Government firm on oil palm investments

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)