16:42 062909
  Post foresees that diesel vehicles could make up a greater share of the total
in the future when B5 is introduced and government incentives are promoted. The
annual road tax that drivers must pay has always been significantly greater for
diesel motor vehicles. One reason that diesel engines were originally taxed
more heavily is because their engines were considered to release comparatively
more harmful emissions into the environment. On January, 1 2007, the GOM
reduced the annual road tax for petroleum vehicles with engine capacities less
than 1600 cubic centimeters (c.c.) by 10 percent while the tax for diesel
vehicles with engine capacities less than 1600 c.c. was reduced by 34 percent.


  Biofuel Production

  Ethanol production


  Ethanol production is commercially insignificant in Malaysia. There is an
opportunity for ethanol production from oil palm biomass but the technology is
yet to be commercialized. Ethanol consumption is unlikely as retail gasoline
prices are subsidized.

  Biodiesel production in the biofuel sector

  According to the Malaysian Palm Oil Board's listing, about twelve Bio-diesel
plants have been completed. The total combined capacity is about 1.5 million
tons. In 2008, bio-diesel output increased by only 5 percent due to high prices
for feedstock. Post expects a 30 percent increase in 2009 as companies are
cranking up their machines when the margins started to appear during the latter
half of 2008. The companies that are making the most profit are those that have
a product-mix which includes the production of vitamin E (a derivative from
crude palm oil), carotene and glycerin (a co-product).

  With the violent swing of palm oil prices, the GOM has started to look at a
promising alternative feedstock, Jatropha. It has excellent small-scale
potential but needs more research before it could be cultivated on a
larger-scale area. The GOM has allocated fund to facilitate research and
development of the crop. The Malaysian Palm Oil Board is tasked to carry out
performance tests on jatropha-based biodiesel. The Malaysian Rubber Board is to
engage in seed breeding and the National Tobacco Board is to gauge the
suitability of cultivating jatropha on bris soil in the northern part of the
country. A few private companies are planning to invest in jatropha cultivation
but the impact on the biofuel sector would not be significant in the next two
years.

  Another four plants with a combined capacity of 190,000 tons are expected to
commence commercial production by the end of 2009. The MPOB has worked with the
Ministry of Plantation Industries & Commodities as well as Malaysian plantation
companies to begin oil palm plantations overseas in Indonesia, Latin America
and West Africa. This will further increase the supply of palm oil for
Malaysian palm biodiesel companies.

  Imports Regimes for Biofuels

  There are currently no import tariffs in Malaysia directly levied on
biofuels. There is no import tariff on crude palm oil but there is a 5 percent
duty levied on processed palm oil. There are no duties on two common biofuel
feedstocks: rapeseed oil and sunflower oil. There is however a 5 percent tariff
on soybean oil and its fractions.

  According to a Oil World analysis, EU is poised to import more than one
million tons of palm oil (mainly from Malaysia and Indonesia) for biofuel
production (550,000 tons for biodiesel and 450,000 tons for power generation)
in 2009.