EFFORTS TO MAKE OIL PALM CULTIVATION AS A MODEL OF SUSTAINABLE AGRICULTURE

In an effort to show the variety of industry efforts to make the cultivation of oil palm as a model for sustainable agriculture in the future that will benefit both the environment and the palm oil industry itself, and also give a special attention to environmental issues through experience-sharing strategy and finding solutions and resources among various stakeholders. PT Smart. Tbk jointly with CIRAD and WWF Indonesia cooperate to hold the fourth International Conference on Oil Palm and Environment (ICOPE), in Bali from 12 to 14 February 2014.

According to Daud Dharsono, Chairman of the ICOPE Steering Committee 2014, on Tuesday (February 11), this year ICOPE chooses a theme “Palm Oil Cultivation: Being a Model for Sustainable palm oil production, while making it as a model of sustainable agricultural development. Some current issues, such as solution to development that minimizes deforestation, greenhouse effect and land use, biodiversity, and plasma farmers will be discussed in this conference.

The development of national palm oil industry is growing rapidly, following the world’s vegetable oil demand which continues to increase. And, with the strengthening of efforts of the national oil palm industries in implementing sustainable agribusiness practice, it encourages the need for holding this conference. Since the first, second and third conference held in 2007, 2010, and 2012, ICOPE has gained international recognition from international experts as a unique and important forum for networking development and sharing of best practices and solutions in accordance with sustainable palm oil production and environmental protection programs both at policy review level as well as its application in the palm oil industry.

The third ICOPE in 2012 was attended by more than 400 participants, they are leading experts and entrepreneurs from 18 countries. Since that time, several key initiatives at various scales have been announced and implemented in various plantation companies and organizations at national and international levels.

“Like the three previous conferences, this year we invite all participants to use this platform to share knowledge and perspectives, express opinions, discuss and formulate future plans that allow for the development of technology and the use of best practices for sustainable palm oil development,” Daud Dharsono added.

The conference which will be officially opened by the Minister of Agriculture accompanied with a briefing by the Forestry and Environment Minister will be divided into several sessions in three days. The first day of the conference features a panel discussion titled “Seeking Models for Sustainable Agriculture in the Future,” followed by a session, namely session 3: “Greenhouse Gas Emissions”, session 4 and 5 will discuss “Ecological Intensification in Oil Palm Cultivation”. On the last day, the discussion will be focused on a quite challenging topic, namely “Diversity of Sustainability Certification System in Palm Oil Industry.”

Based on data processed by the Ministry of Industry, as one of the priority industries to be developed into higher value-added industries such as oleofood, oleochemicals, energy and pharmaceuticals, prognosis in 2013, investment in oil palm cultivation in 2013 reached Rp27.8 trillion with 98 business units.

With the entry of investment in palm oil manufacturing industry from Sinar Mas Group, Musim Mas Group, Wilmar Group, Domba Mas (Bakrie Group), PTPN III, Salim Ivomas, Asian Agri Group, Unilever, and Golden Hop which is estimated at more than Rp24 trillion, then the level of capacity fulfillment of the domestic cooking oil industry increased from 45% in 2010 to over 70% in 2012.

In line with the downstreamization program, there was a shifting trend the exports from CPO (crude palm oil) and CPKO (crude palm kernel oil) upstream products to downstream products (oleofood and oleochemicals). For comparison, in 2007 the volume of CPO and CKPO exports reached 51.54%, and in 2012 dropped to 37.93%. And, volume of exports of CPO derivative products in 2007 reached 48.46%, and in 2012 increased to 62.07%. (E)    

Business News - February 14, 2014

TOWARD AEC 2015 GOVERNMENT WAS ASKED TO GUIDE SMALL BUSINESS

Toward Asean Economic Community [AEC] 2015, the challenges faced by Indonesia was not easy, including the business sector. For that matter change of paradigm and mindset of UMKM players would be necessary. The Government was playing strategic role in upgrading competitiveness of Indonesian goods and services.

