JAKARTA Aug 15 Indonesian lawmakers are looking
to restrict foreign ownership of plantations to no more than 30
percent, as the top palm oil producer tries to maximise land
usage, protect indigenous people and tighten environmental
controls in the sector.
A new draft bill drawn up by members of Indonesia's
parliament aims to open up the sector to smaller, local players.
But it would also discourage foreign investment just after the
nation has set an ambitious goal of raising its palm oil output
by a third to 40 million tonnes by 2020.
Foreign ownership of Indonesian plantations is currently set
at a maximum of 95 percent. As well as simplifying Indonesia's
complex rules on land use, the new proposed law may also make it
easier to prosecute businesses responsible for Southeast Asia's
annual "haze" season.
"It's a bombshell and has snuck in under the radar, and as
far as I know, without consultation with the industry," said a
Jakarta-based financial advisor with an major international
accountancy firm, who is not authorised to speak to the media.
"There will clearly be a decline in new foreign investment
... I would think there will be a decline in the capital value
Foreign plantation firms currently operating in Southeast
Asia's largest economy include Singapore-listed Golden
Agri-Resources and Wilmar International,
Malaysia's Sime Darby Bhd and Cargill.
Limiting foreign ownership in palm firms to 30 percent would
hinder the flow of overseas capital needed to develop and
modernise the industry, said Fadhil Hasan, executive director at
the Indonesian Palm Oil Association.
Golden Agri-Resources and Wilmar were unable to give an
immediate comment on Friday, while Sime Darby and Cargill could
not be reached for comment.
The Indonesian government has introduced a series of
nationalistic rules for commodity exports, including palm, cocoa
and mining, in an effort to boost domestic processing industries
and boost the value of its exports.
Indonesia's parliament is looking to finish discussions on
the draft bill with the government soon and expects it to be
approved before the new administration is in place, Gamal Nasir,
director general of plantations at the agriculture ministry told
Following elections last month, outgoing President Susilo
Bambang Yudhoyono will be replaced by Jakarta governor and
president-elect Joko Widodo in October.
During his campaign, Jokowi - as he is known - outlined a
number of nationalistic agricultural policies, including
boosting smallholder access to land ownership.
If the draft bill becomes law, it would be retroactive for
companies that already own plantations, said Herman Khaeron, an
influential lawmaker and vice chairman of the parliamentary
committee for agriculture, forestry, fisheries and maritime.
This interpretation was rejected by agriculture ministry and
Firms would be given five years to comply with the new bill,
according to a copy of the draft seen by Reuters, and those that
refused to comply may face fines, temporary suspensions or the
revoking of licenses.
Last year, Indonesia, also a major pulp and paper supplier,
introduced a regulation to restrict to 100,000 hectares the
plantation area of new private palm firms.
(Additional reporting by Rujun Shen in SINGAPORE, Anuradha
Raghu in KUALA LUMPUR and Dennys Kapa in JAKARTA; Editing by Tom