Palm | Kelapa Sawit

Smart spends Rp 1.35t on new plantation

Raras Cahyafitri, The Jakarta Post, Jakarta, Publicly listed palm-based consumer company PT Sinar Mas Agro Resources and Technology Tbk (Smart) is adding up to 30,000 hectares to its oil palm plantation holdings with a total investment of Rp 1.35 trillion (US$148 million).

Smart chief executive officer Susanto said that the expansion would include planting 10,000 hectares in West Kalimantan, 5,000 hectares in Central Kalimantan and 2,000 hectares in South Kalimantan.

“The remaining expansion will be in Sumatra,” Susanto said on Thursday.

He said that Smart had secured land for the new plantation areas, adding that the company was unlikely to acquire any more land in the near future.

According to Smart’s website, the company’s palm plantations have a total coverage area of approximately 138,100 hectares. However, as a parent company, Susanto said, Smart held 460,000 hectares of oil palm plantations.

Investment in the new plantations, Susanto said, would be about Rp 45 million per hectares.

“However, this is a cost-to-maturity investment, meaning that we invest from the start of planting until the plants bear fruit. We will finance 65 percent of the spending through bank loans and the remaining 35 percent from our equity,” Susanto said, adding that Bank Mandiri and BRI were among the lenders cooperating with his company.

Oil palms take approximately four years to bear fruit and have a productive age of 25 years.

Smart’s main businesses include cultivating and harvesting palm trees, processing fresh fruit bunches into crude palm oil (CPO) and palm kernels, and refining CPO into derivative products such as cooking oil, margarine and shortening.

Susanto said that the company expected its CPO production to grow by about 10 percent this year.

“We produced about 2 million metric tons of CPO last year, only about 7 percent of national production,” Susanto said, adding that national production would reach 25 million metric tons this year.

According to its website, Smart, which is related to the Sinar Mas Group, operates 15 mills, four kernel crushing plants and four refineries to process CPO.

Susanto said that the company had allocated $400 million to $500 million this year to increase the capacities of its refineries in Jakarta, Surabaya and South Kalimantan.

“In 2011, our processing capacity was about 1.35 million metric tons. This year, we want to double the capacity to 2.6 million tons,” he said.

The increased refineries’ capacities are expected to help the company process all of its CPO in the country. Currently, the company exports part of its CPO to India, China and Europe.

Mandiri to lend Rp 189b to oil palm cooperatives
The Jakarta Post, State-owned largest lender PT Bank Mandiri Tbk signed on Thursday deals to disburse loans to cooperatives of oil palm farmers, in a move to boost the amount of credit disbursed to small and medium enterprises (SMEs) this year.

Mandiri agreed to lend a total of Rp 189 billion (US$20.79 million) to four cooperatives fostered by the Sinar Mas Group, one of Indonesia’s major palm oil producers. The four cooperatives are: Kopsa Puyang Gana, which will receive Rp 56.8 billion to work 1,024 hectares of land in West Kalimantan; Kopsa Mitra Bintang Moda, which has secured 59.49 billion to work 1,062 hectares of land in West Kalimantan; Kopsa Mitra Cipta Sejahtera with Rp 51.88 billion to work 936 hectares of land in West Kalimantan; and Kopsa Reantakam with Rp 21.08 billion to work 400 hectares in South Kalimantan.

A total of more than 1,700 farmers will be covered by the credits.

Mandiri’s commercial and business banking director, Sunarso, said the company has set interest rates at around 11 percent. The loans will mature in five years.

“However, the farmers will only bear 7 percent, while the remainder will be subsidized by the government. The 7 percent interest rates are also capitalized in total loans,” Sunarso said.

Mandiri included the loans to the four cooperatives in its scheme to provide credit for bio-energy development and plantation revitalization (KPEN-RP). With the national program, launched in 2007, Mandiri has committed to disburse Rp 11 trillion of the total national commitment, which includes other banks, of Rp 38.6 trillion.

