Indonesia’s moratorium to be big blow for late entrants to plantations

The government will also evaluate long-standing permits that have been issued but not yet implemented, including permits issued despite plantations being in forest areas. — AFP photo

KUCHING: Indonesia’s moratorium on plantation permits will be negative to those who are late entrants in the country’s plantation industry.

According to a Reuters article, Indonesia’s government issued a presidential instruction to place a moratorium on new permits for palm plantations for three years, as part of efforts to protect forests, a presidential official said on Friday.

“The latest rule on palm plantations also includes freezing new permits that are currently being processed,” the article read.



“The government will also evaluate long-standing permits that have been issued but not yet implemented, including permits issued despite plantations being in forest areas, the document showed.

“An industry body said the new measure could cause problems for some palm companies if their existing permits were evaluated based on the more recent government plan.”

On this latest development, the research arm of Public Investment Bank Bhd (PublicInvest Research) opined that the new policy could bring negative impacts to those plantation players who are relatively new or those with significant plantable landbank in Indonesia as their plantation would be halted.

“We think the new implementation would be a big blow for those who are the late entrants in Indonesian plantation industry.

“It will also help slowdown the fresh fruit bunch (FFB) production growth going forward,” PublicInvest Research said.

That said, PublicInvest Research did not see any significant impact for the plantation companies under its coverage, as majority of them have almost fully planted their landbank in Indonesia.

The research arm noted that TSH Resources Bhd, which has closed to 90 per cent of its plantation landbank in Indonesia, has already slowed down their new planting activities with less than 500 hectares (ha) per annum (pa) since few years ago.

Bhd, our top pick, is the only plantation company that is not affected by the policy, as they have no exposure in Indonesia.”



Overall, PublicInvest Research believed the three-year ban policy would temporarily help ease the rising pressures from environmentalists and European Union (EU) groups.

As mentioned earlier, the temporary ban would also slow down the Indonesian FFB production growth
going forward, which the research arm noted helps provide support for palm oil prices and ease the over
supply concerns in the future.

“Indonesia, which accounts for 51.7 per cent of global palm , is expected to see a rise of 5.5 per cent year on year (y-o-y) to 38.5 million metric tonnes (MT) this year.

“The moratorium is likely to bring down the average crude palm oil (CPO) production growth from 2020 onward, which initially projected to grow at a mere three per cent.”

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Source: Borneo Post Online





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