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Thu, 03 Apr 1997

JP/Palm Oil group backs govt's decision

Palm Oil group backs govt's decision

JAKARTA (JP): The Association of Palm Oil Producers fully backs the government's decision to ban new foreign investment in oil palm plantations, the association's chairman said.

Derom Bangun said the freeze on new foreign investment would give the government a chance to re-evaluate and consolidate some of the permits which have been issued.

"The freeze would also give the government the opportunity to study the supply and demand of the commodity in the world market," Derom was quoted by Antara as saying in Medan yesterday.

Although the price of crude palm oil (CPO) in the international market (about US$600 a ton) was high enough now, the price could drop if there was too much of the commodity, he said.

"Many farmers and workers, who depend on the plantations, would be in trouble if the CPO price suddenly dropped drastically," he said.

As of January the government had released 3.2 million hectares and provided provisional licenses for four million hectares and forest areas for plantation sites from the 16.8 million hectares applied for.

Ninety-three foreign firms have invested US$3.3 billion in 2.1 million hectares of oil palm plantations, 27.5 percent of total licenses.

Malaysia, the world's largest CPO producer, will invest in 1.5 million hectares

Local investors were involved in 526 projects worth Rp 48 trillion (US$20.25 billion) covering 6.6 million hectares.

Derom dismissed the suggestion that the decision was driven by Indonesia's desire to replace Malaysia as the world's biggest CPO producer.

The minister of agriculture, Syarifuddin Baharsjah, urged oil palm plantation companies to improve their productivity.

"Domestic production is only 18 tons of palm clusters per hectare a year and we hope to raise it to 25 tons of cluster a hectare," Syarifuddin said.

The government-sponsored Smallholder Nucleus Estate program, a plantation program which involves farmers and small plantation holders co-operating with large plantations, had helped increase Indonesia's CPO production, he said. (02)