ABSTRACT:
The article has argued that the rising competition between Malaysia and Indonesia is affecting the palm oil industry in totality. The recent phenomenon of palm oil playing a role in Chinese shadow banking has also contributed to the depression in palm oil prices, particularly in 2013. With these in mind, and through the use of Prisoner’s Dilemma game theory, the article argues for both Malaysia and Indonesia to institutionalise co-operation, rather than compete strongly, through the setting up of a palm oil producing and exporting countries organisation (POPEC). This is aimed at better management of the supply and inventory of palm oil in the global market in line with global demand conditions.
Keywords: palm oil, competition, Malaysia, Indonesia, game theory,
comparative advantage, downstream, upstream, shadow banking
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