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Jakarta Post

Business groups oppose plantation bill

  • Linda Yulisman

    The Jakarta Post

Jakarta   /   Fri, September 12, 2014   /  07:39 am

Plantation business groups have voiced their criticism toward the plantation bill, which is now in final deliberations at the House of Representatives, saying that it will hurt the business climate for plantation firms as well as growers.

The bill, a revision to the 2004 Plantation Law, comprises restrictions on foreign ownership and the scope of plantation areas, stipulates punishment for land burning and encourages more local engagement. The House expects to pass the bill later this month.

Indonesian Palm Oil Producers Association (Gapki) executive director Fadhil Hasan said on Thursday that the group strongly opposed the 30 percent foreign ownership cap as it would erode Indonesia'€™s competitiveness as an investment destination in the sector.

'€œIf foreign ownership is restricted to 30 percent, foreign investors will lose interest in investing in Indonesia anymore and will eye other countries with more open investment rules,'€ he told The Jakarta Post.

Fadhil further said that plantation firms, particularly publicly listed ones, would face difficulties in trying to comply with the arrangement.

Under the bill, firms are given five years to adjust to the planned policy.

If the government wanted to place restrictions, it could use a government regulation, making it easier for firms adjust amid the ongoing situation, he added.

At present, the ownership cap is arranged in the newly revised negative investment list, which allows foreign business entities to hold majority ownership of up to 90 percent only in plantations of more than 250 hectares.

Apart from capping foreign ownership shares, the bill also restricts land ownership by a plantation group to a maximum 100,000 ha. It also requires plantation firms to cooperate with growers by allowing them to hold a 20 percent share.

The bill also requires local processing industrial firms relying heavily on imported raw material to open plantations to support their operation. For instance, a sugar refiner sourcing raw sugar overseas will have to build its own sugar cane plantations within three years of its operation.

It also gets tougher on plantation owners or growers that commit land burning by imposing legal punishment on them.

While appreciating some key points of the bill, such as the foreign ownership restriction, Indonesian Rubber Producers Association (Gapkindo) chairman Daud Husni Bastari also raised his objections, particularly with regard to the bill'€™s weak support for small holders and lack of measures to mainstream the smallholder-based perspective in plantation management.

'€œWhat we need is land reform, which the bill still lacks. We also don'€™t see that the bill sufficiently sides with smallholders who should play a dominant role in managing plantations,'€ he said.

Smallholders represent around 85 percent of rubber growers in Indonesia, which is the world'€™s second-largest natural rubber producer after Malaysia.

Daud further said that the bill should have provided a specific land arrangement for smallholders the way Malaysia did with its authority for smallholders, the Rubber Industry Smallholders Development Authority (RISDA).

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