Palm oil to dominate agribusiness

JAKARTA (JP): An analyst predicts that oil palm plantations will remain the favorite agribusiness commodity of investors next year but warns that a weak infrastructure could cloud the sector's bright future.

Agribusiness analyst Ridwan Dereinda told The Jakarta Post that, similar to the last couple of years, 1997 would see the establishment of more oil palm estates.

He said palm oil consumption per capita in Indonesia, mostly in the form of cooking oil, had increased from 10 kilograms a year in 1985 to 14 kilograms a year in 1995.

By comparison, vegetable oil consumption has reached 45 kilograms a year in the United States.

Dereinda said oil palm could be processed into a wide range of downstream products and was currently one of the most commercially promising agricultural commodities in the country.

He conceded, however, that more effort should be made to develop these downstream industries.

"In terms of area, we have the largest oil palm estates in the world, but we make mostly cooking oil," he said.

Indonesia has developed only nine downstream oil palm products from the 63 identified in the world, he said.

Dereinda warned, however, that the agribusiness sector would continue to be hindered by heavy red tape, poor infrastructure and inadequate research and development efforts.

"The sector has a good chance to develop. It would be a pity if we didn't optimize this opportunity," he said.

Bank credits for agribusiness also have not been used to their full capacity.

"The reason for this is because companies meet so many obstacles in developing their businesses," said Dereinda, who is also a commissioner at PT Aneka Pionerperkasa Perkebunan Indonesia.

"Land problems" are many, he said, including the uncertainty of legal procedures and the high cost of land acquisition; problems of overlapping claims; and the question of how to acquire claimed, but idle, land.

"We have good land laws, but so far they have only proven so in theory," Dereinda said.

Earlier this year, he said, a number of Malaysian businesspeople canceled their plans to invest in oil palm estates in Sumatra because they faced numerous legal uncertainties.

"The Malaysians said they couldn't tell how much was needed to start a business here. They said the exact figures were unlimited."

He said that if the upstream industry developed well, it would be easy for the downstream industry to follow suit and, in turn, give added value to the products.

Problems

Other problems faced by the agribusiness sector, Dereinda noted, were the lack of good-quality seeds and the failure to identify and cultivate exportable varieties of agricultural commodities.

"We have many varieties of bananas, mangoes and rambutan, but are they the types preferred by our export market?

"If we could remove these hurdles, many people would be interested in investing here," he said.

He cited coffee, cacao and tea as less commercially promising plantation commodities.

"There is either an oversupply of them or their unit cost is just too high compared to their sales price."

Dereinda said science and technology would have an increasingly important role in agribusiness development.

"Developing agribusiness without developing research and development (R&D) is nonsense.

"Our R&D is still not as good as we want it to be. Currently we use only 0.025 percent of our GDP for R&D," he said, pointing out that the United States and Japan spend more than 3 percent of their GDP on research.

Dereinda warned that Indonesia would remain dependent on other countries and several steps behind if it did not conduct more research.

"In the short term, it is alright to buy technology but we cannot continue to do it in the long run."

He said "intelligence research" was another important aspect in agribusiness development, one that would help experts make accurate predictions about the prospects of certain commodities.

"We must be able to anticipate the markets for our products. Will prices be better? Should we cut back on our production? These are the questions that intelligence research should be able to answer." (pwn)