Profit crops

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Minister of Land Development
Sarawak's Minister of Land Development YB Tan Sri Dr James Jemut Masing with Inside Investor's Sara Garcia Arjona (left) and Marta Molina.

Sarawak’s Ministry of Land Development is responsible for planning, coordination and monitoring of rural development programmes for commercially unused land. Inside Investor talked with YB Tan Sri Dr James Jemut Masing, Minister of Land Development, about the concept, the challenges and the objectives of land development in the state.

Q: What are the current challenges in land development in Sarawak and what is the policy of your ministry in addressing it?

A: The challenges are basically the accessibility of the land, as most is quite far away from the urban centers. We have about 1.5 million hectares of native land, most of which is in the interior of the state. Unless we have accessibility, we cannot develop and utilise the land. That means that infrastructure development is crucial before the land can be utilised for commercial purposes.

Q: Do you think that enough is being done to create better infrastructure?

A: There are regions which are accessible, but we need to construct more infrastructure. Another problem for agricultural activities is the terrain. Parts of the land are not suitable for farming per se – for example for planting palms – as the terrain is very rough. This means we have to think about what other crops can be planted and harvested there. However, my ministry is mainly tasked to plant oil palms, but if I get investors who are willing to shift to other crops, we will support them.

Q: What are the targets for the oil palm industry in Sarawak?

A: At the moment, we have 1.2 million hectares of oil palm plantation. My target for 2020 is to add another 800,000 hectares to make it two million hectares in total. We have the land to do it, but currently we don’t have the roads to access these areas. We aim to get cash-rich investors who look for land and team them up in joint-ventures with the land owners to develop native land. In such a joint venture, the ownership of 60 per cent will be with the investor, and 30 per cent will be with the land owners. The rest is held by the government managing agent. This agent will be the referee to mediate between the two parties.

Q: How receptive are the native land owners to this concept?

A: They have been receptive and understand the need to develop their land. In case of a joint venture, the land will be with the investors for 60 years. The main issue here is how to make it profitable for both parties, a win-win situation must be established.

Q: How does the process work for a foreign investor to set up a land development?

A: The investor comes in and brings his money for the 60 per cent ownership. All development costs will be with him. The land owners put their land in for free in order to get the 30 pre cent equity in the joint venture. However, the land cannot be used as collateral for the bank.

Q: How has been the investor interest so far?

A: It’s good, but we have to find out who are the most suitable investors. We need to know if they have the technology to do it and if they have the money. Most of the interested investors are local companies.

Q: Could you give more details about the joint venture concept?

A: When the investor comes in, the government managing agent will approach the native land owners and ask them if they want to participate. If yes, an agreement is signed and they set up the joint venture company. There will be an advance payment to the land owners, because it takes three to four years before the first crop is harvested. Therefore, the land owners receive $120 upfront for each acre they put into the joint venture. Another $600 per acre is paid into a trust fund for five years and earns interest. The rest will be taken as the equity of the joint venture, representing the value of the land. This means, the upfront investment for the investor is $720 per acre in total. It’s a 60-year period because the life span of an oil palm is 25 years, so we ensure that the investors can reach two planting seasons and get money out of their venture.  After 60 years, the NCR (Native Customary Rights) land owners may continue with the joint venture if they wish using the same principles.

Q: Does that mean that foreigners can own land in the state?

A: During these 60 years, foreigners own the land through the joint venture company. They do not own it directly.

Q: What would be your advice for foreign investors who look for investments with good returns?

A: Well, the return of course depends on the global price of the palm oil.  An investor can approach us and we will talk about what aspect of investment he is interested in and we will work out ways for him to participate. We mainly want to develop  NCR land to eradicate poverty in the native regions. NCR land is land in which natives have customary rights, whether communal or otherwise. These land has been lawfully created prior to 1958 through felling and clearing of virgin jungle. There are 1.5 million hectares of such NCR land in the state. Of this, 1.5 million hectares land bank, 800,000 hectares are plantable. An investor is shown the land, and if he agrees, discussions start of how to establish a joint venture.

Q: What is the strategy in involving rural communities in issues regarding land ownership and development?

A: For many NCR lands there is no title, so we need to do surveys to identify who are the owners and thus establish the land ownership. The participating land owners will have to have some kind of documentation to identify their land holdings.

Q: What are the actual costs for land development?

A: For rural oil palm developments, the costs for one hectare is between RM15,000 to RM20,000 from clearing to planting and until the first harvest.

Q: What alternative crops are plantable?