However, as of March, Mandiri had only disbursed Rp 2.29 trillion. Sunarso said the availability of land for oil palm was one of several problems hampering Mandiri in its attempt to accelerate loan disbursements for plantations.

Sunarso said that the loans to the oil palm cooperatives were part of Mandiri’s plan to increase credit to SMEs this year. Mandiri, he said, disbursed Rp 30.2 trillion ($3.32 billion) in credit to SME’s from a total lending of around Rp 380 trillion last year.

“We are targeting credit for SMEs to reach Rp 40 trillion this year and hope to have a portfolio of Rp 73 trillion of lending to SMEs in 2014,” Sunarso said on Wednesday.

The figure is in keeping with Mandiri’s annual increases in lending to SMEs, which rose by around 30 percent from 2005 to 2011. The bank said it had disbursed credit to more than 40,000 SMEs.

Sunarso said that Mandiri implemented healthy credit to SMEs with a non-performing loans (NPL) ratio of 2.46 percent last year. He added that Mandiri wanted to hold 10 percent to 12 percent of shares in the SME credit market.

— JP/Raras Cahyafitri

Court decision upsets plantation companies

The Jakarta Post, The Constitutional Court’s recent decision to approve a request from a number of local governments to change an article in the Forestry Law has raised uncertainties over the legal status of land owned by plantation companies and forest concession owners.

The chairman of the Indonesian Forestry Businessmen Association (APHI), Nanang Rofandi, said in Jakarta on Friday that with the court’s decision, the association’s members felt that the status of their land had become uncertain.

“The ruling raises a lot of questions and confusion among us and we now have no certainty in carrying out our business,” Nanang told The Jakarta Post.

On Feb. 21, the court issued a ruling to drop the phrase “allocated and/or”, which appears in the third paragraph of the Forestry Law’s first article, at the request of regents from five regencies in Central Kalimantan on the ground that the phrase made the article contrary to the 1945 Constitution.

The regents also argued that the full sentence, which reads: “A forested area is a certain area that is ‘allocated and/or’ determined by the government as a permanent forest area”, gave an absolute authority to the central government to declare some of their areas as permanent forests.

With the original article, the plaintiff said, the central government had the power to determine non-forest areas, which are already owned by local people, to become forest areas. But legal experts say that the removal of the phrase could lend even more power to the government in determining forest areas.

Legal expert Hikmahanto Juwana, who is also the dean of the University of Indonesia’s Law Faculty, said the deletion of the phrase did not really change the meaning because there was no explanation on the legal implication of the change.

“When we talk about the government, which government are we talking about? The word ‘government’ is misleading because it can mean the central government or the local government,” Hikmahanto told the Post.

He said that both central and local governments should sit together and discuss further about the forestry issue. He also said that the ruling still needed to make an explanation in order to make everything clear.

“We discussed this issue at the Forestry Ministry today. We want them to issue circulars that will help us to retain legality in our business,” he said.

In line with the APHI, the Indonesian Palm Oil Producers’ Association (GAPKI) also said that the legality of palm oil business activity in Indonesia has become unclear following the courts’ decision.

“The ruling brings a lot of problems. We are going to consult with legal experts about this issue in order to get some clarity for our business,” GAPKI’s executive director, Fadhil Hasan, told the Post.

In a separate interview, Greenomics Indonesia executive director Elfian Effendi said that all the Forestry Ministry’s decrees on provincial forestry area allocations issued after Sept. 30, 1999, no longer had a legal base as one of the reasons why the court decided to change the article was because it contravened the Constitution.

Elfian added that the court’s ruling also effectively delegitimized the presidential decrees on new permits and prime forest management, and the forest spatial management plan (RTRW) in Sumatra, Kalimantan and Sulawesi by removing their legal foundation.

“This is because the RTRW uses map attachments from a ministerial decree that was issued after Sept. 30, 1999,” he said.

