JP/4/plantation

JP/4/plantation

Plantation bill not attractive to investors

Moch. N. Kurniawan
The Jakarta Post
Jakarta

Businessmen criticized on Sunday the current plantation bill for
not providing favorable incentives to lure investors to the
lucrative plantation business.

Chairman of the Indonesian Palm Oil Producers Association
(Gapki) Derom Bangun and secretary general of the Indonesian
Rubber Producers Association (Gapkindo) Soeharto Honggokusumo
complained over the restriction of a 30-year concession period
planned to be given to plantation firms.

"Investors will not put their money here, as it is not
profitable if firms only get a 30-year concession period, which
is equal to one cultivation cycle, without any guarantee that the
concession will be extended.

"They would rather go to China or to other countries where
businesspeople are allowed to hold a 90-year concession," Derom
told The Jakarta Post.

He explained that, at present, a company is given a concession
for 30 years, which could be extended twice: the first extension
for another 25 years, and the second extension for an added 35
years; but this scheme is also not very attractive to investors.

"So the bill must give concession periods as long as those in
our rival countries to develop our plantation business," he said.

Soeharto concurred with Derom, saying the situation in rubber
plantations was quite similar to palm oil plantations.

He cited Malaysia as a business-friendly country, as it gives
businessmen a concession of up to 99 years for investments in the
rubber plantation sector.

Palm oil and rubber are Indonesia's leading export
commodities.

The House of Representatives has already drafted the
plantation bill and plans to send it to the government before
starting deliberations.

The bill has also come under fire from non-governmental
organizations (NGOs) and farmers' associations for harming both
the people and the environment.

Among their objections are the 30-year concession period for
plantation firms, the potential monopolization by plantation
firms on the strength of their upstream-to-downstream permit, and
the lack of fees for environment rehabilitation programs.

Derom and Soeharto said it was difficult for companies to
monopolize the business despite a permit allowing them to run the
business from the upstream to the downstream.

Soeharto argued that the rubber price was not determined by a
company, but by market supply and demand. Thus, small-scale
farmers could also survive, even if they only run an upstream
business.

"Besides, there is already such a permit. However, farmers
still control 86 percent of rubber plantations across the
country, while companies only manage the remaining 14 percent,"
he said.

He also proposed that the bill should provide legal protection
to plantation firms from any external attacks, as well as provide
incentives to farmers to improve their harvesting and production
capabilities before selling to processing companies.