Palm oil industry liberalized

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)