Sime Darby Plantation executes 63-year Concession Agreement for 220,000 ha of land in African republic

MONROVIA, 4 May 2009 - Sime Darby Plantation Sdn Bhd has cemented its first African plantation deal, following the execution of an Amended and Restated Concession Agreement (CA) with the Government of the Republic of Liberia.

The CA carves out approximately 220,000 hectares of land in several counties in the African republic, namely Bomi, Grand Cape Mount, Gbarpolu and Bong for both oil palm and rubber plantations. Sime Darby will invest RM70 million initially and will commence work on 10,000 ha of land.

The concession will be held for 63 years by Sime Darby Plantation Liberia Inc. (SDPLI), a wholly-owned subsidiary of Sime Darby Plantation. It was signed in Monrovia on Thursday, April 30th 2009.

Sime Darby Bhd President & Group Chief Executive Dato’ Seri Ahmad Zubir Murshid noted that Africa is the new frontier to develop oil palm plantations due to abundant fertile land which is supported by a sizeable and able workforce.

"It is increasingly difficult to acquire arable plantation land in Asia and thus it is imperative that new frontiers be sought to meet increasing demand. Sime Darby will also have the first mover advantage over future entrants into Liberia in terms of securing choice land,” said Dato’ Seri Ahmad Zubir.

This investment will also expand Sime Darby's global presence. While this investment is part of Sime Darby's upstream operations growth strategy outside South East Asia, it will also act as a springboard for potential upstream expansion to other African countries while providing access to key markets both in Africa and Europe.

Sime Darby currently has a non-plantation presence through its Sime Darby Hudson & Knight (Proprietary) Limited downstream operations in South Africa, which manufactures oils and fats products.

Liberia is located on the west side of the African continent. Currently, it has about 90,000 ha of oil palm planted while rubber is planted across 65,000 ha of its land.

Meanwhile, Sime Darby Plantation Managing Director Dato' Azhar Abdul Hamid noted: "This is a long term commitment for Sime Darby and we see it as an opportunity not just to expand our operations but also as a venture that will bring social and economic benefit to the people of Liberia. Sime Darby is proud to have this unique role, as we share our years of plantation experience with Liberians."

He added: “While any investment has risks, we are confident that with time and effort and the support and cooperation of the Government of Liberia, this will be a mutually rewarding venture.” Dato’ Azhar represented Sime Darby Plantation at the signing ceremony in Monrovia.

The CA also mandates Sime Darby to develop a smallholders' development program (Outgrowers Scheme) for the duration of the agreement. The Outgrowers Scheme will be developed along the lines of a co-operative scheme, with farmers owning stakes through organized cooperatives. Sime Darby will develop and manage an area designated by the Liberian government for this purpose.

"The scheme would create opportunities for farmers to own commercially viable plantation businesses. This will develop entrepreneurship and will go a long way towards developing, improving and simulating Liberia's economy," Dato’ Azhar said.

This scheme will be funded by the Liberian government.

The deal originated back in 1985, when the original CA was signed by the then Kumpulan Guthrie Berhad (Guthrie). Guthrie was however forced to abandon their operations in October 2001 following civil unrest in Liberia. The unrest ended in 2003, and since 2005 the Government of Liberia has taken bold steps to ensure the nation progresses. The new government has managed to attract billions of dollars worth of investments, including from steel giant Mittal Steel and from Chinese corporations.

The CA is expected to be ratified by the Liberian Legislature by August 1st 2009.