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NEWS ADMIN

Mahamad Rodzi Abdul Ghani

DATE

05/04/2001

NEWS PROVIDER

Mahamad Rodzi Abdul Ghani

NEWS SOURCE

NULL

CATEGORY

HEADLINE

INDONESIA WOES CAST DOUBTS ON GUTHRIE PLANTATION D
INDONESIA WOES CAST DOUBTS ON GUTHRIE PLANTATION DEAL

KUALA LUMPUR/JAKARTA, April 5 (Reuters) - Land disputes, demands for agreater share of revenues by local governments and security problems arethrowing into doubt Malaysia's Kumpulan Guthrie Bhd's purchaseof Indonesian oil palm plantations, industry sources said on Thursday.Indonesia said last month the around $370 million deal for 25plantations once owned by the troubled Salim Group had been finally closedafter weeks of delays and repeated calls for the Indonesian BankRestructuring Agency (IBRA) to review the deal.But then last week, Indonesia Finance Minister Prijadi Praptosuhardjoproposed setting up a team to review the sale. He said sale proceeds,which the central bank had planned to spend on buying rupiah to help thebattered local currency, should not be used yet.Analysts say any review would further weaken already waning investorconfidence in the troubled country."We prefer (Guthrie) not to go ahead with the acquisition," said NoorAzwa Mohd Noor, an analyst at KAV Research Sdn Bhd in Kuala Lumpur, inview of the various problems Guthrie is likely to face in Indonesia.Critics have expressed concern the deal would lead to foreigndomination in the country's lucrative palm oil industry. Some even askedfor the deal to be cancelled."If the deal can't be cancelled, Guthrie should be willing to offer 70percent of the shares for (farmers) as promised by Salim when it firstdeveloped the plantations," said Siswono Yudohusodo, chairman of theIndonesian Farmers Association."I am very worried that bigger problems will erupt if Guthrie refusesto do that. This will slap the government in the face," he said inJakarta.Commenting on news of a possible review in the deal, Guthrie said in astatement to the Kuala Lumpur Stock Exchange recently: "We wish toreiterate... the sale and purchase agreements remain valid and binding."

ANY REVIEW FURTHER BLOW TO INVESTOR CONFIDENCESome traders in Malaysia said such a review would further underminewaning investor confidence in crisis-hit Indonesia, the world's secondlargest palm oil producer after Malaysia."This will shake anybody's confidence. Who will come and invest inIndonesia after this," said Nakul Rastogi, international trading managerof Pacific Inter-Link Sdn Bhd in Kuala Lumpur.The Guthrie deal was IBRA's second biggest sale after the $1.8 billionit received from selling its stake in Indonesia's largest car maker, AstraInternational in 1999.Salim was once Indonesia's biggest conglomerate and was headed by aclose associate of former President Suharto, who stepped down in disgraceamid the worst economic and political crisis in decades.The plantations cover 265,777 hectares and are located in Aceh, Jambi,Riau and South Sumatra provinces on Sumatra, central and South Kalimantanand central Sulawesi. Guthrie has 110,000 hectares of palm oil holdings inMalaysia and much of its revenues come from palm oil.Industry sources say one of the main problems Guthrie will face isunresolved land acquisition, in which small farmers claim their land hasbeen taken by politically well-connected plantation companies withoutproper compensation.After Suharto's downfall in 1998, many farmers claimed back their landin sometimes violent clashes with plantation staff, while the economiccrisis sparked widespread looting.Bambang Warih Koesoema of the Social Democratic Union, an organisationdealing with local farmers, warned of more problems."It's time for the government to pay back what it had taken from thepeople. People are now very sick and tired. They are very emotional. Iftheir rights are violated again, you know what will happen," he said.

RIAU DISAPPOINTED"Long before the government decided to sell ex-Salim plantation toGuthrie, I asked IBRA to give a chance for people in Riau to buy theplantations located in Riau," said governor Saleh Djasit."IBRA should have taken the opportunity to improve the welfare of thelocal people by selling (plantations) to them. IBRA ignored this becauseit is obliged to get the money for the state," he said withoutelaborating.Resource-rich Riau has asked Jakarta for a greater share in oilrevenues, and much of the plantation area Guthrie would acquire throughits purchase is located in the province.Some analysts said they also wondered how Guthrie would able to manage todeal with security problems in Aceh, where the military has waged waragainst separatist rebels or in central Kalimantan, where 500 people werekilled in February during ethnic clashes.