A: We have very established pepper growers in the state.  We are also looking into vanilla, but for the moment, we don’t have enough expertise on this crop.

Q: How do you balance the interests of private companies, landowners and communities?

A: Before anything happens, there is a lot of dialogue between the investors and the NCR land owners. The profit for palm oil is quite good at the moment. As I said, we grant investors two planting cycles, of which the first cycle would be to cover  the  cost of the initial investment, and the second round will be profitable, because by the time of the second planting, the entire infrastructure should have been completed. So the joint venture could be quite profitable. An important thing is to convince the rural people to develop their land. The NCR people are very conservative in their thinking, new ideas are not very well accepted, and we have to prove to them that such ideas are good for their community. We must at the same time tell them that profit depends on the economic climate at any time. The concept of land ownership, as a spin-off of developing their NCR land, is increasingly accepted by NCR land owners. They also realise that their land will be made accessible after an investor comes in.

Q: What has been your biggest achievement so far in your term as minister?

A: I have managed to convince NCR land owners of the advantages of developing their land and how to make it profitable. Unless they develop their land, it just remains a piece of dirt which does not generate any profit to them as land owners. My officers are constantly on the ground to identify suitable NCR land to be develop.

Q: What are the roles of the agencies under the ministry?

A: There are two, the Sarawak Land Development Board (SLDB) and the Sarawak Land Consolidation & Rehabilitation Authority (SALCRA). This is a different concept from the private joint ventures we were talking about. While private joint ventures use private funding, the agencies use public funds for their development operations, and these funds have limited resources. SLDB’s task is to develop unproductive land in order to improve the socio-economic conditions of the rural poor, and SALCRA’s task is to rehabilitate NCR land for  the benefit of rural communities.

Q: What would be your core message to our readers?

A: Sarawak has a lot of land to develop, not only for cash crop, but also for food crop. My prediction is that food crop will become a very important item in the years to come, as the demand for food is growing worldwide. We in Sarawak provide a good investment climate for investors, as the government is very stable and the regulations and laws for land development are favourable to foreign investors.

 

 

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Reading Time: 6 minutes

Sarawak's Minister of Land Development YB Tan Sri Dr James Jemut Masing with Inside Investor's Sara Garcia Arjona (left) and Marta Molina.

Sarawak’s Ministry of Land Development is responsible for planning, coordination and monitoring of rural development programmes for commercially unused land. Inside Investor talked with YB Tan Sri Dr James Jemut Masing, Minister of Land Development, about the concept, the challenges and the objectives of land development in the state.

Reading Time: 6 minutes

Minister of Land Development
Sarawak's Minister of Land Development YB Tan Sri Dr James Jemut Masing with Inside Investor's Sara Garcia Arjona (left) and Marta Molina.

Sarawak’s Ministry of Land Development is responsible for planning, coordination and monitoring of rural development programmes for commercially unused land. Inside Investor talked with YB Tan Sri Dr James Jemut Masing, Minister of Land Development, about the concept, the challenges and the objectives of land development in the state.

Q: What are the current challenges in land development in Sarawak and what is the policy of your ministry in addressing it?

A: The challenges are basically the accessibility of the land, as most is quite far away from the urban centers. We have about 1.5 million hectares of native land, most of which is in the interior of the state. Unless we have accessibility, we cannot develop and utilise the land. That means that infrastructure development is crucial before the land can be utilised for commercial purposes.

Q: Do you think that enough is being done to create better infrastructure?

A: There are regions which are accessible, but we need to construct more infrastructure. Another problem for agricultural activities is the terrain. Parts of the land are not suitable for farming per se – for example for planting palms – as the terrain is very rough. This means we have to think about what other crops can be planted and harvested there. However, my ministry is mainly tasked to plant oil palms, but if I get investors who are willing to shift to other crops, we will support them.

Q: What are the targets for the oil palm industry in Sarawak?

A: At the moment, we have 1.2 million hectares of oil palm plantation. My target for 2020 is to add another 800,000 hectares to make it two million hectares in total. We have the land to do it, but currently we don’t have the roads to access these areas. We aim to get cash-rich investors who look for land and team them up in joint-ventures with the land owners to develop native land. In such a joint venture, the ownership of 60 per cent will be with the investor, and 30 per cent will be with the land owners. The rest is held by the government managing agent. This agent will be the referee to mediate between the two parties.

Q: How receptive are the native land owners to this concept?

A: They have been receptive and understand the need to develop their land. In case of a joint venture, the land will be with the investors for 60 years. The main issue here is how to make it profitable for both parties, a win-win situation must be established.

