Planting in Sabah and Sarawak

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    WHAT are the challenges that Sarawak planters face in terms of peat soil and Native Customary Rights (NCR) land status?

    Wong: We have about 1.6 million to 1.7 million ha in Sarawak that are classified as NCR. That was by definition of law, that land cleared before 1958 has native status. The Government has announced and the Prime Minister has allocated funds to survey the perimeter of this area of land with NCR status – RM90mil has been allocated for this purpose.

    Currently, the challenges faced by investors include the overlapping claims by land various owners. So in Sarawak, for an investor to go into an NCR project, the person has to apply to the Ministry of Land Development (MLD) and the state government’s unit Land Custody and Development Authority (LCDA), which is the managing agent for NCR projects. Once they get it, the perimeter of the land will be surveyed and the investor can move in. So, the challenge is to do the landbank creation during the initial process. And that is with the help from the state through various authorities like MLD and LCDA.

    If investors follow the proper procedure for NCR land development in Sarawak, there should not be major issues because this is an organised scheme promoted by the state government. Based on what the MLD has put up on its website, the area that has been approved is about 400,000 ha for the purpose of NCR land development. To date, about 70,000 ha have been planted with oil palm.

    We do not see many corporations venturing into Sarawak as they have been to Sabah. Any reasons?

    Lee: Sarawak companies have a competitive edge (generally speaking).

    Wong: Actually, there are a few players like Boustead Plantations Bhd, Sime Darby Bhd and Tradewinds Plantation Bhd which have operations in Sarawak. Tradewinds, for instance, has more than 100,000 ha in Sarawak. Lately, Kim Loong Resources Bhd also went in. Therefore, there are companies from the peninsula going into Sarawak.

    But there is a lot of interest in Sabah.

    Tek: There are no longer large scale greenfield lands in Sabah but several relatively large scale brownfield plantation companies were recently offered for sale last year. This include Felda’s purchase of 16,000 ha of Pontian United and IOI’s purchase of 12,700 ha of Unico-Desa involving billions of ringgit. This definitely generated interest in the market.

    This is a merger and acquisition (M&A); you don’t see a huge land sale?

    Tek: If the offer price is too high, you might not see a match. In the acquisitions quoted, they turn out to be successful matching business transactions on “willing buyer, willing seller” basis. The total land size transacted involved, say 30,000 ha transacted, equates to 2% oil palm planted area in Sabah

    Analysts say these two M&As have set a record-high price benchmark for estates in Sabah.

    Tek: The concluded transactions ranging from RM70,000 to RM80,000 per ha were recorded around September-October 2013 against a backdrop of relatively higher CPO price of around RM2,300-plus while negotiations would have been initiated earlier. Any price benchmark set would again have to find a willing buyer subject to due diligence covering many aspects including financial status, land tenure, assets for sale, palm age profile, topography and others.

    Are there any new frontiers for oil palm cultivation apart from Indonesia? Sime Darby Bhd has entered West Africa for instance.

    Yong: At Genting Plantations, our immediate focus for expansion will continue to be in Indonesia for as long as conditions and regulations remain conducive. Of course, we will also keep a close watch on developments in the new frontiers such as in Africa with a view to exploring potential investment opportunities at the appropriate juncture.

    Tek: The planters say one can grow oil palms where it is within plus-minus five degrees north and south of the equator – for good sunshine and rainfall. As such, there are quite many places where you can cultivate oil palm. However, interested agri-companies will need to appraise, among the many factors to be considered, their respective sustainable business strategies, risk appetite, resources and supply-chain including human capital and funding if they wish to chart their corporate investments and embark on a journey into new frontiers.

    Source: The Star Online