In AEC blueprint which was signed by all Asean countries, it was stated that small business [UKM] was one factor which was regarded as economic propeller factor. There were 4 main priorities for promoting the role of ASEAN small business. Starting  from accelerating UKM development, strengthening competitiveness of ASEAN UKM by facilitating information access, market access, human resources competence, finance and technology. ASEAN UKM also needed assistance in facing macro economic problems, financial difficulties or challenges in trade liberalization. UKM contribution for economic growth in the region was to be enhanced.

Franky Sibarani, Secretary General of the Association of Indonesian Food and Beverages Producers [GAPMMI] in Jakarta on Tuesday [11/2] stated that in facing AEC 2015 players of the F&B industry of middle and upper level were stating their readiness. However, the small industry was far from being ready. For that matter, the Government was asked to set up a roadmap whereby to render counseling. By the time AEC was effective in December 2015, goods and services would be free to move in and out. Inter Asean trading was estimated to constituted 25% of all.

In Indonesia, around 90% of food & beverages industry belonged to the small-and-medium business category, but the production output contributed only 15%. Based on data of the Food and Drug Control Broad [BPOM], of 10,000 UMKM who were subject to survey for anticipating AEC, only 600had their data recorded. “Of that number, 400 were very ready to face AEC, 173 were ready, and the rest needed guidance.” Franky remarked.

The Government also had to run census of UKM ad UMKM. Franky said that the census was run last in 2008. Thereafter the Government had no run any census. Some factors that made small business hard to face AEC was unclear roadmap, low human resource quality, limited market access, increasing labor cost, and low access to capital.

Gapmani recommended to foster inter-ministrial coordination to agree on roadmap of reference for UMKM development, to integrate UKM centers in the regions toward one national objective, to ease business permit application, subsidize raw material, to obtain per sector priority and to actively publicize knowledge to UMKM.

Meanwhile the Ministry of Cooperative and UKM set target for export for small-and-medium business could reach 20% of total export value of 2015 to keep imported products, especially consumer goods, from invading the domestic market. Deputy Assistant of Ministrial Cooperatives Research Syamsuddin said today UMKM products were export oriented and were handicraft goods like footwear, leather were and electronics spareparts.

Beside handicraft goods, Syamsuddin claimed there were other products being developed to meet export standard like food, fruits, and vegetables. He further remarked that this product was designed to compete against same product of China and Thailand which had penetrated the market sooner. However, there were some things to be observed to make sure that the product could compete against same products of other countries. (SS)

Business News - February 14, 2014  

AMERICA PLED INDONESIA TO ENHANCE LAW ENFORCEMENT ON ENVIRONMENTAL DESTRUCTION

The Government the USA again reminded Indonesia the importance of law enforcement to trouble shoot environmental problems, nature destruction and extreme climate in Indonesia, because one of the important aspects in Indonesia-America collaboration was law enforcement. “This is an important aspect of the entire collaboration. America collaborated with various institutions and ministries including the Corruption Eradication Commission [KPK] to enhance law enforcement,” the US Ambassador to Indonesia Robert Blake told Business News [11/2].

President SBY and President Barrack Obama agreed on bilateral collaboration between the two nations within the framework of US-Indonesia Comprehensive Partnership. The agreement was made in year 2010 to stipulate Acrtion Plan. It incorporated among others six working groups i.e. education, defense and security, energy, democracy and social affairs, trading and investment and anomalous climate.

The activities proclaimed by the two nations were among others formation of Climate Change Study Center in Indonesia, which was follow up action of the working group on climate change and environment. “We do not wish to focus on one aspect only, although Law enforcement is important, but inclusive of all aspects to handle various problems. The case is multi-dimensional,”

The US Government was expecting there would be progress in the activities of the working group on climate change. The US Government was proud of the performance at home in managing climate change problems. “The effort of the Working Group in the USA had succeeded in reducing Glass House effect caused by carbon emission by more than 7 percent. This is most significant compared to the time when the group started to work in 2005. There is no other way but to work hard, among others by enhancing partnership program with Indonesia.”

Meanwhile the Research and Development [R & D] Division of the Ministry of Maritime and Fishery [KKP] would continue to step up collaboration with F A O, the UN’s Food body. One of the objectives was to reduce emission of carbon, including CO2 on mangrove. This was most important in conserving Indonesia’s marine resources in Indonesia. “CO2 carbon absorption in the air includes mangrove and peatland. Our collaboration with FAO would reduce CO2 concentrations” Head of KKP R & D Achmad Poernomo disclosed to Business News[11/2].

