27/06/2012 (The Star) - Kalimantan, Sumatra and Papua in Indonesia still offer huge prospects in oil palm ventures both in the upstream and downstream operations for investors but they must carefully mitigate the roadblocks in the Indonesian palm oil industry in order to capitalise on the opportunities.

PT Agro Harapan Lestari head of sustainability Edi Suhardi said investors, among others, would encounter lengthy and uncertain process to obtain permits, licences and approvals from relevant government authorities on company incorporation, land ownership and plantation operational licensing.

“I believe the lengthy process can be mitigated by acquiring smallholders and local plantation companies or concessions, assuming that the locals have obtained the licences,” he said on the final day of the 7th International Planters Conference yesterday.

Currently, the total plantation area under smallholders is over 3.3 million ha of Indonesia’s total oil palm area of about 8.9 million ha in 2011.

According to Edi, the total area with high prospects for oil palm in Kalimantan stood at 10.7 million ha, Sulawesi 361,301ha and Papua 5.9 million ha.

Another roadblock in the republic’s palm oil sector is the governance challenge.

Edi pointed out that the oil palm regulatory environment had been government-heavy with more revoking power and less dispute resolution.

“The regulatory regime gives government officials there unprecedented power to revoke licences. Indonesia has no system in place for typical notification, remedy and appeal procedures,” he added.

In addition, the roadblock that has been felt since May last year by potential oil palm investors both locally and abroad is when Indonesia imposed a forest moratorium, in which no licences grants were to be issued for about 64.2 million ha for two years. — By HANIM ADNAN

Edi also said the Indonesia palm oil industry also suffered from external threats without substantial help from its government.

Such growing negative sentiments were from foreign based environmental non-goverment organisation and also negative health campaigns from using palm based vegetable oil, he said adding that; “There were no substantial campaigns supported by the Indonesian government to counter attack like what the Malaysian Government does for its industry.”

Edi said the growing recognition of certified sustainable palm oil could be a viable option for avoiding such “black campaign” against investment in Indonesia.

“There is also limited supply of high quality oil palm seeds from the government’s palm seeds institutions. Once again Malaysia provides more encouraging example and Malaysian companies seeking business in Indonesia should provide their own quality seeds,” he said.

Edi also cited the foreign investors/companies difficulties with local communities whereby the Indonesian government’s help was difficult to obtain and companies are left alone in the field.

However, he pointed out that this could be the venue where alliance with local firms and professional advisors can be a valuable option to mitigate the difficulties.