New land reform provisions, including a requirement for plantation companies to allocate at least 20% of their land for agrarian reform, could add regulatory risks for Malaysian plantation groups with significant operations in Indonesia.
PALMOILMAGAZINE, KUALA LUMPUR — Indonesia’s newly approved Agrarian Reform Law could increase regulatory uncertainty for Malaysian plantation companies with significant investments and operations in the country, although its immediate impact on corporate earnings remains difficult to assess as several implementing regulations have yet to be issued.
According to KLSE Screener, citing a research note from Public Investment Bank (PublicInvest) Bhd analyst Chong Hoe Leong on Wednesday (30/9/2026), the new legislation could add another layer of challenges for Malaysian plantation groups following a year of heightened scrutiny over land ownership and substantial penalties imposed on plantation companies operating in Indonesia.
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Chong said the impact of the new law will depend largely on the implementing regulations that have yet to be finalized. These rules are expected to clarify key provisions, including limits on land ownership or control, mechanisms for resolving agrarian disputes and the specific authority of a new institution tasked with overseeing agrarian reform.
“The potential impact of the new law remains unclear until regulations are issued to establish land-control limits, dispute-resolution mechanisms and the specific powers of the new body overseeing agrarian reform,” Chong said in the research note.
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20% Land Allocation Requirement
Indonesia’s House of Representatives approved the Agrarian Reform Law on 22 September 2026. The legislation is intended to reorganize land ownership and control, strengthen land redistribution and improve mechanisms for resolving agrarian conflicts.
The law also provides for the establishment of a dedicated national body to oversee the implementation of agrarian reform.
One provision drawing particular attention from businesses requires holders of Cultivation Rights (Hak Guna Usaha or HGU) and plantation permits to allocate at least 20% of their land for agrarian reform and land redistribution purposes. The requirement may also be fulfilled through an equivalent profit-sharing arrangement.
The legislation further opens the possibility of introducing limits on land control. However, the specific thresholds and how they will be implemented remain subject to subsequent regulations.
For Malaysian plantation groups with substantial exposure to Indonesia, the development is being closely watched because the implementing framework could affect operational certainty and the management of plantation assets.
Companies with significant exposure to Indonesia include SD Guthrie, Kuala Lumpur Kepong Berhad and Genting Plantations.
PublicInvest Maintains Positive Sector Outlook
Despite the increase in regulatory risks, Public Investment Bank has not changed its broader outlook for Malaysia’s plantation sector.
Chong said the higher regulatory risk is unlikely to immediately translate into lower earnings or asset losses for plantation companies in the short term.
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Instead, recent share-price weakness among Malaysian plantation companies could create opportunities for investors, particularly amid expectations of stronger earnings in the second half of 2026 and higher crude palm oil (CPO) prices during the peak production period.
PublicInvest maintained its “Overweight” rating on the plantation sector and retained its full-year CPO price forecast at RM4,500 per tonne.
The implementation of the Agrarian Reform Law will therefore remain a key factor for Malaysian plantation companies operating in Indonesia, with the eventual impact likely to depend on how the government defines land-control limits, redistribution obligations and the powers of the new oversight institution. (P2)
