(Adds details, analyst comment)
JAKARTA, Feb 7 (Reuters) - Singapore’s Wilmar , the world’s largest listed palm oil firm, will invest $900 million to build factories in Indonesia to produce palm oil products, an Indonesian government minister said on Monday.
“Wilmar will build six factories of CPO (crude palm oil) end products such as soap and margarine. The company will start to build in the first quarter this year,’ said Minister of Industry M.S Hidayat.
Wilmar was unavailable for comment.
In June, the head of Indonesia’s state investment board said Wilmar wanted to invest $2 billion in Indonesia.
The head of the Indonesia investment board, Gita Wirjawan, said at the time that Wilmar was looking at investing in the planned Merauke food estate in Indonesia’s eastern Papua region.
“Essentially it is right in line with the company’s long-term processing strategy,” said Andreas Bokkenheuser, analyst at UBS.
He added that Wilmar’s investments in Indonesia have been primarily two-fold over the years. One had been “off-stream” into plantations — which is something Wilmar would like to invest more in — but there was not huge availability of good assets; the second part was into processing facilities.
The firm previously said it wanted to expand by investing at least $1 billion in China, Africa and Indonesia, where it said it had secured land for sugar plantations that might take some years to start.
The move by the second largest listed firm on the Singapore bourse, reflects increasing confidence by foreign direct investors in Southeast Asia’s largest economy.
Highlighting this confidence, data released on Monday showed Indonesia’s economy grew 6.9 percent year-on-year in the fourth quarter of 2010, the strongest pace in six years, blowing past expectations and increasing the chances of steeper rate hikes.
Total investment grew by 54 percent last year, with foreign direct investment rising 52 percent as firms — particularly from Asia — put money into plants to make goods from shoes to mining equipment, or to extract mineral resources.
“The political risk in Indonesia has certainly improved (and) Wilmar has very long-term experience in Indonesia — they know the culture, the people, the infrastructure the politics,” Bokkenheuser said. “If there are attractive opportunities within this space, then Wilmar will definitely be there.”
Indonesia, the world’s top exporter of thermal coal and tin and the biggest producer of palm oil, has benefited from the rise in many commodity prices.
Global food prices hit a record high in January, the U.N. Food and Agriculture Organisation said on Thursday, adding that prices, already above the 2008 levels which sparked riots, were likely to rise further.
“It is (a) large (investment) in Wilmar terms,” Bokkenheuser added. “On the processing side, it is sizable — definitely high and to what Wilmar has been paying historically.
“Wilmar’s commitment to that size of capex is not unusual.” (Reporting by Rieka Rahadiana and Michael Taylor; Editing by David Fox)