Kadin says govt should rethink oil palm ban

JAKARTA (JP): The government's ban on new foreign investment in oil palm plantations will harm domestic investment in the sector and allow certain business groups to dominate the sector, the Indonesian Chamber of Commerce and Industry (Kadin) said yesterday.

The chamber's vice chairman on agro-business, Adiwarsita Adinegoro, said the government should rethink its ban on new foreign investment in the sector.

"What is really happening behind the Investment Coordinating Board's decision to stop licensing foreign direct investment in oil palm plantations?" Adiwarsita asked.

"The government must be transparent in this matter so that it will not invite prejudice on the part of foreign investors," he said.

Earlier this month the government temporarily froze Malaysian investments in oil palm plantations in North Sumatra saying Malaysia had overinvested in the sector.

So far 27 Malaysian companies have invested in Indonesian oil palm estates in cooperation with local companies.

The minister of agriculture, Sjarifudin Baharsjah, later said the government's ban did not cover only Malaysian investors but all foreign investors.

Sjarifudin said the decision to freeze oil palm plantation and related palm oil industry foreign investment was because the world market was oversupplied.

Malaysia's minister of international trade and industry, Rafidah Aziz, who was here for the first ASEAN summit earlier this week, said she did not oppose Indonesia's decision.

"That's the Indonesian government's right to decide. I think you understand why your government took such decision," Rafidah said.

Indonesia is the world's second largest crude palm oil producer, producing half of what Malaysia does.

Chrisman Silitonga, a local observer of agricultural and food issues, said he was certain the government would reconsider its decision once the move was countered with free trade arguments.

Chrisman, who also works with the National Logistics Agency, said the decision to ban foreign investment in oil palm plantations was aimed at diversifying the types of agricultural commodities grown in Indonesia.

Adiwarsita agreed and said domestic and foreign plantation investments was concentrated on oil palms.

"The plantation commodity which enjoys the most robust growth is oil palm," Adiwarsita said.

He said oil palm plantation acreage had grown from 120,000 hectares in 1968 to 1.47 million hectares last year, of which large business controlled 1.02 million hectares.

Adiwarsita is also president of PT Wanarimba Kencana which concentrates on agro-business. The company controls 20,000 hectares of oil palm plantations in Kalimantan.

Chrisman said if the government wanted to see more agricultural diversification the ban should apply to local investors too.

The state minister of investment, Sanyoto Sastrowardoyo, said the government might totally close oil palm plantations to foreign investors by including the sector on its negative investment list. He said this was needed to protect local companies.

It is Sanyoto's office which has the power to do this. The negative investment list aims to protect local household and small enterprises.

Several parties, including Chrisman and Adiwarsita, have frowned upon Sanyoto's plan saying that oil palm plantations were already controlled by big businesses like the giant Sinar Mas and Salim groups, which are owned by politically well-connected business tycoons Eka Tjipta Widjaja and Liem Sioe Liong.

"The list is meant to protect small and medium enterprises. Those in the oil palm sector are big businesses, none of whom need special protection that requires the sector to be put on the list," Chrisman said.

Adiwarsita said "the ban on foreign investors in oil palm plantations should not help create a new monopoly in domestic investment (in the sector)."

One source said the government's decision to ban the investments was because the Sinar Mas and Salim groups did not want to see anyone reduce their domination of the sector.

The source said it was also because Malaysian investors were reluctant to set up joint ventures with the two groups and preferred to link up with medium businesses mostly controlled by indigenous Indonesians. (rid/pwn)