Government firm on oil palm investments

JAKARTA (JP): State Minister of Investment Sanyoto Sastrowardoyo said yesterday the government was firm in its decision to ban new foreign investment in oil palm plantations.

Sanyoto made the statement after meeting President Soeharto at the Presidential residence on Jl. Cendana. Sanyoto was accompanied by Coordinating Minister for Production and Distribution Hartarto.

Sanyoto said there was too much investment in oil palm plantations.

Ninety-three foreign firms had invested a total of US$3.3 billion in 2.1 million hectares of oil palm plantations, he said.

Domestic investors were involved in 526 projects worth Rp 48 trillion (US$20 billion), covering 6.6 million hectares.

Sanyoto said investors were mostly attracted to low production costs and the high export price of palm oil.

"Production costs are only $150 a ton while export prices may reach $600 a ton," he said.

The government said last month that it had decided to freeze fresh foreign investment in oil palm plantations because too much land had been taken by the plantations.

The government has never explained its decision, or said whether the ban was permanent.

Minister of Agriculture Sjarifudin Baharsjah said recently the ban was directed at new investment in western regions, thus foreign investors could still develop plantations in eastern, less-developed regions.

But Sanyoto said yesterday the government had not decided whether oil palm plantations should be developed exclusively in eastern regions. He said studies were needed to determine whether the conditions in East Indonesia were suitable for growing oil palms.

The Indonesian Chamber of Commerce and Industry released a statement yesterday supporting proposals to develop oil palm plantations in eastern regions.

The chamber's vice chairman, Adi Warsita, said Kalimantan, Sulawesi, Irian Jaya, Maluku and other eastern regions urgently needed investment to catch up with development in western Indonesia.

Adi said that foreign investors should be allowed to open plantations in eastern regions if they were in partnership with smallholders in the nucleus estate and smallholders programs.

They should also be required to take on local businesses in those provinces as their partners and establish downstream industries to process palm oil.

Adi said more foreign and domestic investment in the sector was required if the if Indonesia wanted to become the world's largest producer of crude palm oil (CPO). Malaysia is now the largest CPO producer, with Indonesia second.

The government hopes the country will produce 7.2 million tons of CPO in 2000 and 9.9 million tons a year by the year 2005, he said.

Adi said that until January, the government had released 3.2 million hectares and provided provisional licenses for four million hectares of land and forest areas from the 16.8 million hectares proposed for plantation sites. (pwn)