Se Asian Traders Keep Eye On Pak

Traders said the Malaysian palmoil market was more sensitive to devaluations in the Pakistani currency than to political developments there. Rupee devaluation means Pakistani importers have to cough up more to buy palmoil and this may affect their buying programme, a trader in Kuala Lumpur said.

Pakistan is a significant importer of palmoil from both Indonesia and Malaysia. Some traders even predicted the political instability could even lead to increased consumption of tea in Pakistan, the biggest single buyer of the commodity from Indonesia.

In times of trouble, people in price-sensitive countries such as Pakistan drink tea. When there is a war, armies basically run on tea, the head of an Indonesian tea trading house said. When there was a Soviet presence in Afghanistan, Russia imported a hell of a lot of tea.

He said Indonesia exported between 20,000-22,000 tonnes of tea a year to Pakistan out of total annual exports estimated at 100,000 to 120,000 tonnes. But the point to consider now is what happens to my prices. I have to remain competitive and yet get my payment at the end of the day, the trader said.

A senior Indonesian palmoil trader said the situation in Pakistan meant he would be careful when doing business there. I will be extra cautious when dealing with private Pakistani buyers because problems over payments could arise if there is unrest there, he said. If, for instance, there are riots, buyers could declare force majeure and the situation could become sticky as far as payments are concerned.

Pakistan and Indonesia moved to step up bilateral trade during a visit by Bhutto to Jakarta in March. Businesses from the two countries signed contracts worth $1.6 billion under which Indonesia would export palmoil, tea, polyester yarn and petrochemicals while buying rice and cotton yarn and fresh fruit from Pakistan.

A senior grains trader said Pakistani companies close to the Bhutto administration did sizeable dealings with local firms during her visit to Indonesia. That part of the business will certainly be affected now, the grains trader said.

But generally speaking, Pakistan has always had political upheavals and there will not be much of a downside here in the wake of the current development.

Palmoil and tea are bread-and-butter items; they will keep on importing unless (the situation) spirals out of control.