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NEWS ADMIN

Mahamad Rodzi Abdul Ghani

DATE

01/06/2001

NEWS PROVIDER

Mahamad Rodzi Abdul Ghani

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NULL

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Malaysia, Indonesia struggle to create common palm
Malaysia, Indonesia struggle to create common palm policyKuala Lumpur, 31/5/2001 (soyatech.com)- Traders are sceptical thatMalaysia and Indonesia, the world's first and second biggest producers ofpalm oil respectively, can establish mutually benefiting palm oilpolicies. They said discussions held between the two countries are "onlygood on paper" and do not reflect the real situation where everybody iseager to dispose of their palm oil."Talks between ministers are only good on paper, but the truth iscooperation in commodities can never be established because the mainagenda here is to sell oil and that is how it works," a trader toldBusiness Times in Kuala Lumpur yesterday."If we take the recent visit by Indian Prime Minister Atal Bihari Vajpayeelast week to Malaysia, they have agreed to look into the possibility ofdoing counter-trade of at least one million tonnes of palm oil for railwayprojects. That is not cooperation but rather competition. Ironically, thetwo producers have called for a level playing field in the past," thetrader added.He said Malaysia cannot be blamed for securing the Indian market for itspalm oil because so much money is involved and both countries have to lookto their own interests.Primary Industries Minister Datuk Seri Dr Lim Keng Yaik and his Indonesiancounterpart Luhut Pandjaitan embarked on joint trips to both India andChina last month to discuss better palm oil cooperation and market accessbetween producers and buyers.India and China are two of the world's biggest buyers of palm oil,consistently buying some three million tonnes of the commodity over thepast several years.Meanwhile, another trader said Malaysia and Indonesia will have to firstagree on a common selling price for palm oil before deciding on anythingelse."Ideally, when it comes to prices, there can never be cooperation betweenMalaysia and Indonesia. "How can you tell Indonesia to sell at the sameprice as Malaysia when they are already guaranteed of their markets attheir current price. I don't think they will risk it," the trader said. Headded that Malaysia has to sell around 11 million tonnes of its palm oilevery year and Indonesia around eight million tonnes."How do you tell another country not to sell its oil in this particularcountry at this particular price? If I don't sell my oil, what will I dowith my oil?" the trader questioned.Malaysia in the past has accused Indonesia of consistently selling itspalm oil at below market prices of around US$10 (US$1 = RM3.80), a movewhich the latter can afford to do due to lower costs of production andstandard of living.The trader added that if both countries can somehow agree on a commonselling price, they need to push for it now because Indonesia will notwait and risk losing sales that will affect gains in export earnings badlyneeded by the country."Undercutting is really a relative term and is subject to variousinterpretations. Indonesia will see it justified due to their lower costsof production and sell at a price they are happy with. Malaysia, in themeantime, cannot afford to lower prices due to higher costs ofproduction," the trader pointed out.He said each country will have to look at its own interests and marketrequirements first. "Malaysia and Indonesia have their own clientele.Pakistan, for example, will only buy refined bleached and deodorised palmolein from Malaysia and not from Indonesia due to better added value," thetrader said.He said Malaysia is obviously on the losing end because the joint trip wasinitiated by Malaysia and not by Indonesia. "Indonesia tagged along andreaped the fruit of Malaysia's labour because they didn't have to do muchresearch and development (R and D) and marketing, tasks solely done byMalaysia. Furthermore, how does the Government tell privately-ownedcompanies to sell at a predetermined price unless they are wholly-owned bythe Government," the trader added.However, traders said the two countries can succeed in areas of promotion,marketing, joint ventures and R and D.