November 1, 2016
Sime Darby (SIME:MK), a Malaysian conglomerate, signed a 63-year concession agreement in 2009 for 220,000 ha of land to be developed into oil palm and rubber plantations in Liberia. An additional 44,000 ha are to be developed under an outgrower scheme. To date, Sime Darby has planted 10,411 ha palm oil and 107 ha rubber.
- Significant changes in Liberian context since 2009. Customary land rights are entrenched in Liberian legislation and efforts to halt deforestation have increased, heightening risks for Sime Darby’s original aggressive expansion plans.
- Sime Darby’s undeveloped land bank in Liberia contains high-density forest; thus 45% cannot be developed responsibly. This figure is conservative as it is not adjusted for medium-density forest (an additional 34%) or biodiversity hotspots.
- Unresolved issues remain six years after community negotiations started. These long processes create the risk of ‘moving targets’ as previously made agreements can be voided by new developments.
- Full concession development would require negotiations with an additional 55 communities. This could entail decades of negotiations with uncertain outcomes, and could result in significant delays to project development.
- Respecting a 2km buffer zone around towns reduces the available area by 20%.
- Sime Darby’s share price could devaluate due to restrictions on the concession area. Mainstream investors continue to value Sime Darby’s Liberian project
assuming full concession development.
Sime Darby’s Liberian business model is at a crossroads. As shown in Figure 1 below, Sime Darby has three possible scenarios for future development.
- Scenario A: Backtrack on social and environmental commitments
- Scenario B: Full concession development implementing proper Free, Prior, and
Informed Consent (FPIC), High Carbon Stock (HCS), and High Conservation Value
- Scenario C: A shift to 100 percent out-grower model
Download as PDF: Sime Darby: Liberian Crossroads