Peatland was getting more attention in the effort to reduce carbon emission. The Government of RI announced target of carbon emission reduction by 26% - 41% in 2020. One of the determinant factor was peatland and mangrove in Indonesia. One third of the world’s earth carbon was found in Indonesia, all were great potential for increase of carbon emission.

Reduction of carbon emission in peatland and mangrove could prevent damage and restore coastal environment. As planned, an FAO team would come next week to realize collaboration with R & D of KKP. The collaboration to reduce CO2 emission was in tandem with strengthening of food resiliency. “We would develop mina rice and fish nursey. We are trusted in our capability by FAO. So it would be advisable to share research outcome with the countries in Asia and Africa.” Achmad said.

The way it had been, Indonesia only took over research outcome from abroad. Now it’s time for Indonesia to pass on research outcome to other countries. The collaboration only involved Indonesia’s Science & Technology Center [LIPI]. “In terms of financing, not yet. We are still finalizing the plan” Achmad remarked.

From past experiences we learned that financing had always been well balanced. Meaning, expenses for foreign participants was borne on fifty-fifty basis with the counterparts. “FAO sent for participants and they paid their own expenses, but we bear the training expenses here. We share financing. We want to show them that we are credible and able to support FAO. Survey outcome of research and collaboration need no patenting. In terms of intellectual rights, we share.” (SS) 

Business News - February 14, 2014

TO MAINTAIN GROWTH OF THE PROPERTY SECTOR

This year 2014 is Indonesia’s political year. High uncertainty filled the air toward Legislative Election in April 2014 and Presidential Election in July 9 2014 was predicted to disturb the property sector, especially commercial property for the upper-middle class.

Such was the general perception of the Association of All Indonesia Housing and Settlement Developers [Apersi]. According to the Association, the running of election could axe the upper middle class commercial property by around 20% because consumers would think twice before investing in the political year.

On the contrary, the lower middle level of property would not feel any effect of the election. This was because normally the lower middle class would be advantaged by the political year. Many of them were getting job order of campaign attributes from the politicians.

Beside political condition, the property market this year was also influenced by BI rate. Credit for mortgage [KPR] for people’s houses as high as 9% to 13% per year which would make buyers of second and third houses to be reserved, resulting in reduced demand for houses by 5% - 10%.

As with price, there would be no forseeable increase for commercial property of the lower-middle level such as subsidized homes. This was because subsidized houses already had their increase when the Government increased price of subsidized oil in June 22, 2013 last. The same was with commercial property of the upper-middle class: Low demand would force developers to lower selling price by as much as 20%.

Banking regulations related to business property also had the potential to supress development of property sector. This year, slowdown of credit was a fearful ghost to banks. The property credit was predictably one of the credit sectors vulnerable to banking regulations.

Regulations on restriction of Down Payment for Loan to Value [LTV] made local banks to be pessimistic about 2014. An example was Bank Tabungan Negara [BTN]. This mortgage-specialist bank only dared to set target of single-digit growth or less than 10%. KPR BTN grew by 6.2% at the maximum in the first 3 months this year. This BTN target was way below performance in 2013. BTN projected credit growth of 22% - 23%. Through 2013 last.

Only trouble was, upon embarking on 2014, new applications for KPR was reduced due to LTV regulation and seasonal factor. Although slowing down, it would not affect ratio of Non Performing Loan [NPL]. BTN expected they could suppress NPL in the range of 3.24%. In year ebd of 2013, NPL BTN moved in the range of 4%.

Although pessimistic, BTN believed there would be recovery in demand in election year 2014. In accordance with their business plan, BTN pursued credit growth of around 18% till end of year. The strategy spearhead would include promotion of credit for construction and infra-structure.

Pessimism was also voiced by Bank Central Asia [BCA] who only dared to aim at KPR growth of 8% to maximum 12%. The reason was that LTV regulation for first and second house had great effect on credit growth. This was indeed a hard blow to BCA. Understandable because KPR constituted high percentage in consumer’s credit.

