Friday, May 15, 2015

Game theory in effect?

From the Star:

KUALA LUMPUR: Malaysia, the world's second-largest palm grower after Indonesia, will keep its crude palm oil export tax for the month of June at zero percent, continuing duty-free exports from this month, a government circular showed on Thursday.

In April, a 4.5 percent tax was implemented, based on a tax structure where a monthly crude palm oil reference price above 2,250 ringgit per tonne leads to a duty being imposed. It can run from 4.5 percent to a maximum 8.5 percent.


Malaysia has decided not to implement the palm oil export tax.  It seems the producers have been hurting quite bad with sub par earnings and decided not to hurt the biggest market cap companies in the country with unnecessary export taxes.

I suspect Malaysia will ultimately benefit in terms of higher corporate income taxes from palm oil profits.  I'm guessing Indonesia will do what it wants to do, independent of Malaysia's decision as they are content to use the palm oil to run their vehicles.  Any deviation will come as a big surprise and thus become a game of game theories.

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