Oil palm estates to concentrate on East Indonesia

JAKARTA (JP): Prospective investors who want to establish oil palm plantations will be expected to focus their attention on eastern Indonesia, as the western part of the country is already saturated with oil palm estates, Minister of Agriculture Sjarifudin said.

The minister made this statement yesterday in response to questions from legislators who asked how the government would handle the increasing number of applications, from foreign and local investors, to establish oil palm estates.

Sjarifudin said the government had decided to concentrate the development of oil palm plantations in provinces that have not yet received a "fair share" of the plantation pie.

These provinces include Jambi, East Kalimantan, Sulawesi and Irian Jaya. Most of the prospective investors, Sjarifudin said, are either Malaysians or joint venture companies between Malaysian and Indonesian entities.

"There are enough investors already operating in the more developed western provinces like Riau and West Kalimantan," he said during a break at a hearing with members of the House of Representative's Commission IV on agriculture and forestry.

Sjarifudin said the government would expedite recommendations to investors who planned to invest in the "needy" provinces.

The government is also planning to direct the 500,000 hectares of plantation projects, to involve transmigrants, toward the less-developed eastern provinces. These projects, he said, would be managed by domestic companies.

Sjarifudin said the applications that have been filed to establish agricultural plantations cover 1.2 million hectares, most of which are intended for oil palm.

Outside of these applications, the government has granted recommendations, licenses or area allocations for around 690,000 hectares. Most of these, however, are located in Riau, West Kalimantan, North Sumatra and West Sumatra.

Sjarifudin said the infrastructure in West and East Kalimantan did not differ much, but the 200,000 hectares of plantations in West Kalimantan far exceeded the 8,000 hectares in East Kalimantan.

Minister of Forestry Djamaludin Suryohadikusumo said earlier this month that up to 650 companies were lining up for government permits to convert forest areas into agricultural plantations.

If all 650 are granted permits, up to 6 million hectares of forest would be converted into plantations.

It is unclear whether the plantation investors referred to by Sjarifudin were those also mentioned by Djamaludin.

Responding to questions on palm oil trade, Sjarifudin said the government was not planning to curb palm oil exports as a way of guaranteeing sufficient supplies on the domestic market.

Instead, he said, the government would encourage the development of downstream palm oil refineries to accommodate crude palm oil (CPO) production.

CPO is a raw material for cooking oil, an important commodity which is regulated domestically by the National Logistics Agency (Bulog).

Last year, shortages of CPO on the domestic market -- caused by favorable prices on the export market -- caused cooking oil prices to surge, making Bulog partly reliant on imports.

Sjarifudin said yesterday the government would provide incentives for investment in downstream palm oil industries.

"This is better than banning exports," he said. (pwn)