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LIST OF ARTICLES

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Article Info

Vol 6 No.2 (2006) p 7-21
Indonesian Oil Palm Competitiveness: PT Socfindo as a Private Sector Example
Baskett, J P C and Jacquemard, J-C H

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Abstract


Indonesian Oil Palm Competitiveness: PT Socfindo as a Private Sector Example

PT Socfindo is a long established, foreign owned, plantation company with operations in North Sumatra and Aceh. This paper provides a brief review of the background situation to the Indonesian oil palm industry, whilst noting the continued rapid expansion of this sector. The paper also provides a detailed example of how, over the past 30 years, PT Socfindo has retained its competitive advantage in terms of production costs and profitability through the twin mechanisms of increased productivity (internal factor) and rupiah devaluation(external factor). Provided the continued improvement in productivity of every hectare of planted land can be sustained by progressive
improvements in planting materials and agricultural practices, the future prospects of this company remain extremely positive. Therefore, the experience gained by PT Socfindo over this extended period of increasing competition and a declining trend in palm oil commodity prices, could act as an example for the new players to follow in order to sustain the competitiveness of the Indonesian oil palm sector

Keyword(s): PALM OIL & OIL PALM INDUSTRY-Indonesia ; PT SOCFIN, INDONESIA ; COMPETITIVENESS ; DEMAND ; PALM OIL FUTURE-Indonesia ; MPOB PUBLICATIONS

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Article Info

Vol 6 No.2 (2006) p1-6
The Elasticity of Foreign Demand for Malaysian Palm Oil
Faizah Shariff; Ayat K Ab Rahman and Mohd Nasir Amiruddin

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Abstract


The Elasticity of Foreign Demand for Malaysian Palm Oil

The price elasticity of export demand is expected to receive considerable attention due to the current economic climate of volatile export markets and prices. The export demand elasticity is used to predict the change in demand for an export for a unit change in its price and to model the
behaviour of foreign buyers. This project estimated the elasticity of foreign demand for Malaysian palm oil for the major importing countries - China P R, India, Pakistan, Egypt and South Korea. The
error correction mechanism (ECM) method was used for the estimation considering its usefulness in quantifying the short-run and long-run effects of explanatory variables on the dependent variables using timeseries data. It was found that the price of palm oil plays a very significant role in its export; thus, the price needs to be stable and competitive with those of its substitutes, especially soyabean oil. From panel data research, the effect of a unit change in the soyabean oil price is greater on the exports of crude palm oil than the effect of the same change in the palm oil price. This means that both oils are highly substitutable.

Keyword(s): PALM OIL & OIL PALM INDUSTRY-Malaysia ; PALM OIL FUTURE-Malaysia ; DEMAND ; EXPORT ; MPOB PUBLICATIONS

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Article Info

Vol 6 No.1 (2006) p39-45
Production and Price Forecast for Malaysian Palm Oil
Ramli Abdullah and Mohd Alias Lazim

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Abstract


Production and Price Forecast for Malaysian Palm Oil

In the oils and fats sector, Malaysia can always be associated with palm oil due to its being the world’s biggest producer and exporter of the commodity. Malaysia produces and exports most of its palm oil due to its small population size and receives quite substantial amount of revenues from this product to support its economy. Thus, in this respect, it is important for the country to monitor the commodity’s production as well as its price that can be used in a way to determine the country’s revenue or in various decision-making processes. It is the objective of this paper then to analyse them econometrically and finally to forecast them. The paper indicates that production of palm oil will increase at a decreasing rate in future due to limited availability of land. By 2020,
production is expected to reach 22 million tonnes while in the shortterm, it will be about 15.9 million tonnes in 2006. Price of palm oil is expected to fluctuate as before but in the near future, strengthening its level by increasing gradually in 2006.

Keyword(s): PALM OIL-Malaysia ; STATISTICS ; FORECASTS ; MARKET DEVELOPMENT ; MPOB PUBLICATIONS

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Article Info

Vol 6 No.1 (2006) p30-38
Competitiveness in Global Trade in Edible Oil : Emerging Trends and Pivotal Drivers
Asopa, V N and Mohd Arif Simeh

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Abstract


Competitiveness in Global Trade in Edible Oil : Emerging Trends and Pivotal Drivers

Away from classical theories of absolute and relative comparative advantage, modern agricultural industries are also experiencing a new paradigm for competitiveness. As producer countries attempt to appropriate more and more of added values, the framework for competitiveness shifts to newer grounds more in sync with the agricultural policies of the developed importing western world.
Interventions through government policies, notwithstanding supposedly a multilateral trade regime, distort competitiveness in the market place. This is done by limiting market access through innovative non-tariff trade barriers and levying discriminatory tariffs mainly to protect and
promote increased growth of domestic industries at the cost of the home consumers. This paper attempts to overview some of these developments affecting competitiveness of global trade in edible oils, in particular with respect to palm oil.

