Indonesia, Binladin group discussing $4bn rice project

Dow Jones Newswires | Wednesday,13 August, 2008

JAKARTA: Indonesia’s Minister of Agriculture and other senior government officials yesterday said they met with senior members of Saudi Arabia’s Binladin Group to discuss the investment group’s plans to spend at least $4bn developing at least 500,000 hectares of Indonesian land for rice production.

Indonesia’s special envoy to the Middle East, Alwi Shihab, told a news conference after the meeting that the Binladin Group has been tasked by the Saudi government to look into investing in agricultural projects following sharp increases in food prices as a result of high crude oil prices.

Abu Bakar al-Hamid, a board member and executive managing director with the Binladin Group, said the company will conduct a feasibility study of the proposed land area, in the Merauke district of Indonesia’s Papua province, before making their final decision.

“We have been looking at other locations that might be suitable but Indonesia is first on our list,” he said.

Shihab said the company plans to grow Basmati rice, a strain of rice that’s not widely consumed by Indonesians, and that the rice will be mostly exported back to Saudi Arabia.

That might prove controversial as it may be seen as rich nations converting vast tracts of forest land in developing countries to feed their own people over those in the host countries.

Government officials said in July, when another group of Saudi investors announced interest in developing a tract of land in Merauke, that Indonesia will ensure it has enough rice for its domestic market first if it is to allow foreign companies and other countries to use its land to export for their own consumption needs.

Indonesia is one of the world’s largest consumers of rice and in recent years has become a net importer of the commodity due to a lack of investment and loss of agricultural land to urbanization.

Al Hamid said the company will be looking into the feasibility of setting aside some of the rice that will be produced in Merauke for the Indonesian market and exporting the rest, should it decide to invest in the project.

He said the close working relationship between Saudi Arabia and Indonesia, as well as Indonesia’s good agricultural prospects, made the company place the country high on its list of places to invest.

Merauke is located in remote Papua, one of the poorest provinces of Indonesia, which is beset by a lack of infrastructure such as roads, irrigation systems and electricity.

Indonesia is hoping to transform Merauke into a commodities producing hub known as the Merauke Integrated Food and Energy Estate (Mifee), and it has been wooing both domestic and foreign investors to invest in the planned production center.

The Binladin Group follows other potential investors looking to invest in Merauke, such as Medco Group, an Indonesian oil and gas company interested in building a pulp-and-paper factory, and International Paper, a US-based company also interested in establishing a paper mill.

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