Impact of the 1997--1998 Asian financial crisis on the Indonesian and Malaysian palm oil and palm kernel oil industries

Scope and method of study. The objectives of this study were (1) to describe the world palm oil and palm kernel oil industry from 1997 to 1999 and the condition of palm oil and palm kernel oil industry in Indonesia and Malaysia during, and after the 1997–1998 Asian financial crisis; (2) to describe the political and economic policies applied by the Indonesian and Malaysian government to handle the crisis in 1997 to 1999; and (3) to determine the impact of 1997–1998 Asian financial crisis on palm oil and palm kernel oil industry in Indonesia and Malaysia. Export and domestic price relationship for Indonesia and Malaysia are estimated using monthly data from January 1997 through December 1999.; Finding and conclusions. For Indonesia, (1) export prices of palm oil and palm kernel oil follow the one period lagged world price; (2) export prices were not influenced by quantity exported and the export ban; (3) Indonesian domestic cooking oil price was influenced by export price of palm oil, BULOG, and export tariff rate; (4) BULOG effectively decreased domestic cooking oil prices; and (5) increased export tariff rates decreased domestic cooking oil prices. For Malaysia, (1) the domestic price of fresh fruit bunches was influenced by the domestic price of crude palm oil; (2) the domestic price of palm kernel and crude palm kernel oil did not influence domestic price of fresh fruit bunches; (3) Malaysian domestic prices of crude palm oil, palm kernel, and crude palm kernel oil were influenced by the export prices of palm oil and palm kernel oil; (4) the exchange rate Malaysian Ringgit-US dollar only influenced the domestic price of crude palm oil; (5) Indonesian export tariff rates influenced Malaysian prices of crude palm oil; (6) the Indonesian export ban did not influence Malaysia's price; and (7) Malaysian export prices followed world prices.