Wednesday, 1 October 2014

Indonesia - New plantation law limits foreign ownership

The House of Representatives on Monday passed the plantation bill, which sets stricter rules on foreign ownership in the plantation sector so as to prioritize smaller local investors.

The limitation is to have no specific percentage value, although the House’s Commission IV has previously demanded a 30 percent foreign ownership cap.

Instead, the law allows the central government to limit direct foreign investment in Indonesia’s growing plantation sector, notable for its palm oil, of which Indonesia is the world’s number one producer and exporter.

Foreign ownership in the plantation sector will be capped through government regulations (PPs). The limits, according to the new law, are to be based on the type of crop, the size of the producing company and certain geographical conditions.

A strict foreign ownership cap would discourage foreign investment in the upstream plantation sector, but a less stringent one, made general by the new law and specified by a PP, would be acceptable, according to the Agriculture Ministry’s director general for plantations, Gamal Nasir.

“If foreign ownership were restricted to 30 percent, foreign investors would lose interest in investing in Indonesia and would look to other countries with more open investment rules,” said Indonesian Palm Oil Producers Association (Gapki) executive director Fadhil Hasan....

Firms have been given five years to comply with the new law...

Source: The Jakarta Post