Nairobi — One year down the line, Bidco Uganda Ltd is still waiting to get land for the Bugala nucleus palm oil project.

Because of this delay, the project is expected to cost more than the initial estimate of $160 million.

Rao Kodey, managing director of Bidco Uganda Ltd, said the delay is hurting the economics of the project since the gestation period of palm oil plants varies between three and five years in plantations, so delays not only affect yields but also the management of the project.

By the end of 2005, according to the project's contract, the Kenya-based Bidco Oil company was supposed to have acquired 10,000 hectares for the nucleus project on the island but, to date, this has not happened.

Among the reasons are absentee landlords whom the government had anticipated would readily sell their land but have since refused to do so. Another is reluctance by the government to allocate part of the Kalangala central forest reserves to Bidco following an outcry by environmentalists.

In effect, the government has failed to keep its part of the bargain, which was to give Bidco 30,000 hectares of land, 10,000 hectares on the island and 20,000 hectares on the mainland, on a 99-year lease. Bidco officials could not however establish in monetary terms, the losses incurred by the delay in acquiring land.

Project co-ordinator Connie Masaba said that to date, the company was supposed to have 10,000 hectares for the nucleus project on the island but it was still looking for land.

"We are definitely concerned; the delay un getting land is hurting everyone. But we want to do everything right, especially addressing all the environmental concerns and mitigation measures," said Ms Masaba.

So far, only 4,000 hectares have been planted with seedlings and 1,000 hectares are being prepared for planting. The remaining 3,500 hectares for the outgrowers is also under development.

The government of Uganda has earmarked an extra $50 million for payment for land acquired from reluctant land owners to meet its obligation.

The government is expected to inject $12.3 million into the vegetable oil project, the International Fund for Agricultural Development (Ifad) $19.9 million and the private sector $120 million.

What might make it harder for the government to get land for the project is its own reluctance to encroach on forest reserves, due to the resistance by environmental groups and civil society organisations.

Bidco officials have, however, said they are not encroaching on forests.

The company's international partners - Wilmar Group of Singapore, US-based Archer Daniel Midlands and Josovina of Malaysia - are also keen to avoidg controversy over the environmental impact.

Wilmar Group is one of the largest operators of palm oil plantations in the world, with an annual turnover of $8 billion, way beyond Uganda's $2.3 billion annual budget. As a member of the International Roundtable on sustainable palm oil which promotes the growth and use of Sustainable Palm Oil, the company is governed by compliance with certain principles like environmental responsibility of projects it is engaged in.

Josovina is a primary exporter of crude oils in East Africa while Archer Daniel Midlands is the largest oilseeds processing entity in the world with an annual turnover of $36 billion. Bidco is bringing on board its expertise as an oil refiner.

Although the partners' interest in the project is purely commercial, social responsibility and a good public image are paramount to the protection of their markets.

Mr Kodey says Bidco and its partners are taking proper precautions and mitigation measures pointed out by the environmental impact assessment that cleared the project in 2003, and have made recommendations that will conserve the areasbiodiversity.

"We are mindful of the biodiversity, and that is why we do not burn trees - we clear and bury. We also leave small pockets of the original forest in our plantations," said Mr Kodey.

In 2000, environmentalists had insisted that encroachment on any of the forest reserves on Bugala island would endanger a rare vegetation type, eptadeniastrum-Uapaca, destruction could affect the islands' fragile ecosystem.

The government of Uganda is faced with hard choices. On one hand it has to provide land to an investment that will boost its economy - the palm oil project currently employs 2,000 people - and on the other, it has to maintain Bugala island's biodiversity. If it fails to meet its bargain as per the contract, the investors can walk away from the deal.

Bidco's $160 million investment in Uganda involves oil palm plantation development in Kalangala district and the Jinja oil complex with an edible oil fractionating and refining plant, a soap making plant and a plastics producing factory. It is targeting the Common Market for Eastern and Southern Africa, Sudan and the Democratic Republic of Congo.

Bugala Island, where the Bidco nucleus project is located, has 13 forest reserves that constitute 40 per cent of the protected forest area in Kalangala district.

The entire island has 34 forest reserves and 75 per cent of these are categorised as nature reserves, where no human activity is allowed.

Bidco's palm oil project was approved by parliament in April 1998, declared effective by the International Fund for Agricultural Development /World Bank in July 1998, and officially launched in October the same year. It is funded by the World Bank through Ifad.