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The European Union’s recognition of the Malaysian Sustainable Palm Oil (MSPO) certification has given Malaysia a strong boost in trade talks with the bloc, paving the way to strengthen its position in one of the world’s largest markets.
Economists say the approval strengthens Malaysia’s hold on the European market, making a valuable market more accessible.
Doris Liu, a Southeast Asia development specialist, said EU policies had long cast a shadow over the outlook for Malaysia’s palm oil industry.
She told Business Times that Malaysia had been forced to diversify aggressively into alternative markets, including India, China, and the Middle East. Now, with MSPO accepted as a credible compliance pathway, one of the world’s largest and most valuable markets is once again within reach.
Karl Gurdas, chief executive of the European Chamber of Commerce and Industry in Malaysia (Eurocham Malaysia), welcomed the recognition of MSPO but stressed that palm oil products account for only a small share of Malaysia’s exports to the EU.
He said Malaysia exports €24 billion, or about RM118.45 billion, worth of goods to the EU, of which palm oil-related products account for less than €2 billion, or RM9.87 billion.
He added that the focus remains on a comprehensive free trade agreement that would allow Malaysia’s overall export potential to grow significantly.
When asked whether Malaysia’s classification as a standard-risk country under the EU Deforestation Regulation (EUDR) should change after MSPO recognition, Gurdas said he was not an expert on classification criteria. When pressed for a general view, he said he had no opinion.
The EU remains the largest regulated palm oil market, with revenue of $6.6 billion, or about RM27.75 billion, in 2023. The market is expected to expand by nearly 5% annually through 2030, reaching more than $9 billion, or RM37.84 billion.
Liu said European buyers demand reliable, traceable, and deforestation-free supply. With MSPO now aligned with EU expectations, Malaysia is positioned to compete on quality and compliance, not only on cost.
She added that the recognition reduces the risk discount that had long weighed on Malaysian shipments and restores confidence among European refiners, traders, and consumer goods manufacturers.
EU recognition also serves as proof that Malaysia’s regulatory system can meet strict global standards, a point that may extend to other export sectors.
Associate Professor Dr. Nik Ahmad Sufian Burhan of Universiti Putra Malaysia said the recognition of MSPO renewed optimism over the Malaysia-EU Free Trade Agreement.
He noted that although other negotiation points such as tariffs, labor practices, and intellectual property rights still need to be resolved, the approval strengthens Malaysia’s negotiating position.
He added that the achievement improves the prospects of completing the free trade agreement and paves the way for deeper and more balanced economic ties between Malaysia and the EU. He also emphasized the importance of this step in protecting smallholder livelihoods and integrating them into sustainable trade.
Malaysia-EU free trade negotiations began in 2010 and were paused in 2012. They are expected to conclude in 2026.
Last week, the EU officially recognized MSPO as a credible sustainability standard with a high-level digital traceability system that facilitates compliance with the EU Deforestation Regulation.
Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani said the EU’s recognition confirms Malaysia’s leadership in sustainable palm oil.
MSPO is a mandatory standard covering the entire palm oil value chain. As of December 2024, around 4.89 million hectares, or 86.5% of Malaysia’s oil palm planted area, had received the certification.
Source: New Straits Times