Guthrie claims RI palm oil deal completed

Guthrie claims RI palm oil deal completed

KUALA LUMPUR (Reuters): Malaysia's Kumpulan Guthrie Bhd. said on Wednesday its newly purchased palm oil plantations in Indonesia were up and running, and it had paid Jakarta US$368 million to close the controversial deal.

Guthrie also planned to raise Islamic bonds worth around $400 million to refinance the loan obtained from a consortium of seven local banks for the acquisition of 265,777 hectares of land on the islands of Java, Borneo and Sulawesi. "It's not only fully settled...we have already sold CPO (crude palm oil)," Guthrie's chief executive Abdul Khalid Ibrahim told reporters after an annual shareholders' meeting.

"We are raising $400 million to finance our loan. We expect to complete this exercise before the end of this year," he added.

Guthrie said it paid the Indonesian Bank Restructuring Agency (IBRA) $368 million in March for the purchase of 25 plantations once owned by the troubled Salim Group.

Indonesia is the world's second largest palm oil producer after Malaysia.

Critics in Indonesia have expressed concern the deal would lead to foreign domination of the country's lucrative palm oil industry. Some have even asked for the deal to be canceled.

But controversy over the deal fails to subside in Indonesia even after Jakarta repeatedly said the issue had been closed. Last week, central government and officials in Riau province on Sumatra said they would form a team to help settle the sale.

The Guthrie deal was IBRA's second biggest sale after the around $500 million it received from selling its stake in Indonesia's largest car maker, Astra International, in 1999.

Commenting on the development in Riau, Khalid said IBRA had guaranteed Guthrie's ownership of the plantations, which means the firm could always refer to the agency to claim back its rights each time there are problems.

Industry sources said among the problems Guthrie will face is unresolved land acquisition, in which small farmers claim their land has been taken in the past by politically well-connected plantation companies without proper compensation.

Khalid said there were no reports of trouble in the new estates, including those located in Aceh on Sumatra, where rebels have been fighting for independence for decades.

"As far as we are concerned...having managed the estates for already two months, people in the plantations basically want to work and continue with their lives," he said.

"So I think we haven't had any adverse experience in our plantations. We are also in operation in Aceh," he added.

Khalid said Guthrie's plantations in Indonesia were expected to produce at least 600,000 tonnes of crude palm oil starting in 2003. Indonesia's CPO production is expected to reach 7.2 million tonnes in 2001, up from 6.5 million tonnes last year.

Guthrie has 110,000 hectares of oil palm holdings in Malaysia and much of its revenues come from palm oil.