Dow Jones Newswires | Tuesday, Aug 12, 2008
-By Fawziah Selamat, Dow Jones Newswires; 62 21 3983 1277; [email protected]
JAKARTA (Dow Jones)--Indonesia's Minister of Agriculture and other senior government officials Tuesday said they met with senior members of Saudi Arabia's Binladin Group to discuss the investment group's plans to spend at least $4 billion developing at least 500,000 hectares of Indonesian land for rice production.
Indonesia's special envoy to the Middle East, Alwi Shihab, told a news conference after the meeting that the Binladin Group has been tasked by the Saudi government to look into investing in agricultural projects following sharp increases in food prices as a result of high crude oil prices.
Abu Bakar Al Hamid, a board member and executive managing director with the Binladin Group, said the company will conduct a feasibility study of the proposed land area, in the Merauke district of Indonesia's Papua province, before making their final decision.
"We have been looking at other locations that might be suitable but Indonesia is first on our list," he said.
Shihab said the company plans to grow Basmati rice, a strain of rice that's not widely consumed by Indonesians, and that the rice will be mostly exported back to Saudi Arabia.
That might prove controversial as it may be seen as rich nations converting vast tracts of forest land in developing countries to feed their own people over those in the host countries.
Government officials said in July, when another group of Saudi investors announced interest in developing a tract of land in Merauke, that Indonesia will ensure it has enough rice for its domestic market first if it is to allow foreign companies and other countries to use its land to export for their own consumption needs.
Indonesia is one of the world's largest consumers of rice and in recent years has become a net importer of the commodity due to a lack of investment and loss of agricultural land to urbanization.
Al Hamid said the company will be looking into the feasibility of setting aside some of the rice that will be produced in Merauke for the Indonesian market and exporting the rest, should it decide to invest in the project.
He said the close working relationship between Saudi Arabia and Indonesia, as well as Indonesia's good agricultural prospects, made the company place the country high on its list of places to invest.
Merauke is located in remote Papua, one of the poorest provinces of Indonesia, which is beset by a lack of infrastructure such as roads, irrigation systems and electricity.
Indonesia is hoping to transform Merauke into a commodities producing hub known as the Merauke Integrated Food and Energy Estate (MIFEE), and it has been wooing both domestic and foreign investors to invest in the planned production center.
The Binladin Group follows other potential investors looking to invest in Merauke, such as Medco Group, an Indonesian oil and gas company interested in building a pulp-and-paper factory, and International Paper, a U.S.-based company also interested in establishing a paper mill.
While the agriculture ministry has been going full steam in attracting foreign investors to Merauke, local reports said the Ministry of Forestry views the project as problematic.
Local daily Bisnis Indonesia recently cited the forestry ministry as saying it had yet to receive any requests for transforming forest land in Merauke into agricultural plantations.
The forestry ministry said Papua only has permission to convert 40,000 hectares of forest land into plantations.
The agricultural ministry said 1.6 million hectares of land has been earmarked for conversion in Merauke.