ASEAN: Regional Trends in Economic Integration, Export ... - USITC

plantations in the prime growing areas (Indonesia) facilitating industrial integration. 61
This is particularly important for Singapore, which has almost no domestic palm oil
industry other than refining and processing facilities. 62 On the other hand, Malaysia has a
more integrated palm oil industry infrastructure than Indonesia but less land for possible
production expansions because Indonesia has a land mass five times that of Malaysia
(and has a larger labor pool). The majority of the available land in Malaysia has already
been either converted to palm oil production or protected as conservation areas. 63
Among ASEAN countries, Indonesia and Malaysia have more liberal investment rules for
foreign capital in the agricultural sector. They have encouraged investment from ASEAN
(Malaysia, Singapore) and non-ASEAN (China, Japan, Korea) countries. 64 Indonesian
law permits foreign ownership of companies up to 95 percent, which is beneficial for
foreign investors unless they encounter difficulties finding Indonesian partners for the
remaining 5 percent stake, which has occurred. 65 Malaysian law allows complete foreign
ownership of companies with export-oriented production, but has restrictions on foreign
ownership of land, which can hinder foreign investments and industry improvement. 66
Most ASEAN countries, though, significantly restrict the investment of foreign capital in
agriculture. Restrictions range from bans on foreign ownership of land (such as palm oil
plantations) to requirements for majority local ownership of manufacturing facilities
(such as palm oil refineries). The tabulation below reflects the general restrictions on land
and facilities investment by ASEAN countries:
61 USITC, hearing transcript, February 3, 2010, 37–38 (testimony of Rosidah Radzian, Embassy of
Malaysia); industry representatives, interview by USITC staff, Jakarta, Indonesia, March 2, 2010; Sime
Darby Plantation, “South East Asia,” 2008; industry representatives, interview by USITC staff, Kuala
Lumpur, Malaysia, March 12, 2010.
62 Industry representatives, interview by USITC staff, Kuala Lumpur, Malaysia, March 12, 2010.
63 USITC, hearing transcript, February 3, 2010, 13, 34–35 (testimony of Rosidah Radzian, Embassy of
Malaysia); Malaysian Palm Oil Council, “Oil Palm: Tree of Life,” 2006, 10; industry representatives,
interview by USITC staff, Kuala Lumpur, Malaysia, March 12, 2010; BACP, “Market Transformation
Strategy for Palm Oil,” May 1, 2008, 13. The cross-border investment figures in the table above do not reflect
Indonesian domestic investment on palm oil projects, which would be expected to be much greater in
monetary terms than its investment throughout ASEAN.
Investment facilitation in certain ASEAN countries’ palm oil industries can occur at a very local level, as
evidenced by 2009 requests made to the Small & Medium Enterprises Development Cluster of the East
ASEAN Growth Area (EAGA), a subregional economic cooperation initiative, by a Philippines economic
development council. Brunei Indonesia Malaysia Philippines East ASEAN Growth Area (BIMP-EAGA),
“Report of the 9th Small & Medium Enterprises Development (SMED) Cluster Meeting,” 2009, 7. See
BIMP-EAGA, http://www.bimpbc.org.
64 Industry representatives, interview by USITC staff, Jakarta, Indonesia, March 2, 2010; industry
representative, interview by USITC staff, Singapore, March 5, 2010.
65 Industry representative, interview by USITC staff, Washington, D.C., February 18, 2010.
66 One industry representative indicated that the Malaysian government recently opened a new sector for
foreign investment but capped foreign ownership at 49 percent. Industry representative, interview by USITC
staff, Singapore, March 5, 2010.
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