September 30, 2014 / 5:17 AM / 4 years ago

Indonesia passes plantations bill, drops clause on foreign ownership

JAKARTA, Sept 30 (Reuters) - Indonesia has approved a plantations bill that aims to maximise land usage and open up the sector to smallholders, a government official said on Tuesday, with a controversial foreign ownership clause dropped from the final version.

The draft of the bill, which was drawn up by members of Indonesia’s parliament, would have retroactively limited foreign ownership of plantations to no more than 30 percent, down from the current maximum of 95 percent.

This had the potential to hurt foreign plantation firms operating in the world’s top palm oil producer, including Golden Agri-Resources, Wilmar International and Sime Darby Bhd.

“The bill has been approved by the DPR (house of representatives) and the government to become law yesterday,” Gamal Nasir, director general of plantations at the agriculture ministry told Reuters.

The article on the limitation of foreign ownership in plantation companies has been removed from the bill, he said, although also indicating it would still be possible to make rules on the issue through government regulation.

The omission of the foreign ownership limits was expected.

Earlier this month, the country’s investment chief said that Indonesia’s outgoing President Susilo Bambang Yudhoyono was against limiting foreign ownership in plantations due to concerns it may expose the government to legal action.

With a new government set to take office on Oct. 20, it is not known whether limiting foreign ownership in the plantations sector will be pursued.

The new law requires plantation companies to allocate 20 percent of their concessions to people who live in the nearby areas and to help them to plant their own plantations, Nasir said.

Companies will have five years to comply with the new law, said Herman Khaeron, an influential lawmaker and vice chairman of the parliamentary committee for agriculture, forestry, fisheries and maritime.

Last year, Indonesia, also a major pulp and paper supplier, introduced a regulation to restrict the plantations of new private palm firms to 100,000 hectares. (Reporting by Yayat Supraitna; writing by Michael Taylor; Editing by Tom Hogue)

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