Palm oil industry liberalized

JAKARTA (JP): The government will soon issue technical directives for the liberalization of foreign investments in the palm oil industry, Agriculture Minister Sjarifudin Baharsjah said here yesterday.

Baharsjah said after a meeting with President Soeharto that the new directives, being prepared jointly with other related ministries, would simplify licensing procedures for foreign investment in oil palm plantations.

"We will, however, direct most new investments in the palm oil sector to the eastern provinces where land resources are quite abundant," he added.

As land in the western part of the country was already fully utilized, it was better and commercially more viable for new investors to open plantations in the eastern region, he said.

The government revoked a freeze on new foreign investment in the palm oil industry, imposed early last year in a bid to protect domestic companies and prevent excessive land acquisition by foreigners, as part of a new reform package agreed with the International Monetary Fund on Jan. 15.

Malaysia is the biggest foreign investor in oil palm estates in the country. Before the freeze Malaysian companies had signed joint venture agreements to develop 1.5 million hectares of oil palm estates, mainly in Sumatra and West Kalimantan.

Data from the directorate general of plantations put Indonesia's oil palm estates at more than 2.4 million hectares as of last year.

The Jan. 15 reform package stipulates, among other things, that foreign investments will be allowed in oil palm estates from Feb. 1 and the ban on exports of crude palm oil and its derivatives will be lifted in April.

"We will soon issue a joint ministerial decree to enforce the new liberalization policy so as to remove any doubts among foreign investors," Baharsjah added.

The minister also disclosed yesterday a government decision to raise the producer (floor) price of unhusked rice from Rp 525 to Rp 600 per kilogram, or 14.28 percent.

However the price of urea fertilizer will not be raised so as to provide a meaningful price incentive to rice growers.

"What is important that the price of urea fertilizer will not be raised," he said.

The rice price increase, when adjusted for the 11 percent inflation in 1997, amounts to a real rise of only 3.28 percent.

Baharsjah said recently that the production of unhusked rice would most likely increase to 53 million tons this year from 49.3 million tons last year.

Baharsjah made his estimate on the assumption that rice acreage, which was seven million hectares during the 1997/1998 planting season, would increase to 11 million hectares this year.

In anticipation of rice shortages, the government has ordered more than two million tons of husked rice from major suppliers such as Thailand and Vietnam. (prb)