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.