Malaysia, RI to discuss oil investment freeze

Malaysia, RI to discuss oil investment freeze

KUALA LUMPUR (Agencies): Malaysia wants to discuss with Indonesia its freeze late last year on new foreign investments in palm oil cultivation which has affected 19 Malaysian companies, news reports said yesterday.

The Primary Industries Ministry will submit a detailed report on problems faced by the Malaysian plantation firms to the government next week, before the matter is taken up with Jakarta, Minister Lim Keng Yaik said.

Indonesia announced an indefinite freeze last November on new palm oil foreign investments, saying it is aimed at consolidating and revamping its domestic palm oil industry.

Lim said the Indonesians felt there were too many companies involved in the sector, where about 75 percent of the four million hectares of land cultivated were owned by foreigners, mostly Malaysians.

Malaysia is the world's biggest producer and exporter of palm oil, and the government is encouraging local companies to invest in plantations overseas.

Lim said the 19 companies are among 32 Malaysian firms currently involved in the palm oil sector in Indonesia. Some of the affected companies are now at a standstill because they had already pumped in money before the freeze was imposed.

"They have invested a lot of effort and money, ranging between 100,000 ringgit (US$40,000) and 10 million ringgit ($4 million) depending on the stage of investment they are in," he said, adding that some companies had bought and cleared land but failed to get approvals for cultivation.

Lim said some of the firms have been told by the Indonesians to channel their investments to growing rubber and cocoa instead.

Indonesian Coordinating Minister for Production and Distribution Hartarto recently rejected Malaysian requests to lift the ban.

Hartarto said the government had not considered giving special facilities to Malaysian investors.

Foreign investments in the sector were banned "because they have reached 1.6 million hectares", the minister said.

"This is already about 80 percent of the total oil palm plantation acreage in Indonesia which is currently two million hectares," he said.

Minister of Agriculture, Sjarifudin Baharsjah, clarified recently the ban was imposed only in Kalimantan, Sumatra and Java.

He said the government would still allow foreign investors to open up oil palm plantations in eastern Indonesia, but would require them to involve smallholders in their plantation projects under the nucleus and smallholders scheme.