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DEMAND IS INCREASING FOR CROPS SUCH AS OIL PALM, TOBACCO AND COCOA

AMONG THE most important crops produced in Indonesia are oil palm, tobacco, rubber, cacao and sugarcane. All five are grown at PT Perkebunan Nusantara II (PTPN II), the third-largest of the14 plantations.

PROSPECTS for the 12,375 acres of cacao are good. Output is expected to reach 486,594 tons in 2003 with bean exports rising.

The state-owned estate was established in 1996 when PTPN II and PTPN IX were merged into one entity. The restructuring boosted company profits by extending the area of production, increased the number of palm oil factories in Papua, created more profitable plants and improved human resources.
The company’s head office is in Tanjung Morawa, in the Deli Serdang regency of North Sumatra. Most of the estates are clustered in this area because the climate is conducive.

PTPN II manages two estates in Prafi and Arso on Papua, along with 16 in Langkat and 13 in Deli Serdang. The company also operates nine palm oil mills (six in North Sumatra and three on Papua), two sugar mills and six rubber-processing mills. It also manages four hospitals in Medan and the Deli Tobacco research facility.
Together with small shareholders’ projects, the company’s overall plantation area spans some 281,694 acres, not all of which are producing as yet. More than 212,506 acres are planted with oil palms; 27,181 are given to rubber; more than 24,710 are planted with sugarcane; 12,355 with cacao and 6,708 with tobacco.
The prospects for natural rubber are good; growth in demand is expected to continue. In 1999, local demand for car and motorcycle tyres totaled 10.85 million units. Demand is expected to reach 23.75 million units by 2003,
according to PT Capricorn Indonesia Consult Inc.

DIVERSIFICATION is the key for PTPN II. More than 212,506 acres of its land have been planted with oil palms.

Indonesia’s rubber exports have been growing at seven percent annually since 1994, with total production currently in excess of 1.6 million tons a year.
The cacao estates also have bright prospects, with output expected to reach 486,594 tons in 2003. Meanwhile, exports of cacao beans are forecast to increase to about 368,237 tons next year.
The majority of PTPN II’s land is planted with oil palms. Demand for its use as cooking oil, and for other refined products, continues to grow. PTPN II has downstream industries that convert palm oil into chemicals such as olein, stearin and fatty acids.
Indonesia is expected to produce 8.6 million tons of palm oil in 2003, and demand for cooking oil is forecast to increase by about 17 percent to 6.4 million tons.

Tobacco sales look promising too, and PTPN II has great hopes of increasing exports. The plantation’s Deli Tobacco has a distinctive aroma and is in demand across the world. PTPN II maintains quality by being very selective in its choice of leaf.
Molasses output has also increased. Output rose from 46,460 tons in 1997 to 57,541 tons by 2000. The plantation has been restructured and profits have increased.
The number of palm oil factories at the company’s estates in Papua have increased with more oil palms being harvested. All this is in preparation for privatization, although the entire program of restructuring has yet to be completed.

SUHAIRI LUBIS President Director of PTPN II

President Director of PTPN II Suhairi Lubis says palm oil represents about 60 percent of the firm’s revenues, with tobacco the second most important, earning some 20 percent.
Last year, revenues totaled $76.2 million, with profits of slightly less than $1 million. Mr. Lubis says the low profit margin was a result of depressed prices for commodities on the international market. Like all plantation presidents, he hopes that commodity prices will begin to lift soon.
“Our strategy is to go into downstream industries, but for the time being we do not have enough money for large investments,” he says.

“Our aim is to produce more by-products from crude palm oil (CPO). About 80 percent of our CPO is for local consumption and the rest is for export. We export to China and India.”
All of PTPN II’s tobacco is sold to Germany, Holland, Denmark and Switzerland. The U.S. is the top destination for chewing tobacco.
“We sell chewing tobacco to Pinkertons, which is our best customer,” says Mr. Lubis. “Next year, I will invite people in the tobacco trade in Germany to form a joint venture.”
He also harbors the possibility of creating a small tourism business around the plantation. “I think it is possible. I want to introduce people to the art of curling tobacco. The Dutch buildings here are over 100 years old and of architectural, as well as historical, interest,” he adds.