Indonesia, Malaysia to Jointly Market Palm Oil

February 27, 2001 - 0:0
JAKARTA In an attempt to prop up the commodity's price amid tight competition on the world vegetable oil market, Indonesia and Malaysia have agreed to cooperate closely with each other in the marketing of their crude palm oil (CPO).

The two governments had agreed to establish a joint strategy for the marketing of their palm oil, Trade and Industry Minister Luhut Binsar Pandjaitan said after a meeting with his Malaysian counterpart Lim Keng Yaik.

The working group would not act as a cartel to determine the price but as a joint marketing and promotion board, tasked to shore up the commodity's price which had continued to drop during the last year, he said.

The CPO price had recently dropped to $230 or 700 ringgits per ton in the Malaysian market while the price of soybean oil was quoted at 900 ringgits per ton.

But despite its lower price, CPO appeared to be a victim of unfair competition with soybean oil, especially in two of the world's largest vegetable oil consuming countries, China and India.

China had imposed a quota system on CPO but not on soybean oil imports. CPO imports in India were subject to a 75 percent duty and soybean oil imports to a 40 percent duty.

Panjaitan said Indonesian and Malaysian representatives would ask the Chinese and Indian governments for a clarification on why they were treating the two commodities differently.

"Next month at the latest, we will discuss the issue with China and India," the minister said.

In addition to forming a joint marketing board, Indonesia and Malaysia had agreed to cooperate in research on and development of palm oil.

Meanwhile, Malaysian Primary Industry Minister Lim Keng Yaik said his government had tried to reduce its domestic palm oil stock by increasing the use of palm oil as an industrial fuel oil.

Malaysia had also felled old trees and replaced them with saplings that would bear fruit within a few years' time.

"Malaysian companies that actively do both (felling old trees and planting saplings) receive an incentive," Lim said.

Malaysia is the world's largest palm oil producer with an output that reached nine million tons in 2000, while Indonesia ranks second with an output of 6.7 million tons in the same year.

Together the two countries control 90 percent of world's palm oil market.

(IRNA)