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News Admin
 
Date
 09/05/2007
News Provider
 Mahamad Rodzi Abdul Ghani
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Headline
 Indonesian estates may gain from cess move

7/5/07 (NSTP) - The Government's decision to make oil palm estate owners fully subsidise losses suffered by cooking oil manufacturers as a result of high palm oil prices is unlikely to significantly impact big players' earnings.

However, it may cause more investment to flow out to Indonesian plantations.

"The Government's decision is unlikely to materially impact earnings of the big boys," Aseambankers equity reseach plantation stock analyst Ong Chee Ting said.

Another local analyst, however, felt that the Government's decision was counter-productive.

"Basically, it is taking away money that can be invested into developing Malaysian plantations, which have been under-invested for a very long time. It'll further erode Malaysian producers' advantage over Indonesia," said the analyst, who asked not to be named.

"Malaysian palm oil producers are already paying RM4 per tonne of crude palm oil (CPO) to MPOB (Malaysian Palm Oil Board). Sabah planters are taxed 7.5 per cent of CPO selling price, while in Sarawak it is 5 per cent. With this additional cess, planters in Malaysia will lose out to Indonesia.

"In Indonesia, planters don't need to pay such tax. I won't be surprised if there is more investment outflow into plantations in Indonesia as it will be more worthwhile for the big boys owning more than 100,000ha," the analyst said.

Over the weekend, Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui announced that starting June 1, oil palm estate owners will have to bear the full brunt of MPOB's cess to subsidise losses incurred by cooking oil manufacturers.

Smallholders owning 40ha or less, however, will be spared.

"This time, it will be a little bit different from (the action taken in) 1999 and 2004.

"The Cabinet is taking a compassionate

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