INDONESIA, MALAYSIA REACH BROAD PALM OIL DEAL

JAKARTA, Feb 23 (Reuters) - Indonesia and Malaysia on Friday reachedbroad agreement on measures to lift sagging world palm oil prices, sayingthey would not compete with each other and would cooperate for betteraccess in China ad India.

Indonesia Trade and Industry Minister Luhut Panjaitan told reporters thetwo Southern Asian countries - - the world’s biggest palm oil producers -- would form a working group that aimed to became a world palm oilassociation.

Panjaitan, speaking after talks in Jakarta with Malaysia PrimaryIndustries Minister Lim Keng Yeik, insisted this would not amount to acartel.

“At the end of March, myself and Lim will go to China and India to discusstheir quotas and import tariffs. So far China and India have imposeddiscriminatory policies,” Panjaitan said.

Indonesia and Malaysia have long tried to tap the two giant markets.

Panjaitan added Indonesia and Malaysia would harmonise tariffs on palm oilexports, although he gave no details.

Some traders have questioned whether nay alliance between the two – whichwas mooted last week - - would help. Indonesia and Malaysia have engagedin a price war for some time, chasing business in an oversupplied market.

As part of unilateral measures, Lim said Malaysia would chop oil palmtrees on around 200,000 hectares (495,000 acres) and yielding about600,000 tonnes of crude palm oil (CPO) this year in a bid to improveprices.

New tree would be planted on the cleared land and would not yield largequantities for 5 – 7 years, Lim added.

He also said Malaysia would convert 500,000 tonnes of CPO into bio-dieseloil, a kind of industrial fuel.

“(This) is economically applicable and reasonable, “ Lim said.

The joint palm oil agreement also include:

- - A working group to comprise government and private sector members andfocus on marketing, not controlling prices;- - A joint campaign to boost worldwide consumption;- - Regular meeting to discuss key issues;- - Cooperation in research and development.

Lim said Malaysia would encourage private firms to use bio-diesel andwould launch an incentive package to back the move.

Lim added Malaysia’s tree cutting plan would be a good model for Indonesiato apply, although Panjaitan made no comment.

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