Increasing regulatory risks in Indonesia could prompt some plantation companies to scale back or exit their operations over the longer term following a wave of large-scale land seizures, New Straits Times reported Malaysia-based Public Investment Bank (PublicInvest) as saying.
In the week before the 16 July report, Indonesian authorities had confiscated 394,547ha of plantation land in Central Kalimantan and Riau, as well as North and South Sumatra.
Previously controlled by 232 companies, the land had been transferred to Agrinas, a state-owned company established in early 2025 under the administration of President Prabowo Subianto, New Straits Times wrote.
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 had set a target to reclaim up to 3M ha of plantations believed to be illegally operating within forest areas by August, the report said.
Following the latest seizures, Agrinas controlled approximately 833,000ha of plantation land, making it one of the largest plantation operators globally.
According to PublicInvest data, several local plantation companies have given up 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,” the bank was quoted as saying.
The firm also said the move was a potential long-term environmental, social and governance risk and could lead to companies being more cautious about replanting activities.
In addition, the company said it was also concerned the military-led enforcement in plantations could exacerbate the declining trend in Indonesian palm oil production, as there were doubts over the state’s ability to manage these plantations effectively.
“Based on our rough forecast, if 50% of the entire seized 833,000ha plantation remains unproductive, the annual palm oil production could decline by about 4% or 1.7M tonnes,” it said.
