CPO producers countries to strengthen bargaining power

Zakki P. Hakim, The Jakarta Post, Jakarta

In response to India's move to slap a high import duty on crude palm oil (CPO), the world's top CPO producers -- Indonesia, Malaysia and Thailand -- aim to form a trilateral cooperation pact that could eventually affect global CPO prices.

"We must have a strong cooperation in production and marketing (of CPO), to eventually dominate the world market and set the course of the global price," Malaysian Minister of International Trade and Industry Rafidah Aziz said here.

A trilateral cooperation pact would result in the region, as the world's world's CPO production base, having more bargaining power to negotiate cases like the one in India.

"India's move is an act of discrimination against Indonesia, Malaysia and Thailand, as it imposes far higher import duty on CPO compared to soybean oil and other vegetable oil," Rafidah said after a meeting with Indonesian Minister of Trade Mari E. Pangestu on Tuesday.

However, Rafidah emphasized that cooperation between the three countries would not be in the form of a cartel -- as that would be against World Trade Organization regulations.

In the mean time, concerning India's high import duty on CPO, Malaysia would also pursue further bilateral negotiations with India, she said.

The Indian government recently increased its CPO import duty from 65 percent to 80 percent to protect its farmers who make a living growing soybean and sunflower -- the edible oil of which are CPO substitutes.

With India currently imposing only 45 percent import duty on soybean, not only will the country's move to raise CPO import duty help protect local soybean and sunflower farmers, it will also encourage Indian importers to import soybean oil instead of palm oil products due to the lower duty.

Separately, Ministry of Trade's director General for International Cooperation Pos M. Hutabarat suspected the lower import rate for soybean oil was a result of lobbying by the U.S. and Brazil, as major soybean producers, at the Uruguay Round of trade talks in the mid 1990s.

"CPO is being discriminated against in favor of soybean oil," he said on Wednesday.

Earlier, Indonesian Minister of Agriculture Anton Apriyantono said the government would possibly join hands with other palm oil producers in negotiating for India to lower its committed ceiling duty rate through the World Trade Organization.

However, such a move would take time.

Anton met with his Indian counterpart last week to lobby for a lower CPO import duty. But India said the decision was final, as it was aimed at protecting its local edible oil producers.

After Malaysia, Indonesia is the world's second largest exporter of CPO -- a raw material for, among other things, cooking oil, soap and detergent.

Output from the two countries makes up about 85 percent of this year's global palm oil production.

CPO producing countries have been looking for ways to give them more sway in determining global CPO prices, as opposed to the current situation in which buyers are more influential than suppliers.