In addition, Greenomics said the ruling would also affect the Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI) because some of the economic programs included in the MP3EI were based on ministerial decrees issued after Sept. 30, 1999, when the Forestry Law became effective.

In a separate interview, Forestry Minister Zulkifli Hasan said that the ruling did not disadvantage any party, including businesspeople.

“There is no party that is disadvantaged by the ruling,” Zulkifli told the Post.

He said the ruling benefited the government because it could help speed up the program to establish forest boundaries in the country. “This will strengthen efforts in establishing the forest land-use plan [TGHK],” he said.

The minister added that the TGHK was very important for Indonesia as the country possessed some 95 million hectares of forested land — the largest amount in Southeast Asia — and played an important role in the global fight against climate change and reducing gas emissions.

In addition, he said he had urged all regents across the country to make an extra effort to accelerate the establishment of forest boundary areas in their respective regions. He gave local governments three months to complete the task.

According to Tahrir Fathoni, the ministry’s human resources development chief, the ministry has requested assistance from consultants and academics to help accelerate the task.

Tahrir said the ministry had outsourced more than 1,000 people to get the job done.

Normally, it takes a full year to obtain the results of a boundary area. (nfo)

China's Palm oil

China's February palm oil stocks rise at one million tonnes

REUTERS : China's palm oil stocks probably rose to nearly a million tonnes in February with a further build-up seen as traders keep buying cargoes from Malaysia and Indonesia on concern over strengthening prices, a Reuters survey showed on Thursday.

Stocks in the world's No 2 consumer of the tropical oil probably rose to 950,000 tonnes over eight months - more than double the usual 400,000 tonnes - according to a median survey of five Chinese and Singaporean trading houses polled ahead of the Bursa Malaysia Palm Oil Conference next week.

China's February imports of palm oil probably stood at 400,000 tonnes, 9.7 percent lower than 443,241 tonnes in January although these levels still reflected strong demand, the poll respondents said.

Palm oil demand has remained robust on the back of re-stocking after the Lunar New Year festival in January and survey respondents said that it could go higher as Chinese importers want to lock in cargoes before prices rise further.

One survey respondent said stocks may go up to 1.5 million tonnes before imports start to slow as China has the capacity to store the edible oil.

China is stocking up not only on palm oil but other commodities such as soybean oil and copper, the respondent added.

The country does not release official figures on stock levels.

China imported around 250,000 tonnes of palm oil from Malaysia and 185,000 tonnes from Indonesia in January, Reuters calculations on China's customs data showed.

Resilient China demand may lead to better Malaysian export numbers in March.

In February exports declined about 10 percent, cargo surveyors data showed, initially sparking fears that Asian demand for the edible oil might be slowing.

Organization for Economic Cooperation and Development (OECD)

Developing countries have agriculture opportunity: OECD

Agricultural policy in developing countries should focus on raising productivity so that farmers can seize an opportunity of high food prices, the OECD said in a study on Friday.

The OECD also urged governments of these countries to accept a shrinking farming sector as people move from the land, drawn by improving opportunities elsewhere.

The report, Agricultural Policies for Poverty Reduction, also argues that developing nations should create solid social protection systems for rural households, including education and primary healthcare.

The Paris-based Organisation for Economic Co-operation and Development also
stressed that "policymakers need to accept that rising opportunities will lead many smallholder farmers to leave the agricultural sector".

The OECD called on governments "to smooth, rather than impede that adjustment".

"Equally important is the overall investment climate, which depends on peace and political stability, sound macroeconomic management, strong institutions and good governance," the OECD said in s statement.
It noted in South Korea, agriculture's share of employment fell from 40 percent to 16 percent in just 14 years until 1991.

The same transition took 53 years in the United States and 68 years in the United Kingdom, the OECD said.

In the study, the organisation warned against market interventions, such as price guarantees and subsidies, "because they treat the symptoms rather than the causes of underdevelopment".