| Industry executives say the exit of several Malaysian plantation firms are isolated cases, and the rest would not be rushing to the doorSeveral Malaysian plantation firms are raising eyebrows because they are exiting Indonesia despite a shortage of land for oil palm at home.However, industry executives said these were isolated cases and the rest would not be rushing to the door.“From an economic point of view, Indonesia is still the best place to own and operate oil palm estates, mills and refineries because operational costs are 10 times cheaper.“The republic alone offers a downstream market of over 225 million people, and those who exit the country are not efficient and have run into management problems,” a Malaysian Palm Oil Association official said.
Last Friday, Kulim (Malaysia) Bhd said it was exiting its Indonesian operations in a RM430 million deal.
It plans to focus instead on its palm oil businesses in Malaysia, Papua New Guinea and the Solomon Islands.
Boustead Holdings Bhd group managing director Tan Sri Lodin Wok Kamaruddin told Reuters yesterday that it could sell 21,000ha of its oil palm plantations in Indonesia as it turns its focus to developing estates at home.
“We want to focus on developing land in Malaysia rather than aggressively expanding overseas. Investment abroad comes with all kinds of problems,” group managing director Tan Sri Lodin Wok Kamaruddin said in the interview.
The market is now abuzz that Kumpulan Guthrie Bhd, which owns some 200,000ha, could be the next to dispose of some of its oil palm assets.
A plantation ministry official said it was not uncommon for some Malaysian companies in Indonesia to face difficulties with locals over land rights. These sometimes take years to resolve.
A Tabung Haji official, who declined to be named, said the fund, which owns 82,000ha of oil palm estates in Riau, encountered a similar problem when they ventured there in the 1980s.
“After buying the land and getting approval from the authorities, we converted the land to grow palm oil and then villagers appeared out of nowhere and claimed that the land was theirs.
He added that the matter was only resolved when villagers found out that a former and retired top Indonesian army general was a shareholder of the joint-venture company.
Despite all this, industry observers and analysts still see Indonesia as the land of oil palm opportunity.
Golden Hope Plantations Bhd group chief executive and Synergy Drive Bhd plantation adviser Datuk Sabri Ahmad said Malaysia had used up all its oil palm land spanning more than 3.6 million hectares.
“There are only one million hectares left in Sabah and Sarawak,” said Sabri.
Analysts also agreed that it was unlikely for companies like Kuala Lumpur Kepong Bhd and PPB Oil Palms Bhd to follow suit because most of the land issues had already been resolved.
Malaysia and Indonesia are the world’s top two palm oil producers, producing 15 million tonnes each. Indonesi, however, is expected to overtake Malaysia as early as the end of this year.
Indonesia is fast overtaking Malaysia due to cheaper and abundant land. It costs as little as RM10,000 to buy one hectare in Kalimantan compared with RM20,000 in Peninsular Malaysia (depending on location) and RM37,000 per hectare) in Sabah. |
