Combination of Flexibility and Strength Takes the Country’s Rubber King to the Top

THE LARGEST producer of rubber thread in Indonesia, PTPN III also makes bands, gloves, and resin for use in paint and inks.

PT Perkebunan Nusantara III (PTPN III) is Indonesia’s biggest rubber producer and the country’s leading integrated plantation and agro-industrial complex. But, far from resting on its laurels, PTPN III is planning to open a new factory next year to make rubber-wood furniture, flooring and building products.
The huge state-owned enterprise also aims to expand its downstream activities, not only for rubber but also for oil palm production. It is seeking foreign investors who can provide both capital and know-how in the oleo-chemicals business.

Once part of Dutch colonial holdings, the plantation was nationalized in 1958. It was later consolidated in 1996 when it merged with two other estates to create one company, which has its headquarters in Medan in North Sumatra.
Today, PTPN III cultivates rubber, oil palms and cocoa on more than 408,950 acres of land, consisting of 37 plantations, in North Sumatra. Palm oil, besides palm kernel, is PTPN III’s main commodity.

The company manages more than 249,571 acres of smallholder oil palm plantations. It is currently in the process of expanding its oil palm plantation by 321,230 acres, which it should achieve in 2004.
PTPN III produces around 440,000 tons of palm oil and kernel a year and expects to raise this to 512,000 tons in 2004. There are 11 palm oil production units, with a capacity of 510 tons per hour (or 2.55 million tons of fresh fruit bunches a year). Expansion will hike this to 3.15 million tons in 2004. Crude palm oil contributes 70 percent of the firm’s revenues.

MEGANANDA DARYONO President Director of PTPN III

President Director of PTPN III Megananda Daryono says there are plans to create a new downstream industry for chemicals derived from palm oil.
“It is very expensive and sophisticated, and PTPN III cannot build an oleo-chemical plant on its own,” he explains.
“We don’t know enough about the management, technology and the market. A lot of money is required to build this industry, so we are looking into the possibility of forming a joint venture, for which we would like a company with the know-how.”
High-yield rubber trees with a maturation period of three-and-a-half to four years, instead of the usual five-and-a-half to six, are grown on 138,376 acres over 14 plantations. Around 40,000 tons of rubber are produced a year at four processing units.
“The most important crop at PTPN III is palm oil, but rubber has also been a good product here since the Dutch era,” says Mr. Daryono.
“We have a downstream industry, producing rubber gloves and rubber thread – we are the largest producer of the latter in Indonesia. We also make rubber bands and other articles, as well as rubber resin for use in paint and inks.”

Mr. Daryono says that this year the firm plans to start building a factory to make rubber-wood products, which should take about 10 months.
“The market for rubber-wood products is very good. Just in Asia alone – in countries such as China, Japan, Thailand and Korea – there is a huge demand,” he points out.
Mr. Daryono says PTPN III is big enough to supply the raw materials, although there are other rubber-wood factories in Indonesia. “We are replanting rubber trees every year and that is where we will get our raw material from,” he says.

The firm employs 31,000 workers and exports nearly 70 percent of its total rubber output. “We export 94 percent of our rubber glove output, and 98 percent of our rubber resin product,” continues Mr. Daryono.
“We sell directly to traders and a high proportion of our products go to tyre manufacturers in the U.S.. We also sell to Europe and Japan.”
Most of the firm’s rubber gloves are sold to Germany. “Actually, our glove factory is 10 years old and some Americans have seen the potential for its modernization. They are very interested in joining us and we are now doing a feasibility study, with the idea of producing 10 lines of gloves,” he adds.
Mr. Daryono says PTPN III has responded to the market. “In meeting the challenge, the management has delineated the ideal corporate vision as a solid and competitive, integrated agro-industry company, securely based on its plantations and estates, able to compete in the global market.

“In realizing our vision, we have undertaken various steps to strengthen PTPN III’s competitive capabilities, such as measures to increase productivity, and improve quality control and cost effectiveness.
“The programs reach not only upstream industries, such as palm oil, rubber and cocoa, but also the increasingly indispensable downstream industries, which add more value to the product.
“The company has also undergone privatization programs in order to tap fresh funds, increase public ownership and share the company’s future profits. It is our firm conviction that through robust business strategy and sound management, the company’s targets can be attained,” he adds.