Investors deterred by costly loans

SAMARINDA, East Kalimantan: The East Kalimantan provincial administration has offered investors almost 1 million hectares in concessions for palm oil plantations since 1998, but only 15 percent has been worked by them.

Investors were reluctant to work the land due to the high rate of local bank loan interest and the slow bureaucracy, said Ismet Barabakh, head of the provincial plantation office.

"We have offered 867,000 hectares in concessions to domestic and foreign investors but only 133,000 hectares have been worked by them so far," he said.

The 867,000 hectares are located in the nine regencies of the province.

Ismet did not go into detail regarding how many investors had injected funds to work the concessions.

He went on to say that many other investors had expressed interest to work the land but had canceled their plans due to the high rate of bank loan interest.

"These domestic investors put their plans on hold, because local bank loan interest now stands at 16 percent to 18 percent. In Malaysia, in comparison, the interest rate is only 13 percent," he said.

Meanwhile, foreign investors cited red tape and slow Indonesian bureaucracy as the main factors that prevented them from working the land, said Ismet. -- JP