Indonesian plantation firms urged to expand

Antara: February 4, 2011

The State Enterprises Ministry is pushing the 14 government-run plantation companies to speed up their expansion plans to capitalize on rising prices and growing demand for agricultural commodities in the international market.

"State plantation companies need to seize the moment. By continuing expansion in the upstream and downstream areas, I want our companies to become the largest palm oil and rubber producers in the world," Megananda Daryono, a deputy minister for primary industries, said on Wednesday.

According to the ministry's data, palm oil production from the country's state plantations is projected to reach 3.15 million tons this year, up from an estimated 2.87 million tons last year.

The net profit of the state plantation companies is forecast to increase to Rp 3.51 trillion ($390 million) this year from 2010's projected profit of Rp 2.74 trillion, the ministry report said.

Commodity prices have risen during the past few months on the back of unpredictable weather hurting production, which raised concerns about tight supplies. The physical price of natural rubber in Thailand, the world's largest supplier, moved to 180.55 baht per kilogram ($5,840 per ton) on Wednesday from 178.55 baht the day before.

Meanwhile, crude palm oil rose 2.3 percent to 3,895 ringgit ($1,280) in Kuala Lumpur on Thursday.

Megananda said that although some state plantation companies were experiencing difficulties in widening their growing areas, several others were in the process of expansion.

"West Kalimantan and Papua are among the areas we're looking at. State grower PTPN VI, for example, is conducting expansion in 10,000 hectares of land in Jambi," he said.

Several other state plantations have already made plans to expand in the downstream sector, particularly in rubber-related industries.

"As many as six state plantation companies are forming a consortium to build a motorcycle tire factory," he said without providing further details.

Motorcycle sales in Indonesia are expected to reach more than eight million units this year. As of November last year, motorcycle sales had reached 6.86 million units.

The State Enterprises Ministry also forecast that tea production would increase to 87,207 tons this year from 86,918 tons last year, while sugar production was expected to reach 1.669 million tons this year from 1.317 million tons in 2010.