Rising regulatory risks may force planters to scale back in Indonesia
Last week, Indonesian authorities confiscated 394,547 hectares of plantation land spanning Central Kalimantan and Riau, as well as North and South Sumatra. The land, previously controlled by 232 companies, has been transferred to Agrinas, a state-owned company established in early 2025 under the administration of President Prabowo Subianto.
The operations were carried out jointly by the Ministry of Environment and Forestry, Ministry of Defence, and the Attorney General's Office. The task force has set a target to reclaim up to three million hectares of plantations deemed illegally operating within forest areas by August.
With the latest seizures, Agrinas now controls approximately 833,000 hectares of plantation land, making it one of the largest plantation operators globally.
With this latest addition, the total plantation area under the Agrinas Group now stands at 833,000 hectares, making the company one of the largest plantation firms in the world.
Based on PublicInvest's channel checks, several local plantation companies have surrendered a small portion of their plantation land to the Indonesian authorities.
"We understand that the impact on their earnings is largely muted. However, this development raises regulatory risks for industry players with significant exposure in Indonesia, which could weigh on their valuations over the long term," it noted.
The firm also views this as a potential long-term environmental, social and governance risk.
Furthermore, PublicInvest said investment in replanting activities is expected to be more cautious, as it may compromise the companies' interests.
The firm added that it is also concerned the military-led enforcement in plantations could exacerbate the declining trend in Indonesian palm production, as there are doubts over the state's ability to manage these plantations effectively.
"Based on our rough forecast, if 50 per cent of the entire seized 833,000 hectares plantation remains unproductive, the annual palm oil production could decline by about four per cent or 1.7 million metric tonnes," it said.
Meanwhile, PublicInvest said the recent surge in crude palm oil prices to over RM4,200 per metric tonne may reignite investor interest in plantation counters.
The firm has maintained a neutral outlook with a full-year crude palm oil price forecast of RM4,200 per metric tonne.
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