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CANBERRA (Dow Jones)--Malaysia, the second-biggest palm oil exporter in the world, has come out strongly against Australia's plan to introduce the "truth-in-labelling legislation" which mainly targets palm oil.

Appearing before an Australian parliamentary committee, Yusof Basiron, chief executive of the state-run Malaysian Palm Oil Council, said the legislation directly targets the Malaysian palm oil industry that accounts for almost 100% of all palm exports to Australia, and whose exports account for 9.3% of Malaysia's gross domestic product.

Basiron told the House of Representatives standing committee on economics that the proposed law discriminates against palm oil by not citing other vegetable oils, undermines bilateral relations between Australia and Malaysia by directly targeting the livelihoods of almost 1 million Malaysians and violates various trade agreements including several principles of the World Trade Organization as well as terms of the Asean-Australia-New Zealand Free Trade Agreement.

Craig Thomson, the head of the Australian committee had said previously that the inquiry reflects concerns that growth in the industry leads to deforestation and the destruction of wildlife habitat including that of the orang-utan.

But allegations of environmental degradation attributed to the palm oil industry are without merit, Basiron said. The Malaysian delegation that Basiron led included the High Commissioner to Australia and senior industry and government officials.

In its submission, Malaysia's Ministry of Plantation Industries and Commodities said the legislation would effectively hinder the growth of an industry that has contributed significantly towards reducing rural poverty and promoting economic growth in Malaysia.

It isn't clear if the parliamentary committee will support the legislation nor if the legislation will ultimately be passed by the government

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