FGV plans Philippine venture after peace deal

KUALA LUMPUR: (Reuters) -- Felda Global Ventures Holdings Bhd (FGV), the world's largest crude palm oil producer, is the first foreign investor to evince interest in the southern Philippines after Manila agreed on a historic peace deal with rebels, potentially opening up tracts of farm land.

The Philippine government and Moro Islamic Liberation Front rebels agreed on Sunday on a pact to end 40 years of conflict in the impoverished southern region of Mindanao.

Officials have cautioned that the deal is only a first step as the two sides need to thrash out details on the scope and powers of a new autonomous region.

Conflict-wracked Mindanao has the most suitable land in the Philippines for oil palms, said Datuk Sabri Ahmad, chief executive officer of cash-rich FGV.

"We will go there for oil palms," he said here yesterday. "There is ample area for oil palms to meet strong local demand," he added.

Felda Global had a US$3.1 billion (RM9.52 billion) listing earlier this year, at the time the largest in the world after Facebook's IPO, and had said it planned to use the funds to expand in Southeast Asia and Africa.

The fighting in Mindanao has deterred any widespread foreign investment in the agriculture and mineral-rich region.

Despite the natural resources, the Philippines imports more than 500,000 tonnes of crude palm oil a year to meet strong local demand for the product, used mostly for cooking.

While Sabri did not give an estimate for how many hectares Felda Global was looking to develop, he said plantation companies would need to invest in at least 10,000ha to gain economies of scale. "We would have to look at building up the infrastructure. It will have to be a holistic approach," he said.

Mindanao has about one million hectares of grasslands, equivalent to the size of Puerto Rico, that can be turned into oil palm estates, the Philippines Palm Oil Development Council (PPDCI) has estimated.

The southern Philippines could become the next destination for land-hungry companies like Malaysia's Sime Darby and Singapore-listed Wilmar, which have struggled with environmental restrictions in top palm oil producer Indonesia and harsh weather conditions in Africa.