18/09/2012 (Jakarta Globe) - A senior Indonesian minister says the government should limit foreign ownership in crude palm oil plantations to encourage local participation in the sector.

Hatta Rajasa, the coordinating minister for economics affairs, said the government was encouraging CPO producers owned by foreign investors to boost the contribution of “plasma” planters, which are plantation areas usually owned by small local landowners who supply to CPO companies.

“The plasma scheme must be pushed forward, as it empowers the locals in the sector,” said Hatta, a close ally to President Susilo Bambang Yudhoyono.

According to government data, foreign investors control around 8.9 million hectares of CPO plantations in Indonesia, equivalent to 40 percent of total CPO plantation available. Control occurs through subsidiaries, joint ventures and in some instances, direct ownership.

The biggest investors that control Indonesian palm oil plantations are from Malaysia. Between them, they oversee 3 million hectares.

Bambang Aria Wisena, a director at Bakrie Sumatera Plantations, a CPO plantation unit of the Bakrie Group, said the government should shift the focus of foreign investment to the downstream sector, which requires large investment.

But Fadhil Hasan, the executive director of the Indonesia Palm Oil Producers Association, disagreed.

He said the downstream sector was capital intensive but not labor intensive, particularly in oleochemical factories that process CPO.

“For example, an oleochemical plant typically only needs 25 to 30 people, whereas, if we let foreigners to invest in the upstream sector, it could absorb thousands of workers [from plantation],” Fadhil said.