KUALA LUMPUR (May 16): The European Union has yet to determine whether Malaysia will be classified as a low-risk country under its upcoming country benchmarking system for the Deforestation Regulation (EUDR), said EU Ambassador to Malaysia Rafael Daerr.

The EUDR’s country benchmarking system will classify nations as low, standard, or high risk based on their deforestation levels, to purportedly minimise the EU’s contribution to global deforestation and forest degradation.

The first official list is expected by June 30.

As a major producer of palm oil, rubber, timber, and cocoa, Malaysia may face trade restrictions under the EUDR, which mandates that seven key commodities — palm oil, rubber, timber, cocoa, cattle, soy, and coffee, as well as their derivatives — be deforestation-free, legally sourced, and supported by due diligence.

Responding to persistent calls from Malaysian authorities, including the Malaysian Palm Oil Board (MPOB) for low risk recognition, Daerr said the outcome of the EU’s assessment is still under discussion.

“What’s important to understand is that, by default, all countries are classified as standard risk, and only those with, for example, a very small palm oil industry may be considered low risk because it is easier to control, trace, and monitor.

“If the country is small and there is little or no growth in the industry, making the risk of deforestation low, the EU might consider classifying it as low risk after a closer look,” he told Bernama in an exclusive interview. 

He said Malaysia’s large and complex landscape presents traceability challenges, which remain a significant consideration for the authorities conducting the benchmarking assessment.

“It is a huge and wonderful country with extensive forest cover, which by nature makes tracking and traceability challenging. We also encounter varying data, and with different regions operating under different traceability systems. This could be a reason why the relevant authorities may consider it too early to assign a definitive classification,” he said. 

Daerr emphasised that the risk categorisation does not change the EUDR requirements.

“It’s simply an indication to member states on how to control batches of imports, and it does not raise or lower the standards required for those imports,” he said.

Malaysia’s palm oil sector, he said, is already ahead in terms of EUDR compliance readiness.

“In terms of how far Malaysia is to deliver EUDR-compliant palm oil, I would argue that you are at the very forefront here in the industry,” he added.

The EU currently imports 10% of Malaysian palm oil, and Daerr said it is open to importing more, provided the supply is fully compliant with the EUDR.

He said the EU recognises the efforts Malaysia had made in improving the sustainability of its palm oil sector, and is prepared to expand trade if those standards continue to align with EUDR requirements.

“Malaysian palm oil sold to Europe fetches higher prices than in other markets, as the EU values high end, sustainable products, and its consumers are willing to pay more for responsibly sourced, environmentally friendly goods. Although only about 10% of Malaysian palm oil is exported to Europe, the profit from that segment is significantly higher than its volume share, as the EU pays premium prices for sustainably produced palm oil,” he said. 

He added that Malaysian exporters, particularly those already engaged with the EU market, are largely prepared to meet the regulation's requirements. “At various conferences I have attended here in Malaysia, the focus has consistently been on sustainable production aligned with ESG (environmental, social and governance) goals,” he said.

Daerr also urged Malaysian stakeholders to promote the country’s sustainable palm oil more actively in Europe to counter lingering misconceptions. “One of the possibilities would be to run a campaign in Europe to show that there is a different kind of palm oil being produced here. There is room for development, and my encouragement is not to be too defensive about it,” he said.

The EUDR, which will take effect from the end of this year for large companies, requires producers of palm oil and six other commodities to ensure their products are not linked to deforestation after Dec 31, 2020.

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