Govt still controling PTP Agrintara<\/p>\n
JAKARTA (JP): The debut of state plantation companies in
\ndeveloping downstream industries through their jointly-owned PTP
\nAgrintara seem to be beset with government intervention, cost
\noverruns and project delays and questionable deals.<\/p>\n
Documents related to Agrintara's two industrial projects and
\nother business operations obtained by The Jakarta Post reveal
\nthat even though Agrintara has been granted a quasi private
\nbusiness status by the finance minister it cannot escape heavy
\ngovernment intervention, notably that of Agriculture Minister
\nSjarifudin Baharsjah.<\/p>\n
The records indicate how Sjarifudin, apparently in a bid to
\nspur Agrintara's industrial development, often exerted his
\ninfluence, sometimes at the request of Agrintara's president, H.
\nSoeharno himself, on almost every major business decision taken
\nby its management.<\/p>\n
Sjarifudin defended his deep involvement in Agrintara in view
\nof its important role as the spearhead of state plantation
\ncompanies to develop downstream industries.<\/p>\n
\"I have from the outset been keenly monitoring Agrintara's
\nindustrial projects. I want to ensure that its plants are highly
\ncompetitive,\" Sjarifudin told the Post last week.<\/p>\n
However, the documents also record what many agricultural
\nofficials consider great preferential treatment of PT Kalpataru
\nSemesta, which is controlled by Burhanuddin, reportedly a very
\nclose associate of Sjarifudin.<\/p>\n
The corporate memos further testify to the inability of
\nAgrintara's board of commissioners to perform their function
\nproperly.<\/p>\n
Agrintara's first project -- the Rp 36.9 billion (US$16
\nmillion) rubber goods plant in Purwakarta, West Java -- suffered
\na cost overrun of Rp 7.28 billion and was several months behind
\nschedule (Post's front page story on May 6).<\/p>\n
But Soeharno defended the price escalation as fully
\njustifiable because it financed the components of the plant which
\nhad previously not been accounted for in the original plan.<\/p>\n
\"We originally were allowed by the shareholders only to rent
\nthe land for the factory. Since we faced difficulties at getting
\nbank loans without adequate collateral, we were later allowed to
\nbuy the land,\" he said.<\/p>\n
He added the plant was initially designed to produce ordinary
\nconveyor belt but market trends required the production of longer
\nconveyor belt so that the factory building had to be redesigned.<\/p>\n
Moreover, he added, since Agrintara obtained bank loans in
\nrupiah while the project required foreign exchange financing in
\nDeutsche mark and American dollar, the cost in rupiah increased
\nas a result of the deutsche mark appreciation.<\/p>\n
\"We simply did not expect the deutsche mark depreciation in
\n1993 would reverse so shortly into a high appreciation so that we
\ndid not swap the foreign exchange cost component,\" Soeharno
\nargued in justifying the cost increase.<\/p>\n
Now its Rp 52 billion palm oil refining and fractionation
\nproject which is being built by PT Kalpataru Semesta on Batam
\nisland, is also threatened with a delay of about seven months and
\ncost overruns.<\/p>\n
Both PT Mestika and PT Kalpataru are controlled by the same
\nshareholders.<\/p>\n
The project's construction management supervisor, PT Mitra
\nLestari Alam, reported to PT Agrintara in February that the
\nproject's completion would most likely be seven months behind the
\nMarch 7, 1996 schedule, as set in the contract.<\/p>\n
Soeharno himself warned PT Kalpataru in a letter dated Dec.21,
\n1995, saying that the delay could increase the pre-operating
\ncosts and the interest costs during construction.<\/p>\n
But Soeharno told the Post yesterday the palm oil refining and
\nfractionation plant would start trial operations in August
\nbecause almost all the plant machinery and equipment had been
\ninstalled.<\/p>\n
\"The contractor is now doing the wiring and piping work,\"
\nadded Soeharno, who was accompanied by project manager Dahyar and
