Indonesia and Malaysia, as the world's top two palm oil producers, have signed an agreement to set up a council, which will have major palm oil producing countries as its members, in an effort to ensure price stability.
According to announcement made by relevant officials on Saturday, the new council will be based in the Indonesian capital city, Jakarta, and will act in a way similar to that of the Organization of the Petroleum Exporting Countries (OPEC) for oil producers by managing palm oil production and stock in the global market, AP reported.
Indonesian Resources Minister Rizal Ramli was quoted by AP as saying that the council will be a "game changer" for the palm oil industry, which is already under pressure due to plummeting prices and unsustainable farming practices.
The two countries account for 85 percent of the world's overall palm oil production, and the drastic fall in palm oil prices has hurt their economies.
Rizal added that the council will also address impediments on the way of palm oil trade to boost competitiveness in the world market, and promote green and sustainable farming.
The council will also make an effort to improve the livelihoods of more than 4 million oil palm smallholders in Indonesia and some 500,000 in Malaysia, the Indonesian official said.
"It will be a game changer for the palm oil industry in many ways," Rizal told reporters following a ceremony held to sign the agreement for the establishment of the council.
Meanwhile, Malaysian Plantation, Industries and Commodities Minister Amar Douglas Unggah Embas said the council will not try to fix the price of palm oil, but will seek to ensure a sustainable price by organizing and harmonizing stock management.
He added that membership at the council will be extended to other producers such as Brazil, Colombia, Thailand, Ghana, Liberia, Nigeria, Papua New Guinea, the Philippines and Uganda.
According to Rizal, the council will develop a framework for sustainable palm oil production.
He noted that by pushing for high standards of sustainable farming, the council will help prevent the burning of forests for the purpose of clearing land for agriculture in Indonesia that has caused a thick dusty haze across the region every year.
"We know we still have to work hard to minimize the impact" of haze, the official said.
The two countries will each contribute USD 5 million to the council's operations and operational details are still being ironed out, officials said.
Palm oil is commonly used in food, fuel and other products.