This article first appeared in The Edge Malaysia Weekly on July 14, 2025 - July 20, 2025

Last Wednesday (July 9), Indonesia announced that almost 400,000ha of seized oil palm plantations had been handed over to Agrinas Palma Nusantara, the newly established state-owned enterprise that is set to be a major force in the country’s palm oil industry.

Agrinas, formed in January by the government under President Prabowo Subianto, has been entrusted with the management of the oil palm plantations seized for operating illegally in designated forest areas. Its mandate includes boosting food and energy security, supporting Indonesia’s biodiesel programmes and promoting sustainable and transparent plantation practices.

According to a Reuters report, with the latest addition, the total land bank under Agrinas is more than 833,000ha, potentially making it one of the world’s largest oil palm planters.

A few Malaysian plantation companies operating in Indonesia have been affected by this development. In a July 10 report, CIMB Securities flagged Agrinas’ plans to take over or reforest up to three million hectares of oil palm and other crop plantations as a rising regulatory risk for Malaysian companies operating there.

According to CIMB Securities, Indonesian subsidiaries of Genting Plantations Bhd (KL:GENP), Kuala Lumpur Kepong Bhd (KL:KLK) and SD Guthrie Bhd (KL:SDG) were included in a Minister of Forestry Decree listing oil palm companies that were operating illegally in forest areas without permits. These companies were listed as having applied to the Indonesian government to legalise the affected lands.

The regulatory risk could affect the companies’ ESG (environmental, social and governance) scores. The companies are still seeking further clarity on the matter, according to CIMB Securities.

Indonesia has always been a difficult place to do business. Over the years, many Malaysian businesses have ventured over there only to eventually exit, but many more have continued to operate in the country.

Boustead Holdings Bhd, Kulim (M) Bhd and TDM Bhd are among those that have sold their oil palm plantations in Indonesia, citing the tough operating climate and low yielding estates there, among other reasons.

Will Malaysian planters be revisiting the question of exiting Indonesia with this recent development? But given the limited opportunities for land expansion in both Malaysia and Indonesia, as well as the hefty investments made in the palm oil ecosystem in the archipelago, do they really have a choice?

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