Iran-Israel conflict to drive up export costs, says Johari Ghani
KUALA LUMPUR: The escalating conflict between Iran and Israel is expected to impact the country's commodity export industry, particularly through a sharp increase in logistics and transportation costs, said Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani.
He said although the demand for key commodities such as rubber and palm oil is not expected to be directly affected, as they are essential goods, disrupted shipping routes will cause export costs to soar.
Johari said shipping companies are now forced to avoid risky areas and choose alternative routes that are longer, or unload goods at safe ports before transporting them by land, thus increasing costs.
"When there is a war like the one between Iran and Israel, the logistics costs of products bound for the region will increase. Transportation costs can rise by up to three times.
"As a country that is highly dependent on international trade, any disruption in the world's geopolitical landscape will definitely affect us.
"Our GDP (Gross Domestic Product) is around RM1.9 trillion. But our trade volume with the world is almost RM2.8 trillion, almost RM3 trillion. This means we are very dependent on trade. So when international trade is affected, it will indirectly affect us," he said.
Johari said this at the launch of the Industry Linkage Fund (ILF) 2.0 and the enhancement of the Automation and Green Technology Fund (FAT-G), organised by the Malaysian Rubber Council, here today.
Johari said, for example, that the cost of sending a container to West Africa used to be around US$1,200 (RM5,089), but it can now reach up to US$3,000 (RM12,722) — and at one point, even hit US$6,000 (RM25,443) — due to geopolitical risks.
He, however, assured that the fundamentals of the country's commodity industry remain strong because Malaysia's main markets, namely India, China, and the European Union are still stable and not directly affected by the conflict.
"Demand for food and essential products such as rubber gloves will always be there. The only challenge now is to manage the increasing logistics costs so that the competitiveness of our products is not affected," he said.
Recognising the increasingly complex external challenges, Johari said that local industries need to continue to strengthen their resilience through innovation and efficiency improvements.
"This is why funds like the ILF and FAT-G are so important. They aim to help local companies, especially small and medium enterprises, to invest in technology, automation, and research and development to produce high-value-added products that are more competitive in the global market," he said.
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