16/06/2008 (Nine MSN) - Sime Darby, the world's largest listed oil palm landowner, is set to diversify "in a big way" into rice production, according to its chairman.

Musa Hitam said on Monday that the Malaysian company would start by growing rice on 7,000 hectares of land in the Malaysian state of Sarawak.

He suggested that Sime was likely to expand its rice activities further ? depending on how much more land was made available by the authorities ? without setting a target. "If you are looking for one item that Malaysia needs badly and I'm very enthusiastic about, it's rice," he said.

The expansion into rice is in line with the government's attempt to increase production of Asia's most important staple following a surge in world rice prices and the fact that Malaysia relies on imports for about 30 per cent of its annual rice consumption. However, Mr Musa insisted that the government-controlled company's rice production plans were motivated by business rather than political considerations.

"I have done enough national service," said Mr Musa, who is also a former Malaysian minister. "This is something that we can really contribute to society for local consumption, unlike palm oil which is for world production, but we must ensure that it is viable and profitable."

He expressed confidence that Malaysia could successfully develop its rice production, which now stands at about 1.6m tonnes a year.

He said: "If you look at our history, we have been doing nothing but diversification in our economic base. We started by being number one in the world in rubber and tin, then we used that money to diversify into palm oil?.?.?.?Now it is time for us to go back to basics, in a manner of speaking, because food production is the most important item for any country like ours."

Mr Musa was speaking on the sidelines of a regional meeting of the World Economic Forum.

Mr Musa added that Sime remained committed to developing its palm oil business, both in Malaysia and overseas, and would not drop out of producing biofuel from palm oil.

He said: "The price of edible palm oil has gone up so much that the early excitement of turning it into biofuel has practically gone. But I have not been in favour of abandoning completely the idea of turning palm oil into biofuel." -Financial Times-