Keyword(s): PALM OIL ; EDIBLE OILS ; INTERNATIONAL TRADE ; MPOB PUBLICATIONS

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Article Info

Vol 6 No.1 (2006) p18-29
Oil Palm in Indonesian Socio-Economic Improvement - A Review of Options
Zahari Zen; Colin Barlow and Ria Gondowarsito

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Abstract


Oil Palm in Indonesian Socio-Economic Improvement - A Review of Options

The Indonesian Government has used oil palm as a tool of rural socioeconomic improvement, doing this through nucleus estates operated by estate companies and through assisting individual smallholdings. Over 900 000 ha of high yielding oil palm have been established in 2-3 ha settler blocks in nucleus estate plasma, and 250 000 ha have been planted on individual smallholdings. The initiatives have together raised the incomes of over 500 000 farmers, and may be judged successful market interventions which are far superior to laissez faire. Although the average economic and social performances of both initiatives have been reasonable, their outcomes have been variable. The nucleus estates have sometimes suffered from faulty management, bad community rapport and difficult land conversions, and from the mistakes of government agencies and settler cooperatives. They were
discontinued in 2001, due to scarce finance. The assistance to individual smallholdings has always had short funding, limiting its scope. Both initiatives were commenced under the New Order, and face fresh challenges in the present era of democracy and otonomi daerah. The analysis of this paper nonetheless shows that these Indonesian interventions should be continued, albeit more capital being provided and their deficiencies being remedied. It denotes that the interventions compare well with official efforts in other countries, strengthening the general case for public action to assist poor rural dwellers.

Keyword(s): PALM OIL & OIL PALM INDUSTRY-Indoneis ; OIL PALM ; ECONOMIC DEVELOPMENT ; MARKETING ; MPOB PUBLICATIONS

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Article Info

Vol 6 No.1 (2006) p1-17
Oil Palm : The Agricultural Producer of Food, Fibre and Fuel for Global Economy
Yusof Basiron and Chan Kook Weng

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Abstract


Oil Palm : The Agricultural Producer of Food, Fibre and Fuel for Global Economy

Oil palm industry has expanded from just an agricultural producer of edible oils and fats to fibre (material) and fuel (energy) as well for the global economy. In producing food, fibre and fuel (the 3Fs), the industry has also identified the enlarged environmental consequences that will now be involved. Arising from this, the science and technology (S&T) for the 3Fs production now falls squarely on the research and development (R&D) undertaken on land-use and land-use cover changes
from forestry (LULUCF) with inclusion of the two latter products. Besides the best practices implemented to enhance the economic, environmental and social requirements, any change in the land-use pattern is prioritized with the environmental consequences identified and minimized. The S&T development in itself is not enough and must be applied together with business. It is critical that sustainability and poverty reduction remain the guiding principles for efficient use of resources, harness of intellect, and channel knowledge to benefit the rural poor and marginalized. As more plantation companies develop the potential to produce the 3Fs, there will be greater realization that both the policy and infrastructure support from the government is important. This must be accompanied by higher participation in activities by all the stakeholders over the whole value supply chain that involve the companies, industry and nation at all three levels to strengthen agricultural development to realize this 3Fs objective. The benefits of this new 3Fs approach are three-fold: firstly, greater promotion of value-addition and accomplishment of accelerated growth
of agro-businesses in the food, material (fibre) and energy (fuel) subsectors. Secondly, creating more jobs in the rural sector with greater security for a fair standard of living for the smallholders and their families. Thirdly, discourage migration of people to the urban areas as the rural populace is better able to face the challenges coming from the economic liberalization and globalization resulting from more job opportunities created by the plantations and emerging agro-businesses. A total of 10 recommendations for policy refinement to enhance the 3Fs objective are discussed. They are aimed at achieving food security, fibre and fuel production by focusing on developmental and environmental consequences; continuing sustainable agriculture to improve the economic, social and environmental impacts of the companies in managing the 3Fs objective thereby hastening rural development when these new agro-businesses start to benefit not only the welfare of the people living in and around the plantations but also along the whole value chain.

Keyword(s): PALM OIL & OIL PALM INDUSTRY-Malaysia ; RESEARCH AND DEVELOPMENT ; ECONOMIC DEVELOPMENT ; FUTURE PROSPECTS ; MPOB PUBLICATIONS

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Article Info

Vol 5 No.2 (2005) p47-53
Impact of Commercialization of Biofuel on Prices of Related Commodities
Faizah Shariff; Ayat K Ab Rahman; Mohd Nasir Amiruddin and Yusof Basiron

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Abstract


Impact of Commercialization of Biofuel on Prices of Related Commodities

This paper examines the use of vegetable oils and sugar for biofuel in selected countries, as a price stabilization mechanism in the EU, USA and Brazil. Two scenarios; one before and the other after the advent of the biofuel programme were analysed for soyabean, rapeseed, sugar and corn prices. Correlations between the price and production of biofuel for the selected vegetable oils were high and showed positive relationship after commercializing of the biofuel. This means that the biofuel programme had improved the prices for the selected vegetable oils. The index from the ARCH and GARCH models were much higher and the linear trend of selected vegetable oil prices showed a downward trend prior to commercialization. However, after their use as biofuel, the index became much lower and the linear trend of selected vegetable oil prices showed an upward trend. This means that, after commercializing the biofuel, prices stabilized and slowly increased. The findings indicate that the biofuel programme can remove excess production to new uses and improve prices. Hence, it can be deduced that removal of palm oil from the market and put to new uses (biofuel) could improve palm oil price. Therefore, it is strongly suggested that Malaysia should commercialize biofuel from palm oil.

