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Korea, Germany and Brazil. The conference provided an opportunity to discuss ways to develop oil palm to be an alternative energy. Issues discussed include standardisation of mix in its bio diesel production, continuously supporting R & D, increasing investment and encouraging farmers to take part in bio diesel production. Besides, it was proposed that the ACMECS (Ayeyawady-Chaophraya-Mekong Economic Cooperation Strategy) countries including Cambodia, Laos, Myanmar, Thailand, and Vietnam should participate in this oil palm production. The Ministry of Energy aims to utilise bio diesel in 3% of total diesel in 2011 or 2.4 million litre per day. However, one constraint is availability of raw materials. If the country were to convert totally to use bio diesel, there has to be 7 million rais of oil palm planted areas, compared to only 2 million rais at present. Besides, expansion of oil palm planted areas, improving planting efficiency and reduction of production cost are also crucial. There is still doubt whether the Government’s oil palm strategy can be truly carried out, especially as the Government would not continue to subsidise the price of diesel. Historically, the palm oil industry has developed to meet the demand of the country. But when there is an over supply of palm oil due to favourable weather condition, the domestic price will normally drop sharply below world price, leading to palm oil being exported solely to mitigate over supply. As such there is no incentive to make good use of value added production or of the other by-products, emanating from the palm oil related industries. Only when investments are made in private sector R&D and growers and producers upgrade their efficiency and lower the production cost, will the growth potential for the Thai palm oil industry in domestic and international export markets be realised.

9.3 Competition The structure of palm oil and oil palm industry comprises 5 sectors, namely growers, CPO crushing mills, refinery, palm oil related industry and consumers. Any change in one sector will affect another. External factors also play important roles in determining domestic price such as world market price, and the price of other substitutable vegetable oils. Another uncontrollable factor namely weather condition has direct impact on volume of FFB to be supplied to the market in every season. In the past, competition to buy raw materials for refined palm oil production depended mainly on price, i.e. purchasing price of raw materials and selling price of finished products. While raw materials price fluctuates all the time, price of finished product is dependent on pricing of competitors. At present, since 1 January 2003, import tax of palm oil under AFTA has been lowered to 5% but the government has not yet issued any clear direction as regards implementation. This can present difficulties to management in the event of 23

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LST_2004 LAM SOON (THAILAND) PCL Annual Report 2004

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LST_2004 LAM SOON (THAILAND) PCL Annual Report 2004

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