Kadin says govt should rethink oil palm ban

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)