Village coop joins huge palm oil plantation project

JAKARTA (JP): A Village Cooperative Unit (KUD) in West Sumatra will establish a US$28 million palm oil plantation and processing plant in cooperation with state-owned and private companies.

The chairman of KUD Aur Kuning, a cooperative in the Pasaman regency of West Sumatra, Sudirman S., told Commission IV of the House of Representatives (DPR) yesterday that his cooperative will set up a joint venture with the state-owned plantation firm PT Perkebunan (PTP) VI and PT Arthasolid, a private trading company, to establish a 5,400-hectare palm oil plantation and crude palm oil (CPO) mill.

Aur Kuning's 2,400 members have been involved in the development of PTP VI's palm oil plantation in West Sumatra, earning about Rp 463,800 each per month.

The president of PTP VI, Koentadi Hadinoto, told the commission that the three parties will sign the joint venture agreement later this month.

He said the planned venture, to be called PT Bukit Artha Harapan, will be 55 percent owned by Arthasolid, 35 percent by KUD Aur Kuning and 10 percent by PTP VI. The cooperative will have an option to increase its equity ownership to 55 percent.

Koentadi said Arthasolid, a subsidiary of the Artha Graha Sentral Group, which operates in banking, telecommunications, trading, palm oil and orchid plantation and hotel, will finance the cost of the palm oil project, including Rp 35.29 billion for the plantation and Rp 25.27 billion for the CPO plant.

Payment

KUD Aur Kuning's members, who will get salaries of about Rp 700,000 each every month for 10 years from participating in the operation of the plantation and CPO plant, will pay their equity participation within four years.

"The construction of the plant will begin early next year and will be completed within 18 months. Operation is expected to start in late 1996," he said, adding that the plant's processing capacity will be 20 tons of palm oil bunches per hour in the first two years, which will be increased to 23 tons per hour in the fourth year.

He said the project is expected to give a profit margin of about 1.59 percent to 14.23 percent within 10 years, while the investment will be recovered within five-and-a-half years.

Arthasolid's executive director, Eddy Rinaldi, said 35 percent of the investment for the project will come from equity and 65 percent from commercial loans.

According to Eddy, his company's sales of palm oil reached Rp 100 billion in 1993. "This year we expect a 25 percent increase in sales," he said.

Arthasolid sells palm oil to the Middle East, Europe, Africa, India, Pakistan and China. (icn)