Q: How does the process work for a foreign investor to set up a land development?

A: The investor comes in and brings his money for the 60 per cent ownership. All development costs will be with him. The land owners put their land in for free in order to get the 30 pre cent equity in the joint venture. However, the land cannot be used as collateral for the bank.

Q: How has been the investor interest so far?

A: It’s good, but we have to find out who are the most suitable investors. We need to know if they have the technology to do it and if they have the money. Most of the interested investors are local companies.

Q: Could you give more details about the joint venture concept?

A: When the investor comes in, the government managing agent will approach the native land owners and ask them if they want to participate. If yes, an agreement is signed and they set up the joint venture company. There will be an advance payment to the land owners, because it takes three to four years before the first crop is harvested. Therefore, the land owners receive $120 upfront for each acre they put into the joint venture. Another $600 per acre is paid into a trust fund for five years and earns interest. The rest will be taken as the equity of the joint venture, representing the value of the land. This means, the upfront investment for the investor is $720 per acre in total. It’s a 60-year period because the life span of an oil palm is 25 years, so we ensure that the investors can reach two planting seasons and get money out of their venture.  After 60 years, the NCR (Native Customary Rights) land owners may continue with the joint venture if they wish using the same principles.

Q: Does that mean that foreigners can own land in the state?

A: During these 60 years, foreigners own the land through the joint venture company. They do not own it directly.

Q: What would be your advice for foreign investors who look for investments with good returns?

A: Well, the return of course depends on the global price of the palm oil.  An investor can approach us and we will talk about what aspect of investment he is interested in and we will work out ways for him to participate. We mainly want to develop  NCR land to eradicate poverty in the native regions. NCR land is land in which natives have customary rights, whether communal or otherwise. These land has been lawfully created prior to 1958 through felling and clearing of virgin jungle. There are 1.5 million hectares of such NCR land in the state. Of this, 1.5 million hectares land bank, 800,000 hectares are plantable. An investor is shown the land, and if he agrees, discussions start of how to establish a joint venture.

Q: What is the strategy in involving rural communities in issues regarding land ownership and development?

A: For many NCR lands there is no title, so we need to do surveys to identify who are the owners and thus establish the land ownership. The participating land owners will have to have some kind of documentation to identify their land holdings.

Q: What are the actual costs for land development?

A: For rural oil palm developments, the costs for one hectare is between RM15,000 to RM20,000 from clearing to planting and until the first harvest.

Q: What alternative crops are plantable?

A: We have very established pepper growers in the state.  We are also looking into vanilla, but for the moment, we don’t have enough expertise on this crop.

Q: How do you balance the interests of private companies, landowners and communities?

A: Before anything happens, there is a lot of dialogue between the investors and the NCR land owners. The profit for palm oil is quite good at the moment. As I said, we grant investors two planting cycles, of which the first cycle would be to cover  the  cost of the initial investment, and the second round will be profitable, because by the time of the second planting, the entire infrastructure should have been completed. So the joint venture could be quite profitable. An important thing is to convince the rural people to develop their land. The NCR people are very conservative in their thinking, new ideas are not very well accepted, and we have to prove to them that such ideas are good for their community. We must at the same time tell them that profit depends on the economic climate at any time. The concept of land ownership, as a spin-off of developing their NCR land, is increasingly accepted by NCR land owners. They also realise that their land will be made accessible after an investor comes in.

Q: What has been your biggest achievement so far in your term as minister?

A: I have managed to convince NCR land owners of the advantages of developing their land and how to make it profitable. Unless they develop their land, it just remains a piece of dirt which does not generate any profit to them as land owners. My officers are constantly on the ground to identify suitable NCR land to be develop.

Q: What are the roles of the agencies under the ministry?

A: There are two, the Sarawak Land Development Board (SLDB) and the Sarawak Land Consolidation & Rehabilitation Authority (SALCRA). This is a different concept from the private joint ventures we were talking about. While private joint ventures use private funding, the agencies use public funds for their development operations, and these funds have limited resources. SLDB’s task is to develop unproductive land in order to improve the socio-economic conditions of the rural poor, and SALCRA’s task is to rehabilitate NCR land for  the benefit of rural communities.

Q: What would be your core message to our readers?

A: Sarawak has a lot of land to develop, not only for cash crop, but also for food crop. My prediction is that food crop will become a very important item in the years to come, as the demand for food is growing worldwide. We in Sarawak provide a good investment climate for investors, as the government is very stable and the regulations and laws for land development are favourable to foreign investors.

 

 

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