gbg

Mr Santosa

For the last two years we have focused on expanding our land bank which has now reached 266,000 hectares (at the beginning of 2011), which is the equivalent to four of five times the area of Singapore. Now our concentration is on improving the productivity of our plantations. That requires scientific research on how to improve the fertility of the soil while still being friendly to the environment. The second aspect of this is introducing mechanizations to improve labour productivity. Cheap labour for CPO plantations used to be a big advantage in Indonesia, but today cheaper labour can be found in countries such as Bangladesh. Therefore as our costs have increased significantly in the past ten years, we have to anticipate further increases for the next ten years and focus on measures for higher yields such as improving the seeds used for replanting.

I also think that we are the most transparent company in Indonesia as we update our information on our sales, prices and practices regularly through our website. Here we also publish our information on how we are working with the community and I think this is very important for our customers.

gbg

Mr Santosa

We may do that in the future; but it is the issue of profit margins in the downstream industry. For upstream you have to work from a 35-40% minimum operating margin, but in downstream you have to be very careful as your margin may not be more than 5%.

gbg

Mr Santosa

We are most interested in mechanization of the operating system for our plantations. If you looked at our operation system five years ago, we still did manual fertilization using manpower to fertilize the tree. Now, at least one third of all trees have been fertilized through a mechanized system. For treatment and pollination, we have introduced insects to do this rather than man power now as this is time consuming and not cost effective. We also use owls to protect the plantations from rats and monitor how many owls are needed per hectare according to the behaviour of the pests. The fertility of the soil is also regularly monitored.

Our methods have been developed through partnerships with research institutes engaged in the agricultural sector. Every year, we offer grants for those doing a Masters degree or PhD and conduct research that can be used for our strategy. We offer them shared intellectual property for that research. Alongside this we have in house research and joint research, for example we participated in the genome project in a passive role through a genome expert at the Bandung Institute of Technology. Our research right now is more focused on the long term rather than short term results.

In terms of international partnerships, CPO is a conservative industry and a commodity so partnerships are really more about logistics. In the downstream sector it is a different story for the production techniques etc. but we are not engaged in this field at this stage.

gbg

Mr Santosa

We apply very stringent standards that go above the minimum of the government regulations. To open up a new area of land you have to get the necessary licenses and carry out an environmental assessment impact analysis, however we do our own as well. For example we got around 20,000 hectares of high conservation value forest (HGU), the government regulation allowed us to plant in all 20,000 hectares but we decided after our studies that only 13,000 hectares should be planted.

Central and local government regulations and plans are not always in agreement so when we evaluate land to purchase, if we see there is a conflict then we do not touch it. We are more cautious than other companies. I think these conflicts in licensing and regional authority is the biggest challenge facing the industry today.