15/1/06 (The Jakarta Post)  - Indonesia and Malaysia, two of the world's largest crude palm oil producers, agreed last week to set up a joint body to regulate the international price of the commodity.

Indonesian-Malaysian Business Council chairman Tanri Abeng and his Malaysian counterpart, Seri Ahmad Sarji, signed the agreement on Thursday at the two-day bilateral summit between the two countries in Bukittinggi, West Sumatra.

President Susilo Bambang Yudhoyono and Malaysian Prime Minister Abdullah Badawi also attended the official signing of the body that would also serve as a promotion and marketing center for the edible oil, state news agency Antara reported.

Indonesia is the world's second largest exporter after Malaysia of palm oil -- a raw material for, among other products, cooking oil, soaps and detergents.

Output from the two countries is expected to make up about 85 percent of this year's global palm oil production.

The two countries were committed to increasing funding for CPO research and development efforts, he said.

A detailed funding mechanism would be discussed later, he said.

Malaysia-Indonesia Business Council chairman Ahmad Sarji said the body would also work to prevent discriminatory CPO import duties. India, for instance, has imposed such import barrier to protect its soybean and sunflower farmers, as both plants yield edible oil that is a substitute for CPO.

Sarji added that Malaysian investors would start investing some RM30 million (Rp 75 billion) to open CPO refineries in Ketapang and Sanggau, West Kalimantan.

The increasing use of bio fuel, meant Indonesia's CPO exports rose to 9.6 million tons for last year, from 8.7 million tons in 2004. In 2003, the country exported 6.39 million tons of palm oil.

The country is expected to produce up to 14.58 million tons this year, while Malaysia would supply some 15.43 million tons to the world market.

Global CPO consumption is set to rise by 7 percent to 34.9 million tons on higher consumption in China and by European Union (EU) countries.

China, the EU, India, Pakistan, Indonesia and Malaysia are the world's largest CPO consumers.