Jakarta and Kuala Lumpur agree to form an alliance in their palm oil industry. Its target is to be able to improve the palm oil’s price which in this time has decreased sharply, in consequence of bad competition among two big palm oil countries.
It is true that Indonesia and Malaysia share 85 percent of world palm oil‘s market, but they could not control the palm oil’s price. Which it’s the buyer from Europe dominating the palm oil’s price, even regulate the standards of palm oil. And surely with the competition between Indonesia and Malaysia to control palm oil market, make the production of palm oil is progressively out of controlled and tend to be over produce.
This condition is likely to push Jakarta and Kuala Lumpur to change their policy in palm oil industry. They start to learn or at least have an idea to form organization structure like OPEC which can control the price of world crude oil. Their share of palm oil production are 85 percent, more than capacity of OPEC which is only less than 80 percent of share world crude oil.
It is estimated that there will be long road to find the deal between two State in arranging their palm oil‘s production. During this time have occurred bad competitions which exactly harm both of them, including black campaign among their palm oil industry. This is unlikely making both State which share majority of palm oil production do not able to control the price of world palm oil.
Surely with the opening of palm oil’s farm which is very massif and out of controlled, could complicate in controlling the production of palm oil in both State. This is the importance of cooperation which can link the arrangement of production in both sides in control. This could change the bargain position in world palm oil market.
During this time consumer of palm oil in Europe make very tight standards of oil palm. Their regulation often harm both State, they were forced to follow the regulation which is made by the buyer. As a result palm oil price can be control by Europe consumer.
Particularly also problem over production of palm oil is becoming main problem. Both country also aggressively in opening palm oil’s farm which can increase production of palm oil out of control, even smoke case which knock over the south-east Asia, because of this palm oil industry. It is estimated that a lot of Malaysia company operating in Indonesia, opening palm oil’s farm by burning forest
This condition likely must also be paid attention by organization which forms by both states. They must also commit in taking care of environment, limiting opening of palm oil farm, arranging palm oil production, and develop or build the industry of processing palm oil. If this is reached the target, it is possible that palm oil cartel form by both state will control the market of world palm oil.