Q+A: Palm oil, growth and Indonesia's forest clearing ban

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Reuters | Wed May 25, 2011

KUALA LUMPUR (Reuters) -- Indonesia, the world's No.1 palm oil producer, signed into law a two-year freeze on new permits converting forests in plantations that may prompt palm oil firms to seek new ways to grow supply to meet rising demand from India and China.

Following are questions and answers on how the $30 billion dollar palm oil industry will deal with the ban:

IS LAND STILL AVAILABLE IN INDONESIA WITH THE BAN IN PLACE?

Yes, there is plenty of degraded and secondary forest in Indonesia. But since there is no fixed definition for degraded land, estimates range widely from six million to 76 million hectares, making it hard to pinpoint land availability.

Palm oil investors say the news of the moratorium will push up land prices in Kalimantan province on Borneo island by 20 to 30 percent on the perception of scarcer and more expensive land -- with costs seen at about $4,500-$7,000 per hectare depending on location and suitability for cultivation.

WILL THERE BE CONSOLIDATION IN THE PALM OIL SECTOR?

Probably. Palm oil firms may follow in the footsteps of Singapore's Wilma, the world's largest listed planter, which last year bought a strategic stake in Kenyan Agric to gain access to Kenyan's largely unplanted land bank in Indonesia.

An outright acquisition of a listed planter may be difficult. Valuations for Indonesian focused planters could be pushed up after the ban as shareholders inflate price tags for business and land, analysts say.

HOW ABOUT BUYING LAND IN AFRICA?

That appears to be the strategy for firms like Malaysia's Sime Darby, the No.1 planter in terms of land assets, Wilma and Singapore's Golden Agric Resources.

All these firms have inked deals to buy African palm oil firms or land concessions with governments over the past year, helping to fuel a land grab in the continent that coincides with Indonesia's plans for the forest clearing ban.

But getting African production up to par with Indonesia and Malaysia could take years as planters face issues related to labor, infrastructure, farming techniques and disputes over land rights with local communities.

($1 = 8537.500 Indonesian rupiah)

(Reporting by Niluksi Koswanage; Editing by Ed Lane and Simon Webb)

Original source: Reuters
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1 Comments


  1. Dr. Olaseinde Makanjuola Arigbede ---- USMEFAN
    03 Jun 2011

    It is easy to agree with our elders who say that: "a war that is announced ahead of hostilities should not kill a crippled person but, it is only the wise-crippled that can be safe". And this is precisely what African leaders have refused to be, 'Generals of armies handicapped by centuries of global subterfuges, bad faith, unrequited injustices, etc., who have a desperate need to lead with profound wisdom in order to overcome deep weakness but are too busy picking at their national treasuries to face the great task of true leadership'. Sometimes it is amazing that these leaders would happily cut their noses to cheat their own faces. To be forewarned, for them, is certainly not to be forearmed but to indulge in self-weakening corruption. Indeed, the scenario predicted in this posting is already playing out in many of our countries, with our own elites, both traditional and so-called modern, acting as gate watchers for plunderers of the homeland. When we attempt to mount actions based on the power of our people to stop this crippling pillage of our patrimony, so-called Global Development Support agencies and organisations actively work against our effort. These saviour organisations, in their determination to save Africa from Africans and their legendary incompetence, come up with RAI (Responsible Agricultural Investment) and other such subterfuges, to hoodwink Africa and make crime wear the garments of salvation! We certainly need a comprehensive rethink, to determine what actions are needed to overcome this gangup that is defended as win-win development cooperation. Clearly, organisations and leaders who think and speak in such plain terms, having been labelled extremists of various kinds, never find resource support to do their work but, do we have to sell our continent for 80 cents/hectare, and sell all of it including our right to food sovereignty, in order to receive some miserable crumbs designed to keep us palliated whilst we are completely ruined? We need to think about this seriously and find alternatives that work for our salvation.

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