IOI Corp ramps up risk screening for Indonesian investments amid land grab concerns

PUTRAJAYA (Nov 4): IOI Corp Bhd (KL:IOICORP) will conduct more rigorous risk assessments before undertaking new investments or land acquisitions in Indonesia, according to its managing director and chief executive officer Datuk Lee Yeow Chor.

This decision stems from growing concerns over Indonesia’s large-scale land seizures, primarily targeting oil palm plantations and mining areas allegedly operating without proper permits, Lee told reporters on Tuesday after the group’s annual general meeting.

IOI Corp is currently unaffected by the Indonesian government’s actions, Lee said.

“There was a gazette announcement by the [Indonesian] government in March this year. I think there were many companies listed there (affected by the land seizure). Fortunately, our company was not listed — that means we are safe from this. But of course, we will undertake more risk assessments on that front, given the Indonesian government’s policies in this area,” he said.

Despite these crackdowns on illegal land use, Indonesia remains an attractive investment destination, Lee said. He also noted that the seizures have affected only a minimal fraction of plantation companies’ total planted areas.

“So far, we still see Indonesia as an investor-friendly country. Even these actions on plots of land planted within gazetted forest reserves only affect a very small portion of plantation companies’ total planted areas. In most cases, it’s less than 1% or 2%,” he said.

“In any business, there will always be risks. What’s important is that we have a rigorous risk management framework — we go in with our eyes wide open. And due diligence is very important,” he added.

He also shared that the group has a threshold it "won’t go beyond" for high-risk investments. "But naturally, in a riskier area, we would expect higher risk-adjusted returns, because the returns should reflect the level of risk we’re taking,” he said.

According to IOI Corp’s latest annual report, the group’s plantation land bank in Indonesia totals about 26,444 hectares, spread across four estates in West Kalimantan.

The integrated palm oil group also holds an indirect 32.1% stake in Bumitama Agri Ltd, which is involved in oil palm cultivation and milling in Indonesia.

Shares of IOI Corp closed down three sen or 0.74% at RM4.04 on Tuesday, valuing the group at RM25.46 billion.