Keyword(s): VEGETABLE OIL AS FUEL ; BIODIESEL ; FUTURE PROSPECTS ; MPOB PUBLICATIONS

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Article Info

Vol 5 No.2 (2005) p37-46
Palm Kernel Cake Marketing: Constraints and Prospects
Ahmad Borhan A Nordin; R Venugopal; Nasir Amiruddin and Mohd Arif Simeh

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Abstract


Palm Kernel Cake Marketing: Constraints and Prospects

Standardization or product specification is an important measure to ensure that only high quality product reaches the market place. The formation of palm kernel cake (PKC) trade specifications and the requirements of quality testing plus regular inspections had assured the quality of PKC was under control throughout the years. The changing preferences by customers and the advancement of technology validate the revision of such specifications. The study reviews the quality performance of PKC within its trade specifications in the previous years and the possibility of improving its quality to a higher level. Moreover, it reveals the economic significance of elevating the quality of PKC through innovative processing system that produces its raw materials i.e. palm kernel.

Keyword(s): PALM KERNEL CAKE (PKC) ; MARKETING ; FUTURE PROSPECTS ; MARKET DEVELOPMENT ; MPOB PUBLICATIONS

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Article Info

Vol 5 No.2 (2005) p23-36
Environmental Issues in an Age of Regional Autonomy: The Case of Pollution in the Plantation Sector of North Sumatra
Zahari Zen; John McCarthy and Colin Barlow

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Abstract


Environmental Issues in an Age of Regional Autonomy: The Case of Pollution in the Plantation Sector of North Sumatra

Discussion of the agro-industry sector to date has largely neglected the significant impact of Indonesia’s extensive plantation sector on the rural environment. This article discusses this problem in North Sumatra, the historical centre of Indonesian agro-industry, examining the underlying factors leading to the failure of legal and economic instruments to control agro-industrial and plantation activities before and during decentralisation. It examines the reasons for the failure of bureaucratic regulation, arguing that the underlying problems of political
accountability of state officials continue to undermine law enforcement. As well as improving the accountability of state officials, a policy to mitigate the large-scale pollution associated with the sector needs to be better crafted to suit the characteristics of the industries concerned and
address the wider socio-economic realities within which the problems are embedded and where any policy tool must be applied. The sector can be profitable without having to harm the environment through both self-motivated changes and government support.
Although the government of Indonesia has created a legislative framework for pollution control, rubber factories and palm oil mills across the country continue to generate large quantities of solid waste, air and water pollution. A key factor behind this is that many institutions and interpersonal relations are involved apart from the legislative framework, and are often beyond the reach or even knowledge of the policy makers and legislators (Eckersley, 1995).
While scholars and activists have widely addressed the problems of deforestation, forest fire and haze associated with plantation expansion, they have largely neglected the environmental issues of air pollution and effluent in the rivers (Kantor Menteri Negara Lingkungan Hidup, 1998; IFFM/GTZ, 1998; Gonner, 1998; Gellert, 1998; Down to Earth, 1998; Casson, 2000; Alwy, 1998; WRM, 1998; Wakker, 1999). The latter are major problems affecting the quality of life of local communities living around crumb rubber factories (CRFs) and oil palm mills (OPMs), and are crucial in the environmental context.

Keyword(s): ENVIRONMENTAL POLLUTION ; POLLUTIION CONTROL ; OIL PALM ; RUBBER ; NORTH SUMATRA ; MPOB PUBLICATIONS

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Article Info

Vol 5 No.2 (2005) p11-22
Supply Response of Malaysian Palm Oil Producers: Impact of Interest Rate Variations
Mohammad Alias and Tuck Cheong Tang

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Abstract


Supply Response of Malaysian Palm Oil Producers: Impact of Interest Rate Variations

This paper examines the long run relationship between the supply of Malaysian palm oil and its determinants using Johansen multivariate cointegration analysis. The supply response of Malaysian oil palm producers is investigated using annual data from 1967 to 2002. An error correction model is proposed to investigate the short run response of supply to its determinants. Supply of palm oil is postulated to be a function of expected price of palm oil relative to the expected price of rubber (the substitute crop); government expenditure, a proxy for government policy; a time trend variable to represent technological change or preference and interest rate to represent the cost of borrowing.
Previous studies have not included the interest rate variable. Naïve expectations model is used to model price expectations. Structural information, in particular, the gestation period for oil palms from first planting is used in the specification of the long run relationship.

Keyword(s): PALM OIL-Production ; SUPPLY ; PALM OIL & OIL PALM INDUSTRY-Malaysia ; MPOB PUBLICATIONS

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© Malaysian Palm Oil Board (MPOB). All Rights reserved.
No part of this publication may be reproduced, stored in a retrieval system,
in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the publisher.

This online publication is electronically compiled by Palm Information Centre, Malaysian Palm Oil Board (MPOB)
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