Guthrie to up investment in RI operations

Rendi A. Witular, The Jakarta Post, Jakarta

Malaysia's largest plantation group, Kumpulan Guthrie Bhd., said it would invest about US$100 million over the next two years to increase the output of its oil palm operations in Indonesia.

The group's chief executive, Tan Sri Datuk Khalid Ibrahim, told The Jakarta Post over the weekend that Guthrie was very satisfied with the performance of its 25 oil palm plantations here, which it purchased from the Indonesian Bank Restructuring Agency (IBRA) in 2001.

"Our palm oil output from Indonesia is very satisfying. So we plan to invest more money to set up mills and other facilities needed to boost the production," said Ibrahim on the sidelines of a seminar on the agroindustry.

He said that when the group purchased the 25 oil palm plantations in April 2001, total output was about 200,000 tons per year. And by March of this year, output had reached 300,000 tons.

He said that with the new investment, output was expected to jump to 450,000 tons in 2003 and 600,000 tons in 2004.

Guthrie paid some US$368 million for the 25 oil palm plantations, which cover more than 260,000 hectares in Sumatra, Kalimantan and Sulawesi.

IBRA took over the plantations in the late 1990s from the Indonesian Salim Group, as part of the group's repayment of its debts to the government.

The agency sold the plantations to Guthrie to raise cash to help finance the state budget deficit, and also to prevent the plantations from deteriorating any further without the necessary new investment.

Guthrie has encountered some difficulties in operating the plantations, including from local regency administrations imposing various taxes, which in turn have increased production costs.

There have also been problems with looting by villagers and land disputes.

Indonesia is the world's second largest palm oil producer after Malaysia. Oil palm trees in Indonesia are younger than those in the old British colonial plantations of Malaysia, so they produce more palm oil.

Some industry players and politicians in Indonesia have expressed concern that the plantations acquired by Guthrie would lead to foreign domination of the country's lucrative palm oil industry, with some of these observer asking that the deal with IBRA be canceled.