B. Potential Impacts of the Rapid Expansion of Liberia’s Oil Palm Sector 1. Summary of Potential Investments
The stage is set for dramatic developments in the Liberian oil palm sector. Four major international oil palm companies, including two of the largest Malaysian and Indonesian
companies, Sime Darby and Sinar Mas known locally as Golden VerOleum, are finalizing concession permits for the development of over 500,000 hectares. Three of
these companies, Sime Darby, Equatorial Palm Oil Ltd, and SocfinCavalla, have already completed part or all of their concession agreements with the pertinent Government of
Liberia agencies, the Ministry of Agriculture and the Board of Investments. Indications are strong that the fourth, Sinar MasGolden VerOleum will imminently sign a
concession agreement with the Government of Liberia.
Sime Darby, Sinar Mas, and Socfin are three of the most financially and technically strong oil palm companies in the world with extensive holdings, infrastructure, and
research and development capabilities. Equatorial Palm Oil, though a recent player, has senior managers who have worked for many years with two Southeast Asia companies
with solid reputations and track records for innovation, New Britain Palm Oil of Papua New Guinea and London Sumatra in Indonesia. Most significantly, all four of these
companies are active established members of the RSPO. While no guarantee of good corporate behavior, this does provide unusual opportunities and advantages for Liberia.
Based on information received from various sources, the summary of pending oil palm investments in Liberia is as follows in Table 1 and as depicted in the general areas of the
circles in Figure 6:
Pending Oil Palm Investment Initiatives in Liberia
Investing Investor
Estimated Outgrower
Investment Company
Origin Counties
Hectares Hectares
Size 1. Sime Darby
Malaysia Grand Cape
Mount 220,000
44,000 1,200 MM
Bomi Bong
Gbarpolu 2. Golden VerOleum
Indonesia Sinoe
200,000 40,000
1,600 MM Sinar Mas
River Cess Grand Cru
Maryland Grand Gedeh
3. Equatorial Palm Oil, United
Kingdom Sinoe
60,000 10,000
100 MM Ltd.
Grand Bassa 4. SocfinCavalla
Belgium Bong
10,000 -
40 MM 5. Haj Group
Liberia Grand Cape
Mount 4,500
2,000 2.5-5.0 MM
TOTALS 494,500
56,000 2,950 MM
Table 1: Pending Oil Palm Investment Initiatives in Liberia
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FFigure 6: Figure
F
Figure 6: General Locations of Pending Oil Palm Concessions in Liberia
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2. Review of Economic and Social Benefits from Accelerated Oil Palm Development
A cursory review of the above data indicates that if these companies meet their targets, then the following benefits could be achieved:
1 Creation of over 90,000 workplaces within the investor company operations This assumes 6 hectares per plantation worker, a lower average than the 9-10 hectare
averages in Southeast Asia due to less labor productivity and production skills in modern oil palm production. It also assumes that the companies will build a mill for every
10,000-15,000 hectares that could employ about 150-200 workers each. The FFI advisor was able to review one concession agreement with the Government of Liberia Sime
Darby and noted that it contained targets but lacked specificity on actual commitments agreed to by the company. The business prospectus for another company Golden
VerOleumSime Darby contained projections of this magnitude.
2 Generation of improved incomes for over 30,000 Liberian smallholderoutgrower families.
Almost any interventions could lead to increased income given the extremely low levels of productivity and maintenance of the aging oil palm plantations. The best results could
be achieved if the companies in collaboration with government or NGO extension services provide financial and technical support to smallholdersoutgrowers in
establishing new plantations or totally replanting existing ones. This could entail implementing improvements such as introduction of higher-yielding clonal varieties,
application of good agricultural practices and inputs, and skill development training and extension for the producers. Care needs to be taken that there are adequate provisions for
smallholderoutgrowers having adequate income opportunities and meeting food consumption needs during the five-year period prior to the plantations achieving
maturity. Some options for smallholders that have been demonstrated in other countries include intercropping with foodcrops such as grains and pulses and integrating livestock
into the plantations.
3 Production of about 1.0-1.5 million tons Crude Palm Oil CPO per year. These projections are based on a combined average oil production of 2-3 metric tons of
CPO per hectare on the company core plantations plus the smallholderoutgrower schemes. This level is equivalent to about 60-75 of the Indonesian average production
yields per hectare. Actually, much higher yields 6-8 tons per hectare or more have been achieved by the three large established international companies now operating in Liberia
in their Southeast Asian operations. This has largely been achieved through best management practices including planting advanced clonal seedling material, streamlining
harvesting techniques, and optimizing fertility and nutrient cycling. Another factor that could drive production levels higher would be to install state of the art processing
technology in order to achieve optimal oil extraction rates OER. In any case, if this level of production were in effect today, Liberia would be among the top five largest
global producers including Indonesia, Malaysia, Thailand, and Nigeria. Currently, Liberia rates near the bottom of the producer countries and does not have adequate
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production for domestic consumption needs. 4. Company revenues can reach levels of US750-1,125 MM per year within 7-10 years
once plantations are mature and well-managed.
The resulting revenues for the investing companies would make a significant contribution to raising Liberias Gross National Product GNP. This assumes export
prices remaining at the current level of US750 per metric ton. This pricing level is not unrealistic as prices have stayed at this level for the last two years. However, achieving
this level of revenue increases will take major additional infrastructure investments in roads, ports, housing, and communications systems by the companies, banks, and
government financing institutions. Additionally, government and private sector resources will be needed to boost the capacities of educational and training institutions to provide
technical, managerial, and skill development.
5 Generate substantial tax revenues and financing for an oil palm development fund. The pending palm oil developments in Liberia could make substantial contributions to
national tax revenues and thereby improving Liberias fragile financial position. International donors and financing agencies such as USAID, IFC, and the World Bank
could redirect their funding from balance of payments subsidies towards investments in productive infrastructure and human resource development. The government could
earmark a portion of tax revenues or create a special levy to set up an oil palm development fund to benefit smallholders and local communities and promoting
sustainable production. However, such a fund needs to be professionally and independently managed with high standards of transparency and accountability.
3. Potential Environmental and Social Issues
