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Source: Reuters

Indonesia says degraded land key for palm expansion

Published: 01 Jun 2010 04:19:09 PST

* Six million hectares of degraded land available for estates

* Crude palm oil output of 40 million t by 2020 achievable

* Planters say climate deal puts industry in unfair position

YOGYAKARTA, Indonesia June 1 - Indonesia's palm oil industry can grow via acquisitions of six million hectares of degraded land across the archipelago, a government official said on Tuesday, in a bid to allay concerns of slowing expansion.

Planters in the world's largest palm oil producer are increasingly worried over Indonesia's plans to revoke forestry licences to palm oil firms as part of a $1 billion climate change deal signed with Norway.

Didiek Goenadi, a senior official with Indonesia Investment Coordinating Board, said forests and peatlands that hold large carbon reserves can still be preserved while giving planters an option to swap out to degraded land.

"We can help save forests and achieve our target of 40 million tonnes of crude palm oil by 2020. It is achievable," Goenadi told an industry conference in the historic city of Yogyakarta.

Industry watchers say a decade of aggressive expansion has pushed oil palm acreage to 7.9 million hectares last year although Goenadi put the country's total acreage at a much lower 6.8 million hectares.

He did not say where the six million hectares for expansion would come from but pointed out that Kalimantan on Borneo island and Papua province had sufficient land for the country to achieve its 10 million hectare oil palm estate target in 10 years.

Green groups contend that these two regions face the highest rates of deforestation by open burning, practices that pump vast amounts of global warming emissions into the atmosphere and speed up climate change.

INDUSTRY WORRIED

Planters say government promises of degraded land and compensation in exchange for cancelling their forests concessions could put the industry, worth $15 billion in terms of export sales, in an unfair position.

"The degraded land might just already belong to someone else and we could get a plot of land that has poorer soil quality in exchange," said an Indonesian planter from Kalimantan who declined to be named due to the sensivity of the issue.

"Also, these could just be patches of unwanted land scattered all over the area. We won't be able to achieve economies of scale if that happens."

The government's proposal to allocate a percentage of $1 billion fund from Norway for compensation may not be enough to recoup from initial investment into forested land, planters say.

This year top planters like Singapore listed Wilmar and Malaysia's Sime Darby were gearing up to expand and plant in new concessions across Indonesia as land prices soften from record $15,000-$20,000 a hectare in 2008. ($1=3.295 Malaysian Ringgit)

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