Hartarto rejects Malaysian's oil palm proposal

JAKARTA (JP): The coordinating minister for production and distribution, Hartarto, has rejected Malaysian requests to develop oil palm plantation in Indonesian provinces which are in ASEAN's subregional growth zones.

Hartarto said yesterday the government had not considered giving special facilities to Malaysian investors.

Foreign investments in the sector were banned "because they have reached 1.6 million hectares", the minister said.

"This is about 80 percent of the total oil palm plantation acreage in Indonesia which is currently two million hectares," he said.

But Hartarto refused to say how the government would accommodate the increasing number of foreign investors eager to operate in the oil palm sector.

The government said earlier this month it was banning foreign investment in oil palm plantations because of the large areas already licensed to joint ventures and foreign investors.

But the minister of agriculture, Sjarifudin Baharsjah, said recently the ban was imposed only in Kalimantan, Sumatra and Java.

He said the government would still allow foreign investors to open up oil palm plantations in eastern Indonesia, but would require them to involve smallholders in their plantation projects under the nucleus and smallholders scheme.

Hartarto said suggestions that oil palm plantations be prioritized for eastern Indonesia needed further assessment.

"We still need to consolidate with parties that are related to investments in this sector," he said during a gathering of North Sulawesi citizens in Jakarta.

"Consolidation is needed to provide opportunities for our own businesses," he said.

Malaysian businesses have since requested the government provide special facilities for oil palm investors, particularly those operating in Association of Southeast East Asian Nations' subregional growth areas.

Indonesia is a member of three such growth areas: the Brunei- Indonesia-Malaysia-Philippines East Asia Growth Area, the Indonesia-Malaysia-Thailand Growth Triangle and the Indonesia- Malaysia-Singapore Growth Triangle.

The vice chairman of the Malaysian Chamber of Commerce, Abdul Rahman Maidin, said last week it was the government's prerogative to impose such a ban.

But he asked the government to expedite investment procedures and plantation operations of Malaysian businesses that had already begun investing in the growth areas.

Businesspeople and observers have said investing in oil palm plantations in Indonesia was tedious because it involved plenty of red tape and had many associated costs -- both legal and illegal.

Analysts have said the ban was aimed at protecting local oil palm plantations which tycoons Eka Tjipta Widjaja and Liem Sioe Liong dominate.

Meanwhile, economist Dorodjatun Kuntjoro-Jakti from the University of Indonesia, who was also at yesterday's gathering, said eastern Indonesians should participate in projects in subregional growth areas rather than wait for deregulatory measures or the opening up of new free trade areas.

Dorodjatun said subregional growth areas were more important than the free trade regimes of ASEAN, APEC and the World Trade Organization.

"It is even more important than the elimination of nontariff and tariff barriers, deregulations and other plans that the government has in store to boost the region's economy," he said.

Dorodjatun said cooperation in subregional growth areas was bound to boost provincial economies.

"We can expect to see more flows of goods, services, staff, money, capital, information and technology in these areas," he said. (pwn)