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.