Malaysian oil palm firms may pull out of Indonesia: Report

Malaysian oil palm firms may pull out of Indonesia: Report

KUALA LUMPUR (DPA): Malaysian oil palm plantation firms in
Indonesia have slowed down operations and may pull out their
investments, a report said yesterday.

The Star daily said Malaysian companies are having second
thoughts about their investments, which amount to two million
hectares or 36 percent of Indonesia's total oil palm plantations.

Malaysian firms have so far invested about 500 million ringgit
(US$121.9 million) in Indonesia's oil palm sector over the past
three years.

The daily quoted analysts as saying Malaysian firms were
worried about the continuing financial and political crisis in
Indonesia, the possibility of new laws introduced by the new
government and the credibility of local joint venture partners.

"Some companies now find their investments in Indonesia no
longer attractive, especially with the severe financial crisis
there," the newspaper quoted Goh Tian Tiong, an analyst with PB
WorldSec, as saying.

Goh said it was possible for firms to lose their entire
investments if the Indonesian situation worsens. "We, therefore,
should not rule out the possibility of losses if they decide to
withdraw from Indonesia," he added.

Malaysian plantation firms ventured into Indonesia over the
past several years as Malaysia itself, the world's largest oil
palm producer and exporter, faced a shortage of fertile land and
cheap labor. Indonesia is the second biggest palm oil producer in
the world.

The daily quoted an unnamed analyst as saying that two
Malaysian firms have already slowed down development projects due
to the crisis.

Another headache affecting Malaysian firms is the credibility
of Indonesian joint venture partners, with some companies seeing
local partners siphon off joint venture money for personal use,
another analyst said.

As ownership of the land is held by the local partner,
Malaysian investors were worried they might have to leave empty-
handed should a dispute arise.

The daily cited the case of Malaysia's Kulim (M) Bhd. which
had advanced 240 million ringgit to its Indonesian partners, but
the investment has yet to be approved by Indonesian authorities.

"Without connections, it is difficult and time-consuming to
get approvals and meet the local requirements," an analyst said.

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