06 August 2001, (Business Times) - PALM oil industry players have beeninvited to be co-owners of the world's first electronic exchange for thetrading of oil palm products initiated by Malaysia, the global number oneproducer of the commodity.
Promoter HeiTech Padu Bhd said industry players could collectively holdthe majority stake in Ecomex Palm Oil (M) Sdn Bhd, the vehicle for theestablishment of Malaysian Electronic Exchange for Palm Oil (ePomex),which will trade around the clock.
ePomex's maiden trading is due in early October after the launch of Ecomexon Aug 20.
The exchange will bring together the growers, millers, refiners,downstream manufacturers and overseas buyers in a single market, whereoffers and bids are executed in an electronic environment.
ePomex is a joint initiative of HeiTech Padu and New Zealand's GlobalEcomex Trading System.
"We have agreed that the industry can have the majority stake, andpossibly without any single party controlling the exchange," HeiTech Paduexecutive chairman Datuk Mohd Hilmey Mohd Taib said in an interview. "Wewant the exchange to be a successful initiative because it will benefitthe country a lot." Hilmey said, however, that so far no firm proposalshad been made by any party.
"Being a technology company, HeiTech Padu wants to facilitate and help runthe exchange for the benefit of the industry. That is why the equity inEcomex is offered to the industry players." He added: "No one should lookat the initiative purely from the commercial point of view. To us, thisproject is like a national service ... building a future platform for thebenefit of the industry." Hilmey noted that it would cost between RM5million and RM10 million to implement ePomex.
He said it is pertinent and timely for Malaysia to initiate such anexchange given the country's credential as the largest palm oil producer.
"If we do not do it now, other people may do it. I cannot imaginecountries that are not big palm oil players operating this kind ofexchange." There has been talk that the US and Australia were keen tooperate such a bourse.
Hilmey outlined several advantages of ePomex and a major one was ensuringtransparency. "An electronic marketplace permits trades and theenvironment in which they are executed to be monitored and documented.
"As far as good corporate governance and transparency are concerned, thiskind of electronic trading could give a boost." Another key benefit is theexchange's ability to implement trading outside the normal working hoursin Malaysia for overseas buyers or sellers.
Golden Hope Plantations Bhd director Sabri Ahmad pointed out that thedomestic palm oil industry had matured as well as being reasonablyeffective and productive.
But as the country steadily moves into the next era, the industry playershave yet to exploit the latest tools available in the purchase and sale ofoil palm products.
"The potential gains in efficiency arising from using these new tools aresubstantial, but even relatively small gains will translate into largesums of money for both buyers and sellers in such a large marketplace."The domestic palm oil industry itself is very large, involving hundreds ofplayers and billions of ringgit worth of transactions.
Malaysia currently produces nearly one million tonnes of palm oil a month,exporting 95 per cent of the output with India and China being the largestbuyers.
Sabri estimates that this year, the total CPO production output will be atabout 11.3 million to 11.4 million tonnes.
On whether ePomex would influence the prices of CPO on the MalaysianDerivatives Exchange, Sabri said the objectives of a futures market and amarket for physical delivery are different and complementary.
While futures quotations are useful to track price movements, they are notthe best method for price discovery of product for physical delivery.
He stressed that prices in the physical market should take into accountthe reputation of the buyer and seller, the quality of the product, aswell as amount, location and the trade terms.