Jakarta unrest delaying commodity pacts with KL

19 July 2001 - POLITICAL unrest in Indonesia has taken its toll oncommodity initiatives that the republic has pledged with Malaysia.

Industry sources said cooperation between the two countries may be stalleduntil the political situation in Indonesia is resolved.

They said if the republic goes ahead with the move to impeach PresidentAbdurrahman Wahid, the cooperation is expected to take a back seat untilthe political uncertain-ties are addressed.

"The cooperation will continue to exist.

It's just that it might be delayed by the appointments of new ministersand possibly a new president," a government official told Business Timesin Kuala Lumpur.

Malaysia and Indonesia have agreed to establish numerous cooperation inthe areas of palm oil and rubber development to improve the prices of thecommodities.

The alliance came about because Malaysia and Indonesia, the world's firstand second largest producers of palm oil respectively, have been jostlingwith each other to secure palm oil markets for the past several years.

Among areas looked into by the cooperation include palm oil sales markets,joint research and development efforts and palm oil marketing andpromotions.

It was also formed with the aim of not undercutting each other, haveoverlapping markets and jointly face intense competitions from otheredible oils such as soyabean, rapeseed and sunflower oils as a uniformedbody.

Primary Industries Minister Datuk Seri Dr Lim Keng Yaik and his Indonesiancounterpart Trade and Industry Minister Luhut Pandjaitan had both embarkedon trade visits to India and China in April.

Among the issues addressed include market access, higher import dutiesimposed on palm oil compared with soya-bean oil and joint ventures onrefining facilities.

The two countries had also formed the Tripartite Rubber Cooperation (TRC)along with Thailand earlier this month to buy and store rubber to reducesupply and boost prices.

The three countries account for 85 per cent of the world's rubberproduction.

Ministers from the three countries have also signed an agreement inBangkok, Thailand, earlier this month to cut production by 4 per cent ayear from 2002 by replacing rubber trees with oil palms and other crops.

Embattled Indonesian President Abdurrahman is due to undergo impeachmenthearings slated for August 1 and is expected to carry on for the next fewweeks.

All eyes are now focused on July 20, the deadline Abdurrahman set for thePeople's Representative Assembly (DPR), the country's supreme law-makingbody, to drop its agenda for him to account for his 20-month erratic ruleduring the hearing session.

The hearing is set to drag on at least for the next few weeks, cripplinggovernment decision-making, scaring off foreign investors and underminingfinancial markets.

"Whatever the outcome, we will have to wait for possible new ministers toliaise with and their appointments will be a time-consuming process," saidanother government official from a rubber agency.

He added that the delay is reminiscent of last year's delay in whichIndonesia asked for the TRC meeting to be postponed three times due topolitical and economic unrest inflicting the republic.

"The hearing without a doubt will delay the cooperation," he added.

The source said Malaysia and Indonesia will always have a common stand onthe success of the cooperation regardless of the outcome and sees nochance of the cooperation ceasing to exist.

"Malaysia, Thailand and Indonesia have a better chance of facing themighty consumers as a pact rather than on their own.

"We just have to wait and see for the outcome," he added.

Indonesia, the world's second exporter of palm oil after Malaysia,produced some 6.9 million tonnes of palm oil last year of which 4.2million tonnes were exported, up from 6.25 million and 3.32 million tonnesrespectively in 1999.

Malaysia produced 10.6 million tonnes of the commodity in 2000 andexported 9.08 million tonnes compared with 10.55 million tonnes and 8.91million tonnes respectively, the year before.

Indonesia is also the world's second largest producer of natural rubberafter Thailand, producing 1.5 million tonnes last year.