RI, Malaysia to prop up palm oil prices

JAKARTA (JP): Indonesia and Malaysia have agreed to join forces in marketing their palm oils amid the continued fall in the prices of the palmoil oil products in the international market.

Minister of Industry and Trade Luhut Binsar Panjaitan said on Friday that the two governments agreed to establish a working group to realize the palm oil marketing strategy.

The minister said the working group would not be in the form of a cartel to determine market price but a sort of joint promotion and marketing group aimed at helping shore up prices, after a meeting with the Malaysia's Minister of Primary Industries Lim Keng Yaik here.

Palm oil prices in the international market have been declining steadily during the past year, partly due to a growing competition from other vegetable oils especially soybean oil, said Luhut.

Currently the crude palm oil price is about US$230 or about 700 ringgit a ton, while soybean oil is priced at 900 ringgit a ton.

Lim said that despite the higher price, soybean oil has enjoyed some privileges from the biggest palm oil importers, China and India.

He said that the joint-cooperation group would appeal to India and China for an explanation of the special treatment and ask that the two countries increase their palm oil consumption.

China imposes a quota on palm oil imports, while India imposes a 75 percent import duty on the commodity, Lim said, adding that there are no quotas for imports of soybean oil in China and India's import duty for soybean oil is only 40 percent.

Besides joint marketing efforts, Malaysia agreed to a joint campaign and research and development efforts for palm oil, he said.

Lim said that in its efforts to shore up palm oil prices, Malaysia would not hesitate to restructure its stock to be used as fuel for industries, and by cutting down older oil palm trees and replanting so that its harvest could be slowed down.

"Furthermore, palm oil companies that implement the actions will receive an incentive package from the government," he added.

Indonesia and Malaysia control about 90 percent of the world's palm oil market, each producing 6.7 million tons and nine million tons a year respectively. (tnt/bkm)