aggressively into alternative markets including India, China, and the Middle East.

“Now, with MSPO accepted as a credible pathway for compliance, one of the world’s largest and most value-driven markets is firmly back within reach,” she told Business Times.

Eurocham Malaysia chief executive officer Karl Godderis said EU businesses welcomed the MSPO recognition, but stressed that palm-oil products formed only a small share of Malaysia’s exports to the EU.

“Malaysia exports €24 billion (about RM118.45 billion) worth of goods to the EU, of which palm-oil related products are less than €2 billion (RM9.87 billion).

“We remain focused on an overall free trade agreement (FTA) agreement that allows the total export potential to grow significantly,” he said.

Asked whether Malaysia’s “standard risk” classification under the EU Deforestation Regulation (EUDR) should change following the MSPO recognition, Godderis said he was “not an expert on classification criteria”. Pressed for a general view, he replied: “No opinion”.

The EU remains the single largest structured market for palm oil, with revenues worth US$6.6 (about RM27.75 billion) billion in 2023.

It is projected to expand at nearly five per cent annually to 2030, reaching over US$9 billion (RM37.84 billion).

Liew said buyers in Europe demand credible, traceable and deforestation-free supply.

“With MSPO now aligned with EU expectations, Malaysia is positioned to compete on quality and compliance, not just cost.

“This reduces the “risk discount” that has long weighed on our shipments and restores confidence among European refiners, traders, and consumer-goods manufacturers who want stable, low-risk sourcing partners,” she added.

The EU’s recognition also serves as a testament to the regulatory system’s capability of meeting the stringent global standards.

Liew said similar technical capacity can be extended to other export sectors where EU market entry depends on strong compliance benchmarks.

Universiti Putra Malaysia head of Social and Development Sciences at the Faculty of Human Ecology Associate Prof Dr Nik Ahmad Sufian Burhan said the MSPO recognition renewed optimism for the EU-Malaysia FTA.

“Although other negotiation points such as tariffs, labour practices, and intellectual property rights still need resolution, this approval strengthens Malaysia’s bargaining position,” he said.

It also encourages closer technical cooperation between both parties on sustainability policies, which can build mutual trust and accelerate progress.

“Overall, this milestone improves the likelihood of finalising the FTA and paves the way for deeper and more balanced economic ties between Malaysia and the EU.

“Importantly, it reinforces Malaysia’s social commitment by ensuring smallholders are included in sustainable trade, protecting their livelihoods while meeting global expectations,” he said.

FTA negotiations between Malaysia and the EU first launched in 2010 but talks stalled in 2012 over market access issues and sustainability standards, particularly concerning palm oil.

The negotiations are expected to be concluded in 2026.

Last week, the EU officially acknowledged the MSPO certification as a credible sustainability standard with a high-standard digital traceability system that can facilitate operators’ compliance with the EUDR.

Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani said the EU acknowledgement affirms Malaysia’s leadership in sustainable palm oil.

Audited by independent third-party certification bodies, MSPO is a mandatory standard that spans the entire palm oil value chain.

As of December 2024, about 4.89 million hectares or 86.5 per cent of Malaysia’s palm oil cultivation areas are MSPO-certified.

Tags: EU Deforestation Regulation, markets, Malaysian Sustainable Palm Oil, exports, European Union, Malaysia, palm oil