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29 Jul 2013
Plantation Business Sectors, Its Obtacles


Couple of months ago, in an occasion of transaction signing, a managing partner from law office from Malaysia and I had an interesting conversation about business opportunity deals in Indonesia. He stated that nowadays, more and more investors talk about Indonesia and he’s just wondering how tremendous is Indonesia to attract foreign investor to engineer their money throughout many business sectors in Indonesia. Yet, we both were aware of bureaucracy procedure and policy which in practice, it somehow is contrary to business interest, especially in time-frame. Yes, time does matters. Nevertheless, there always be a hundred chance in one, yeah, few obstacles. Then, what makes they interested in? We concluded that energy and natural resources are numbers of catchy sectors in Indonesia. Particularly to this article, Plantation, call it one, crude palm oil.


Unfortunately, the issuance of Presidential Instruction No. 10 of 2011 concerning Suspension of New Permit Granting and Completion of Primary Natural Forest and Peat land Governance raises lots of cons from the oil palm investors and producers include our Ministry of Agriculture where this instruction suspends any new permits grant in the area of primary natural forest and peat land. This instruction derived from Letter of Intent between Indonesia and Norway for the purpose, among others, Indonesian commitment to reduce emission rate up to 26%. This moratorium only protects energy resources sectors such as geothermal, oil and gas, and electricity, and provision of rice and sugarcane land. So what about other sectors? What about palm oil industry sector? It will contradict to Minister of Agriculture target to increase production of Palm Oil on year 2020 shall reach 50 million ton, and to Ministerial Regulation No.14/Permentan/PL.110/2009 concerning Guidelines for Utilization of Peat land to Palm Oil Cultivation. Furthermore, this instruction does not regulate utilization of degradated forest to economic purpose. Whereas, degradated forests are potential to be used as next palm oil plantation and industries development in Indonesia.


Well, now, Minister of Agriculture stated in one of Indonesian daily newspaper that the focus of the palm oil plantation and industries is likely changed, to develop the existing palm oil plantation permits. Many companies in Indonesia then increase its status to become foreign investment company to obtain injection of capital and enjoy various fiscal facilities. Thus, foreign investors come join to this sector by virtue of joint-venture company structure from the existing company. In Plantation Business Sectors, a company must obtain Technical Recommendation for the purpose of Investment, both foreign and domestic investment. As industries, palm oil shall need lots of equipments, machines, and human resources to build and develop its plants and factories. This will need huge capital on importing such machines and other equipments. These are the benefits that Foreign or Domestic Investment Company can enjoy. Technical Recommendation is pursuant to Article 44 Minister of Agriculture No. 26/Permentan/OT.140/2/2007 concerning Guidelines of Plantation Business Permit.

The issuance of Technical Recommendation shall dependant on how complete the documents that a Company submits. According to our experience, the Technical Recommendation is issued after all Assesment Team in the Directorate General of Plantation in Ministry of Agriculture conducted comprehensive due assesment to all aforementioned documents and in practice, it shall require a month to obtain such Technical Recommendation.

However, main issue here, is that how Indonesian Government could ensure level of legal certainty. We’ll see how this moratorium issues will go on.

Niken Nydia Nathania

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