\nEddy J. Amir, the manager of Agrintara's rubber goods factory.<\/p>\n
Siregar also argued in his report to Soeharno in November,
\n1995 that the price escalation asked for by PT Kalpataru were
\nquite unreasonable, contending that Rp 52 billion for such a
\nproject with a daily capacity of 1,000 tons was already high.<\/p>\n
Uncompetitive<\/p>\n
Siregar further argued in his letter to Agrintara's chief
\nSoeharno that the additional prices would make the capital costs
\nof the project unusually high and consequently make it
\nuncompetitive against private olein producers.<\/p>\n
Siregar cautioned that the high capital costs, combined with
\nthe high minimum wage in Batam and the shipping costs of crude
\npalm oil from as far away as North Sumatra to Batam, would make
\nthe plant's products uncompetitive.<\/p>\n
Despite the probable delay, and even though the project was
\nawarded on a turnkey basis, Soeharno approved last November about
\nUS$900,000 and Rp 124 million in additional costs for the project
\nat the strong objection from the construction supervisor.<\/p>\n
\"The price escalation was caused by the redesigning of the
\nfirst plant to make it efficiently integrated into the second
\nunit to be built,\" Sjarifudin said last week in defending the
\nrationale of the price increase.<\/p>\n
Soeharno claimed, however, that the redesigning also resulted
\nin some cost reduction through better efficiency so that there
\nhad actually not been any increase in the project's costs.<\/p>\n
Repeat order<\/p>\n
In another move which officials also considered as
\npreferential treatment of PT Kalpataru, Soeharno late last year
\nawarded, with prior approval of Sjarifudin, PT Kalpataru a repeat
\norder for the construction of the second line to the first palm
\noil plant.<\/p>\n
The second palm oil project, also designed with a daily
\ncapacity of 1,000 tons, was first proposed in April, 1995, at a
\ncost of Rp 35.2 billion.<\/p>\n
However, Sjarifudin notified Finance Minister Mar'ie Muhammad
\nlater in November, 1995, that the cost of the project should be
\nrevised upward to Rp 45.05 billion because the previous proposal
\ndid not take into account the interest costs during construction,
\nthe costs of a packaging unit and housing for employees.<\/p>\n
\"If Agrintara wants to play a significant role in stabilizing
\nthe cooking oil price, its palm oil refining and fractionation
\nplant should be expanded right from the outset,\" Sjarifudin
\nargued.<\/p>\n
Earlier in July, 1995, Soeharno raised the eyebrows of many
\nagricultural officials when he proposed in a letter to Minister
\nSjarifudin that Agrintara be allowed to set up joint-venture
\ntrading companies in Indonesia and Singapore to facilitate the
\nmarketing of its products.<\/p>\n
Once again, PT Kalpataru and Burhanuddin were in the
\nlimelight.<\/p>\n
Soeharno proposed that PT Kalpataru and Focor Trading Ltd. be
\nappointed as Agrintara's shareholding partners in the two joint-
\nventure trading houses and that Burhanuddin of Kalpataru be
\nappointed a director in the planned trading house in Singapore
\nand a supervisor (commissioner) in the one in Indonesia.<\/p>\n
\"I see trading houses as necessary to help Agrintara to market
\nits products,\" Sjarifudin noted.<\/p>\n
He argued that since the professional experiences of most of
\nAgrintara's executives were in plantation management (as
\nplanters) they will need a change in attitude to become good
\nmarketing professionals.<\/p>\n
Soeharno said Agrintara needs a marketing arm to sell its CPO-
\nbased products from Batam, arguing \" we are quite new in this
\ndownstream industry so that we need a strategic partner with a
\nlot of experiences and extensive distribution networks.\"<\/p>\n
\"We are now finalizing the incorporation documents,\" Soeharno
\nsaid yesterday.<\/p>\n
He said Focor Trading Ltd. was chosen as a strategic partner
\nbecause of its long experiences in the marketing of CPO-based
\nproducts in Indonesia and overseas.<\/p>\n
