Palm Oil companies began Glancing Investment in Palm Oil Downstream Sector

Written by:

Wiko Saputra

Agribusiness Research & Investment Advisory (A.R.I.A Dept)

PT. Pavillion Capital Indonesia

Indonesian government's efforts to develop downstream palm oil industry to get the response by businesses in the oil palm industry. Based on reports from the Ministry of Industry, there are six large companies that will invest in downstream palm oil sector in Indonesia are Wilmar Group, Permata Hijau Group, Domba Mas, PT. VVF Indonesia, PT. SMART and PTPN III. This is the first step to boost the growth of downstream industries that still underdeveloped compared to the upstream industry.

An estimated total investment of the six companies will reach U$D 2.03 billion. Wilmar Group will build six new plants in two places, namely Gresik (East Java) and Sei Mengke (North Sumatra). The plant will focus on developing industrial oleochemicals will be integrated with the derivatives industry. Wilmar Group is estimated to require an investment of USD 900 million. Later this year, Wilmar Group has started construction of their factory in Gresik and next year in Sei Mengke.

Permata Hijau Group, which has been very focused on the development of cooking oil processing industry. And is the producer of cooking oil in Indonesia's third largest with a market share of 6.04% began to look at the development of oleochemicals industry. Permata Hijau Group will develop their integrated oleochemical industry with an investment of USD 220 million.

Domba Mas also will build a processing plant oleochemical with a focus on two products namely fatty acids and fatty alcohol. Investment is estimated to reach USD 180 million. PT VVF Indonesia also plans to expand into the downstream industry. They will invest $ 100 million to develop palm oil derivative products.

PT. SMART is a leading company in the development of oil palm industry in Indonesia is also committed to fully support the development of downstream palm oil industry in Indonesia. PT. SMART has prepared an investment of USD 250 million. In March 2011, the Sinar Mas Group has inaugurated construction of the plant downstream palm oil industry is located in Marunda Center International Warehouse & Industrial Estate, District Bekasi. The factory is capable of processing 300,000 MT of CPO / year. And will produce 168,000 MT of cooking oil and 112,000 MT of margarine and shortening. In addition, PT. SMART also has expanded its plant Cocoa Butter Subtitute (CBS) 5 hectares with a capacity of 140,000 MT/year.

In addition to investments made by private companies, state-owned company engaged in oil palm industry (PTPN II) also participated in the development of downstream palm oil industry. PTPN II with a working area covers North Sumatra plans to develop the palm oil industry cluster in Sei Mengke. PTPN II will build on the region Sei Mengke industry in the early stages covering 104 hectares. The plan will be built some cooking oil processing refinery, margarine and shortening processing refinery and oleochemcal processing integrated. For the initial stage, PTPN II will invest up to USD 300 million. PTPN II will collaborate with investors to develop industrial areas Sei Mengke as a special industrial area development of downstream palm oil industry in Indonesia.

With these investments, government efforts to encourage an increase in the value-added palm oil products through the development of downstream industries will be realized. Currently, the government is attempting to provide support to the investment plan. The Government will set up the infrastructure that supports the development of downstream industries. This effort has been poured by the government in the Master Plan for Acceleration and Expansion of Indonesian Economic Development 2011-2025. Which the government will give priority to infrastructure development to support the development of downstream palm oil industry in Indonesia.

In addition to efforts to boost infrastructure development. Government of Indonesia also synchronizes policies that will encourage the competitiveness of downstream industries in palm oil sector. The government has revised its palm oil export tax policy is more pro-smallholder and the development of downstream industries. In addition, the government also provides fiscal incentives in the form of a tax allowance against some palm oil derivative products and processing industry with a capacity above of 50,000 MT/year. Providing ease of licensing and so forth. With the joint commitment of the company and the government expected the downstream palm oil industry will be able to contribute greatly to economic development in Indonesia.