Sime Darby’s Africa ambitions stall pending new deforestation rules

GBAH, Liberia/KUALA LUMPUR (Reuters) – When Malaysia’s biggest plantation company Sime Darby leased 220,000 hectares of lush forest in northwest Liberia in 2009, executives said they had found a much needed new frontier in global palm oil development.

A worker displays palm fruits at Sime Darby Plantation in Gbah, in Bomi County, Liberia December 30, 2017. REUTERS/Thierry Gouegnon

Undulating hills, a tropical climate and plenty of untouched land made the West African country’s interior ideal for palm oil growers running out of room in Southeast Asia.

Nine years later, however, Sime Darby Plantation has planted only 10,000 hectares in Liberia and has not laid a seed in two years, stalled by uncertainties over new environmental standards.

“We are losing money. We have to balance our books or there is no future,” said David Parker, the head of Sime Darby Plantations in Liberia.

In its earnings report for the financial year ending in June 2017, Sime Darby said it had filed a 202 million ringgit ($51.3 million) impairment – a permanent reduction in the value of the asset – on its Liberia operations.

The operations were “affected by a number of factors, including the Ebola outbreak and more stringent environmental plans that have stalled expansion since 2014”, it said.

The $62 billion palm oil industry is considering whether to adopt new “no deforestation” rules for an oil found on supermarket shelves across the world, from cooking oil to snack food and soups to soaps.

The rules mark a more environmentally friendly form of palm oil development, but leave producers with a major conundrum: how to meet growing demand and make money with so much land now potentially off limits.

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