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NEWS UPDATES 10 May 2009

Malaysia’s planter to invest in Indonesia

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Kepong, Malaysia’s third largest listed planter, will invest $50 million to lease and develop 20,700 hectares of oil palm and rubber estates in Indonesia, Reuters quoted the firm as saying.

Malaysian planters have rekindled their interest in developing and buying Indonesian palm estates as well as looking as far as West Africa as palm oil prices surge on robust demand and agriculture land at home starts to run out.

KL Kepong will start developing the land in Indonesia’s Sumatra island, following a 30-year joint venture with Indonesia’s state-run PTPN II who owns the rights to the estates along with two palm oil mills and 3 rubber factories.

“This represents ... an opportunity to utilise KL Kepong’s know-how and skills to rehabilitate the assets so as to increase the production...from the current low yields,” KL Kepong said in a filing to the stock exchange.

“The revitalisation of the assets will include replanting at least 40 per cent of its plantations in the immediate term and rebuilding two new oil palm mills.”

Indonesia, the world’s top palm oil producer, yields only about 2 tonnes of crude palm oil per hectare from its plantations, or just a third of the 6 to 7 tonnes in rival Malaysia with better estate management practices, analysts say.

KL Kepong’s joint venture comes as Sime Darby, Malaysia’s largest listed palm oil producer, struck a deal with the Liberian government last week to develop oil palm and rubber estates in the West African country.

Last month, mid-sized Malaysian palm oil firm IJM Plantations said it planned to invest about $43 million to buy 10,000 hectares of plantation land in Indonesia’s Sumatra.










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