RI, Malaysia to form palm oil alliance

RI, Malaysia to form palm oil alliance

JAKARTA (Reuters): Malaysia and Indonesia, the world's biggest
producers of palm oil, plan an alliance to boost the sagging
international price of the commodity, an Indonesian trade and
industry ministry official said on Wednesday.

But some traders questioned if an alliance would really help.

Pos M. Hutabarat, director of multilateral cooperation for
Asia, the Americas, Australia and Oceania, said details would be
discussed by Trade and Industry Minister Luhut Pandjaitan and
Malaysian Primary Industries Minister Lim Keng Yaik in Jakarta on
Feb. 23.

"This strategic alliance is merely in a form of joint
strategies to sell palm oil in a way which will not violate WTO
regulations. So we will not form a cartel," Hutabarat told
Reuters, referring to the World Trade Organization.

"This will not be in the form of stock retention, because
based on experience such retention in other commodities never
works well."

Indonesia and Malaysia have been engaged in a price war for
some time, as both chased business in an over-supplied market.

Rosediana Soeharto, the head of an Indonesian panel to pave
the way for the two nations to cooperate, said the joint strategy
would include joint promotion, research and development and
efforts to boost investment in oil palm industry.

"The strategy will also include joint efforts to penetrate in
new markets and to boost palm oil consumption domestically and
globally," Soeharto said.

Soeharto said the cooperation would apply to efforts by both
government and private sector.

Indonesian palm oil traders expressed skepticism over the
plan, however, saying it was impossible for the two countries to
work together. They doubted the strategies would work.

"Malaysia and Indonesia are old competitors, they will not be
able to cooperate," said one trader in Medan, North Sumatra.

A Jakarta trader said: "Those strategies won't be able to lift
prices because of the oversupply. We may be able to lift prices
if we hold back supply."

Traders said domestic palm oil prices were near seven-year
lows and have been on a downtrend since the beginning of this
year.

They said international prices were also slipping because of
abundant supplies from Malaysia and Indonesia and the competition
from soybean oil.

"Right now, Indonesia and Malaysia have agreed that we should
not compete against each other and that our enemy is the soybean
oil," Hutabarat added, referring to the growing popularity of
soybean oil. "So we have to join hands to fight."