KL concerned over investments in RI palm oil
KL concerned over investments in RI palm oil
KUALA LUMPUR (Reuters): Indonesian assurances that Malaysian palm oil firms operating there will be safe have failed to comfort investors who have to deal with looting, red tape and political risk, industry sources said on Friday.
Indonesia's President Abdurrahman Wahid met a delegation of major Malaysian palm oil investors in the Indonesian capital Jakarta in April and said their businesses would be safe.
But investors remain nervous and have put any expansion plans on hold.
"We are just cautious about everything, until we see a tangible sign," said an industry source in Kuala Lumpur who declined to be identified.
Another Malaysian palm oil industry source said: "We are not expanding anymore. If can pull out, we should have pulled out. But what can we do because half of our feet are already there."
Malaysia, the world's biggest producer and exporter of palm oil, is facing a shortage of land for cultivation and has to bring workers, mostly from Indonesia, to tend the country's oil palm and rubber plantations.
Indonesia was seen as an ideal destination for Malaysian investors because of its proximity and abundance of land and labor. The military-backed government of former president Soeharto also meant opposition was dealt with harshly, ensuring political stability.
About 59 Malaysian companies invested in Indonesian oil palm plantations in I994-1995 when it deregulated its foreign investment sector and streamlined bureaucracy.
But Industry sources said the number of Malaysian firms with plantation interests in Indonesia had fallen to 27 this year.
The companies had to deal with frequent lootings and lawlessness as Indonesia struggles to overcome its worst political and economic crisis in decades.
The crisis, which led to the downfall of Soeharto in 1998, has sparked tension in the multi-ethnic nation of 200 million people, fueled unemployment and led to serious law and order problems.
"If all these riots stop happening and we see some more concrete sign from Jakarta, then maybe that will encourage us to proceed with further development," said the first source.
"But until then, these assurances are only words. We don't have any positive proof that things are improving," he said.
The latest communal clash in Kalimantan, where four people were killed this week in fighting between the indigenous Dayak and settlers from Madura was another blow to the investors.
"We are not in a hurry to pump extra money to develop the land. The latest incident will not help," said the first source.
Most of Malaysian plantations operate in Sumatra and Kalimantan, on the Indonesian side of Borneo island. Indonesia is also the world's second largest crude palm oil producer.
Malaysia's crude palm oil production is projected to rise to 10.8 million to 11.0 million tons in 2000 against 10.5 million tonnes last year.
Indonesia expects output to reach 6.5 million tonnes this year against 5.9 million tonnes in 1999 as planted areas have grown and more trees have matured.
Industry sources said doing business in Indonesia had become more difficult, especially in the run-up to the implementation of an autonomy law in 2001 which will give regional governments more say in managing their affairs.
Even before the law comes into effect, regional governments have already started to flex their muscles by, for example, rejecting permits given to investors by the central government to expand plantations.
"The problems are bureaucracy and law enforcement. Any decree issued by the central government will be interpreted differently by people at the lower level," said the second source.
Questions over land ownership was also another problem because new government officials could revoke decrees issued by predecessors, he said.
"There's a saying in Indonesia that there is law but there's no enforcement," the industry source said.