Indonesia's new agrarian law adds regulatory uncertainty for Malaysian plantation firms

Indonesia's parliament recently passed an Agrarian Reform Law intended to redistribute land, resolve agrarian disputes and establish a dedicated agency for land reform. The legislation mandates that holders of cultivation rights allocate at least 20 percent of their land for reform or meet the requirement through profit-sharing, and it will later set limits on landholdings. Malaysian plantation companies with significant Indonesian operations, including SD Guthrie, Kuala Lumpur Kepong and Genting Plantations, could encounter added regulatory risk under the new framework.

However, analysts note that the precise effect on profits or assets cannot be assessed until detailed regulations are finalized. Despite the uncertainty, the analyst maintains an overweight stance on the sector, citing opportunities in other firms with no Indonesian exposure. The bank also kept its full-year crude palm oil price forecast at RM4,500 per tonne.