Focor Trading Ltd. is the Hong Kong-based trading subsidiary
\nof PT Arthasolid which itself is a unit of the Arthagraha group,<\/p>\n
However, Soeharno did not want to comment much on PT
\nKalpataru's role in the joint venture trading companies, saying
\nthe company was recommended by Focor Trading Ltd.\/PT Arthasolid.<\/p>\n
But Arthasolid's Executive Director Eddy Rinaldi told the Post
\nyesterday his company had no relations whatsoever with PT
\nKalpataru.<\/p>\n
\"But you should realize that a strategic partner could mean
\nmany things. It should not always contribute directly to the
\nbusiness. But it might help provide access to facilities or other
\nthings that contribute to business operations,\" Rinaldi said in
\nreferring to PT Kalpataru's participation in the joint venture
\ntrading companies.<\/p>\n
CPO allocations<\/p>\n
Soeharno suggested to Sjarifudin in August, 1995 that
\nAgrintara be given crude palm oil allocations to allow adequate
\ntime for the company to gain marketing experiences.<\/p>\n
In November, Sjarifudin, ordered the Joint Marketing Agency of
\nstate plantation companies to give Agrintara 30,000 tons of crude
\npalm oil a month starting in December.<\/p>\n
On Jan. 24, 1996, Soeharno again asked Sjarifudin to intervene
\nin the Joint Marketing Board to enable Agrintara to get its
\nJanuary and February crude palm oil allocations at a preferential
\nprice similar to the one granted to the National Logistics Agency
\n(Bulog) as the stabilizer of the cooking oil price.<\/p>\n
Sjarifudin immediately fulfilled the request, asking the Joint
\nMarketing Board to sell Agrintara 30,000 tons of crude palm oil
\nevery month below the market price.<\/p>\n
Sjarifudin confirmed that the allocations had been granted to
\ngive Agrintara the opportunity to gain marketing experience
\nbefore its plant in Batam went on stream and, at the same time,
\nto help stabilize the cooking oil price.<\/p>\n
\"However, starting this month (May), they have to pay the
\nmarket price for their crude palm oil allocations because the
\ncooking oil prices seem to be stable ,\" Sjarifudin added.<\/p>\n
However, Soeharno said Agrintara could not get CPO allocations
\nfully at the volume recommended by Sjarifudin because the
\nmarketing board simply had no stocks.<\/p>\n
\"We began to get CPO allocations only in January at a volume
\nof 10,000 tons. Because we had not time to arrange their refining
\nwe simply resold the CPO to private cooking oil companies,\"
\nSoeharno added.<\/p>\n
Agrintara, he said, got 20,000 tons in February and 15,000
\ntons in March which were toll-refined at the factories of the
\nSinar Mas and Bukit Kapur Reksa plants.<\/p>\n
\"The olein from these CPO allocations enabled us to gain
\nmarketing experiences and to start developing distribution
\nnetworks,\" he said.<\/p>\n
Soeharno admitted keen competition in the domestic olein
\nmarket because Agrintara has to compete with such major producers
\nas the Sinar Mas, Bimoli, Musi Mas and Bukit Kapur Reksa groups.<\/p>\n
Documents show that PT Agrintara's board of commissioners was
\nopposed to such preferential treatment because they saw that kind
\nof business practice as being incapable of teaching the company
\nthe hard lesson of doing business.<\/p>\n
The commissioners argued that Agrintara's request for
\n\"marketing experiences\" was entirely unreasonable because the
\nmarketing agencies of state plantation companies -- the Joint
\nMarketing Agency, Indoham GmbH in Hamburg and PTO Commodities
\nLtd. in New York -- still operate.<\/p>\n
But Sjarifudin's approval made the commissioners' opposition
\nmeaningless.<\/p>\n
H.S. Dillon, who until January was a commissioner at PT
\nAgrintara, said he would not comment on that company as he was
\nnow an outsider.<\/p>\n
However, Dillon admitted that Agrintara's board of
\ncommissioners had been rendered ineffective right from the
\noutset. (vin)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-still-controling-ptp-agrintara-1447893297",
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