In fact slowdown of property credit had been visible since late 2013. By end of December 2013. By end of December 2013, pipelining of KPR BCA had been stagnant or not much changed from attainment in quarter III – 2013. Realization of BCA KPR mortgage credit was Rp52.46 trillion. So the strategy adopted was to make adjustment in the KPR sector. For example, to be selective in processing new credit to prevent NPL increase. By end of 2013, NPL KPR settled at 0.5% - 0.8%.

Bankers’ prediction was in accordance with Bank Indonesia survey. Slowdown in banking credit was reflected in Net Balance [SBT] of survey result on new application for credit in quarter IV 2013. SBT figures went down to 88.5% against 90% of the previous quarter. The greatest downturn was credit for homes and credit for apartment [KPR/KPA].

The trigger of slowdown in property business was implementation of LTV regulation in September 2013. Other factors were increase of benchmark rate. BI’s survey unveiled that credit growth slowed down to 19.1% in quarter I 2014. That BI survey predicted credit growth this year to slowdown [by around 15% - 17%] against last year [21% - 22%], proved BI’s successful policy ran so far.

BI’s strategy to increase benchmark rate several times o as high as 7.5% was urgently needed considering that growth in the real sector had been slowing down since last year; moreover for certain sectors like property where NPL grew higher due to uncontrollable property prices.

Rupiah depreciation against USD also injured some import-based companies as import expenses swelled due to depreciated Rupiah. The same was with exported companies based on natural resources. In the present condition where banks aggressively extend credit, The risk of increasing NPL was bound to happen, so credit pipelining must be slowed down by increasing interest.

It was reasonable to say that credit extention would not disadvantaged the banking industry although the profit made from credit interest would be slightly affected. Somehow there was the brighter side of BI in increasing BI rate and enhancing LTV rules which healthen credit pipelining.

Meanwhile PT Sarana Multigriya Financial [SMF] set target to reap fund of at least Rp 1 trillion from release of Participation-Letter based Effect [EBA-SP]. The fund would be used by SMF to jack up secondary financing for housing. The only thing was SMF must be patient in releasing security asset products until the regulation was finalized by the Financial Service Authority [OJK] which was expected to be effective in the first half of this year.

The EBA-SP fund would jack up company’s financing in extending housing financing, whether in the form of security asset or financing for mortgage agencies. So far, only PT Bank Tabungan Negara Tbk [Persero] received financing through mortgage security asset.

EBA-SP would enrich security products for investors. As footnote, SMF had been issuing KIK-EBA, which was a contract between investment manager and custodian bank who was also holding inclusive units as investors, unlike EBA SP which was issued by SMF themselves.

By end of last year, SMF was noted to extend total credit of Rp 3.5 trillion, i.e. for financing Rp 2.5 trillion and security asset Rp 1 trillion. In view of the prospect this year, SMF was optimistic to be able the surpass previous year’s attainment.

While financers of the property sector tend to be moderate in responding to economic prospect of this year, players of the property industry themselves were expecting that this political year would lead to formation of pro-people policy. One of the thinkable measure was to change the platform of housing subsidy into downpayment-based subsidy platform in mortgage. A platform as such would enlighten consumers’ burden who mostly small people.

In view of the structure of Indonesia’s population who were mostly of young age-bracket consisting of young couples and families, the prospect of property in Indonesia in the future was still bright. Other reason was that shelter was Man’s basic essential need.

As population increased, total land area remained the same. With changing supply-demand ratio, the property marketing concept changed accordingly. Under such circumstances the relevant concept would be landed house changing into vertical building.

Property beside its purpose as accommodation for the consumers could also be a medium of investment. Many benefits could be taken from property investment. For one thing property price definitely tend to increase, although the degree of increase depended on economic condition. The minus point of property was that it was relatively less liquid and called for high amount of fund to invest.

Finally, financial institutions or property industry players were called to be wise in facing the political year so growth of property business could be maintained at least at last year’s level. The effort to step up performance of the property business would sustain national economic growth as a whole since the property industry was one of the catalysts of a economic success of a nation beside the automotive sector. (SS)

Business News - February 14, 2014